UNITED STATES
SECURITIESshellSECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended February 28,29, 20232024
☐ | 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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock without par value |
| GBX |
| New York Stock Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
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Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
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| Emerging growth company |
| ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares of the registrant’s common stock, without par value, outstanding on April 5, 20231, 2024 was 31,922,93731,130,943 shares.
FORM 10-Q
Table of Contents
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PART I. |
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Item 1. |
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. | 43 | |
Item 6. |
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2
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements, other than statements of historical fact included in this report, concerning our plans, objectives, goals, strategies, future events, future performance, financing needs, plans or intentions relating to business trends and other information referred to under "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. We use words such “affect,” “anticipate,” “assume,” “backlog,” “be,” “believe,” “commit,” “can,” “contingent,” “continue,” “could,” “due to,” “estimate,” “expect,” “future,” “identify,” “intend,” “likely,” “may,” “optimism,“ongoing,” “opinion,” “optimize,” “plan,” “potential,” “trend,” “realize,” “result,” “seek,” “should,” “strategy,” “will,” “would,” and similar expressions to identify forward-looking statements. Forward-looking statements are not guarantees of future performance.
Forward-looking statements are based on our current expectations and beliefs and on currently available operating, financial and market information and are subject to various risks and uncertainties, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations and beliefs are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations or beliefs will result or be achieved and actual future results and trends may differ materially from what is expressed in or indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and important factors include but are not limited to the following:
3
There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including the risks, uncertainties and factors described in more detail in Part I Item 1A “Risk Factors” in our most recent Annual Report on Form 10-K and our subsequent Quarterly Report on Form 10-Q which are incorporated herein by reference. You should evaluate all forward-looking statements made in this report in the context of these risks, uncertainties and factors. You are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the date hereof. 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.
43
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
(In millions, except number of shares which are reflected in thousands, unaudited)
|
| February 28, |
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| August 31, |
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| February 29, |
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| August 31, |
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Assets |
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Cash and cash equivalents |
| $ | 379.9 |
|
| $ | 543.0 |
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| $ | 252.0 |
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| $ | 281.7 |
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Restricted cash |
|
| 19.7 |
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|
| 16.1 |
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| 20.0 |
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| 21.0 |
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Accounts receivable, net |
|
| 571.5 |
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|
| 501.2 |
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|
| 519.1 |
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|
| 529.9 |
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Income tax receivable |
|
| 22.4 |
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|
| 39.8 |
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| 20.9 |
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|
| 42.2 |
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Inventories |
|
| 910.6 |
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|
| 815.3 |
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|
| 827.0 |
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|
| 823.6 |
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Leased railcars for syndication |
|
| 102.5 |
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| 111.1 |
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| 134.4 |
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| 187.4 |
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Equipment on operating leases, net |
|
| 891.8 |
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|
| 770.9 |
|
|
| 1,160.5 |
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|
| 1,000.0 |
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Property, plant and equipment, net |
|
| 618.4 |
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|
| 645.2 |
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| 636.1 |
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|
| 619.2 |
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Investment in unconsolidated affiliates |
|
| 83.4 |
|
|
| 92.5 |
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|
| 90.0 |
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|
| 88.7 |
|
Intangibles and other assets, net |
|
| 224.0 |
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|
| 189.1 |
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|
| 255.6 |
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|
| 255.8 |
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Goodwill |
|
| 128.3 |
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|
| 127.3 |
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|
| 128.0 |
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|
| 128.9 |
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| $ | 3,952.5 |
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| $ | 3,851.5 |
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| $ | 4,043.6 |
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| $ | 3,978.4 |
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Liabilities and Equity |
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Revolving notes |
| $ | 310.3 |
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| $ | 296.6 |
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| $ | 300.8 |
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| $ | 297.1 |
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Accounts payable and accrued liabilities |
|
| 722.6 |
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| 725.1 |
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| 649.3 |
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| 743.5 |
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Deferred income taxes |
|
| 70.2 |
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| 68.6 |
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| 79.7 |
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|
| 114.1 |
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Deferred revenue |
|
| 73.0 |
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| 35.3 |
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| 81.5 |
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| 46.2 |
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Notes payable, net |
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| 1,327.0 |
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| 1,269.1 |
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| 1,421.8 |
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| 1,311.7 |
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Commitments and contingencies (Note 15) |
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Commitments and contingencies (Note 14) |
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Contingently redeemable noncontrolling interest |
|
| 27.5 |
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| 27.7 |
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| 56.0 |
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| 55.6 |
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Equity: |
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Greenbrier |
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Preferred stock - without par value; 25,000 shares |
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| — |
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| — |
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| — |
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| — |
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Common stock - without par value; 50,000 shares |
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| — |
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| — |
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Common stock - without par value; 50,000 shares |
|
| — |
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| — |
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Additional paid-in capital |
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| 403.0 |
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| 424.8 |
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| 366.1 |
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| 364.4 |
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Retained earnings |
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| 896.0 |
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| 897.7 |
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| 942.7 |
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| 897.5 |
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Accumulated other comprehensive loss |
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| (21.7 | ) |
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| (45.6 | ) |
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| (8.9 | ) |
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| (7.3 | ) |
Total equity – Greenbrier |
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| 1,277.3 |
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| 1,276.9 |
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| 1,299.9 |
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| 1,254.6 |
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Noncontrolling interest |
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| 144.6 |
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| 152.2 |
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| 154.6 |
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| 155.6 |
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Total equity |
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| 1,421.9 |
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| 1,429.1 |
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| 1,454.5 |
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| 1,410.2 |
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| $ | 3,952.5 |
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| $ | 3,851.5 |
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| $ | 4,043.6 |
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| $ | 3,978.4 |
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The accompanying notes are an integral part of these financial statements
54
Condensed Consolidated Statements of Income
(In millions, except number of shares which are reflected in thousands and per share amounts, unaudited)
|
| Three Months Ended |
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| Six Months Ended |
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| Three Months Ended |
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| Six Months Ended |
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| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
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| February 29, |
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| February 28, |
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| February 29, |
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| February 28, |
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Revenue |
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Manufacturing |
| $ | 968.6 |
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| $ | 555.7 |
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| $ | 1,615.1 |
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| $ | 1,008.2 |
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| $ | 735.8 |
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| $ | 968.6 |
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| $ | 1,411.7 |
|
| $ | 1,615.1 |
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Maintenance Services |
|
| 98.0 |
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|
| 86.6 |
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| 183.5 |
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|
| 159.0 |
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| 75.2 |
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| 98.0 |
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| 159.0 |
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|
| 183.5 |
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Leasing & Management Services |
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| 55.4 |
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| 40.5 |
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| 89.9 |
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| 66.3 |
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| 51.7 |
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| 55.4 |
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|
| 100.8 |
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|
| 89.9 |
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|
| 1,122.0 |
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|
| 682.8 |
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|
| 1,888.5 |
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|
| 1,233.5 |
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| 862.7 |
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| 1,122.0 |
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| 1,671.5 |
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| 1,888.5 |
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Cost of revenue |
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Manufacturing |
|
| 901.2 |
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| 535.0 |
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| 1,505.7 |
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|
| 956.6 |
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| 656.2 |
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|
| 901.2 |
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|
| 1,257.1 |
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|
| 1,505.7 |
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Maintenance Services |
|
| 89.6 |
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|
| 81.7 |
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|
| 169.2 |
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|
| 152.9 |
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|
| 69.2 |
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|
| 89.6 |
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|
| 140.8 |
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|
| 169.2 |
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Leasing & Management Services |
|
| 14.4 |
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|
| 11.3 |
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|
| 27.3 |
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|
| 21.6 |
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|
| 15.1 |
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|
| 14.4 |
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|
| 30.1 |
|
|
| 27.3 |
|
|
| 1,005.2 |
|
|
| 628.0 |
|
|
| 1,702.2 |
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|
| 1,131.1 |
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|
| 740.5 |
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|
| 1,005.2 |
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|
| 1,428.0 |
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|
| 1,702.2 |
| |
Margin |
|
| 116.8 |
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|
| 54.8 |
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|
| 186.3 |
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|
| 102.4 |
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|
| 122.2 |
|
|
| 116.8 |
|
|
| 243.5 |
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|
| 186.3 |
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Selling and administrative expense |
|
| 59.0 |
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|
| 54.7 |
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|
| 112.4 |
|
|
| 99.0 |
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|
| 63.6 |
|
|
| 59.0 |
|
|
| 119.9 |
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|
| 112.4 |
|
Net gain on disposition of equipment |
|
| (9.6 | ) |
|
| (25.1 | ) |
|
| (12.9 | ) |
|
| (33.6 | ) |
|
| (4.9 | ) |
|
| (9.6 | ) |
|
| (4.8 | ) |
|
| (12.9 | ) |
Impairment of long-lived assets |
|
| — |
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| — |
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| 24.2 |
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|
| — |
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|
| — |
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|
| — |
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|
| — |
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|
| 24.2 |
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Earnings from operations |
|
| 67.4 |
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|
| 25.2 |
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|
| 62.6 |
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|
| 37.0 |
|
|
| 63.5 |
|
|
| 67.4 |
|
|
| 128.4 |
|
|
| 62.6 |
|
Other costs |
|
|
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Interest and foreign exchange |
|
| 21.6 |
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|
| 11.8 |
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|
| 41.2 |
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|
| 24.4 |
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|
| 24.6 |
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|
| 21.6 |
|
|
| 47.8 |
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|
| 41.2 |
|
Earnings before income tax and earnings from unconsolidated affiliates |
|
| 45.8 |
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|
| 13.4 |
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|
| 21.4 |
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|
| 12.6 |
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|
| 38.9 |
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|
| 45.8 |
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|
| 80.6 |
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|
| 21.4 |
|
Income tax expense |
|
| (11.9 | ) |
|
| (3.2 | ) |
|
| (8.1 | ) |
|
| (1.8 | ) |
|
| (9.3 | ) |
|
| (11.9 | ) |
|
| (19.3 | ) |
|
| (8.1 | ) |
Earnings before earnings from unconsolidated affiliates |
|
| 33.9 |
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|
| 10.2 |
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| 13.3 |
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|
| 10.8 |
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| 29.6 |
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| 33.9 |
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|
| 61.3 |
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|
| 13.3 |
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Earnings from unconsolidated affiliates |
|
| 2.9 |
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|
| 1.0 |
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|
| 6.2 |
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|
| 6.0 |
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|
| 4.0 |
|
|
| 2.9 |
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|
| 5.5 |
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|
| 6.2 |
|
Net earnings |
|
| 36.8 |
|
|
| 11.2 |
|
|
| 19.5 |
|
|
| 16.8 |
|
|
| 33.6 |
|
|
| 36.8 |
|
|
| 66.8 |
|
|
| 19.5 |
|
Net (earnings) loss attributable to noncontrolling interest |
|
| (3.7 | ) |
|
| 1.6 |
|
|
| (3.1 | ) |
|
| 6.8 |
| ||||||||||||||||
Net earnings attributable to noncontrolling interest |
|
| (0.2 | ) |
|
| (3.7 | ) |
|
| (2.2 | ) |
|
| (3.1 | ) | ||||||||||||||||
Net earnings attributable to Greenbrier |
| $ | 33.1 |
|
| $ | 12.8 |
|
| $ | 16.4 |
|
| $ | 23.6 |
|
| $ | 33.4 |
|
| $ | 33.1 |
|
| $ | 64.6 |
|
| $ | 16.4 |
|
Basic earnings per common share |
| $ | 1.01 |
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| $ | 0.39 |
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| $ | 0.50 |
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| $ | 0.72 |
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| $ | 1.08 |
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| $ | 1.01 |
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| $ | 2.08 |
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| $ | 0.50 |
|
Diluted earnings per common share |
| $ | 0.97 |
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| $ | 0.38 |
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| $ | 0.49 |
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| $ | 0.70 |
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| $ | 1.03 |
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| $ | 0.97 |
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| $ | 1.99 |
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| $ | 0.49 |
|
Weighted average common shares: |
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Basic |
|
| 32,588 |
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|
| 32,582 |
|
|
| 32,654 |
|
|
| 32,546 |
|
|
| 31,117 |
|
|
| 32,588 |
|
|
| 31,071 |
|
|
| 32,654 |
|
Diluted |
|
| 34,400 |
|
|
| 34,463 |
|
|
| 33,654 |
|
|
| 33,609 |
|
|
| 32,570 |
|
|
| 34,400 |
|
|
| 32,676 |
|
|
| 33,654 |
|
The accompanying notes are an integral part of these financial statements
65
Condensed Consolidated Statements of Comprehensive Income
(In millions, unaudited)
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||||||
Net earnings |
| $ | 36.8 |
|
| $ | 11.2 |
|
| $ | 19.5 |
|
| $ | 16.8 |
|
| $ | 33.6 |
|
| $ | 36.8 |
|
| $ | 66.8 |
|
| $ | 19.5 |
|
|
|
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| |
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|
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Other comprehensive income (loss) |
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| |
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Translation adjustment |
|
| 5.4 |
|
|
| 4.3 |
|
|
| 10.9 |
|
|
| (9.6 | ) |
|
| (1.8 | ) |
|
| 5.4 |
|
|
| (1.8 | ) |
|
| 10.9 |
|
Reclassification of derivative financial instruments |
|
| (1.6 | ) |
|
| 1.3 |
|
|
| (2.1 | ) |
|
| 2.3 |
|
|
| (4.0 | ) |
|
| (1.6 | ) |
|
| (7.5 | ) |
|
| (2.1 | ) |
Unrealized gain (loss) on derivative financial |
|
| 6.1 |
|
|
| 0.8 |
|
|
| 15.0 |
|
|
| (2.4 | ) | ||||||||||||||||
Unrealized gain on derivative financial |
|
| 2.8 |
|
|
| 6.1 |
|
|
| 7.1 |
|
|
| 15.0 |
| ||||||||||||||||
Other (net of tax effect) |
|
| 0.1 |
|
|
| 0.2 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.5 |
|
|
| 0.1 |
|
|
| 0.6 |
|
|
| 0.1 |
|
|
| 10.0 |
|
|
| 6.6 |
|
|
| 23.9 |
|
|
| (9.6 | ) |
|
| (2.5 | ) |
|
| 10.0 |
|
|
| (1.6 | ) |
|
| 23.9 |
| |
Comprehensive income |
|
| 46.8 |
|
|
| 17.8 |
|
|
| 43.4 |
|
|
| 7.2 |
|
|
| 31.1 |
|
|
| 46.8 |
|
|
| 65.2 |
|
|
| 43.4 |
|
Comprehensive (income) loss attributable to |
|
| (3.7 | ) |
|
| 1.6 |
|
|
| (3.1 | ) |
|
| 6.8 |
| ||||||||||||||||
Comprehensive income attributable to noncontrolling interest |
|
| (0.2 | ) |
|
| (3.7 | ) |
|
| (2.2 | ) |
|
| (3.1 | ) | ||||||||||||||||
Comprehensive income attributable to Greenbrier |
| $ | 43.1 |
|
| $ | 19.4 |
|
| $ | 40.3 |
|
| $ | 14.0 |
|
| $ | 30.9 |
|
| $ | 43.1 |
|
| $ | 63.0 |
|
| $ | 40.3 |
|
1 Net of tax effect of $0.71.0 million and $($0.20.7 million)million for the three months ended February 28, 202329, 2024 and February 28, 20222023, respectively, and $1.9 million and $1.0 million and $(0.7 million) for the six months ended February 28, 202329, 2024 and February 28, 2022.2023, respectively.
2 Net of tax effect of $(3.80.8 million) and $(0.83.8 million) for the three months ended February 28, 202329, 2024 and February 28, 20222023, respectively, and $(1.8 million) and $(6.8 million) and $0.2 million for the six months ended February 28, 202329, 2024 and February 28, 2022.2023, respectively.
The accompanying notes are an integral part of these financial statements
76
Condensed Consolidated Statements of Equity
(In millions, except per share amounts, unaudited)
| Attributable to Greenbrier |
|
|
|
|
|
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||||||||||
Balance August 31, 2022 |
| 32.6 |
| $ | 424.8 |
| $ | 897.7 |
| $ | (45.6 | ) | $ | 1,276.9 |
| $ | 152.2 |
| $ | 1,429.1 |
| $ | 27.7 |
| ||||||||||||||||||||||||
Balance August 31, 2023 |
| 30.9 |
| $ | 364.4 |
| $ | 897.5 |
| $ | (7.3 | ) | $ | 1,254.6 |
| $ | 155.6 |
| $ | 1,410.2 |
| $ | 55.6 |
| ||||||||||||||||||||||||
Net earnings |
| — |
| — |
| 16.4 |
| — |
| 16.4 |
| 3.3 |
| 19.7 |
| (0.2 | ) |
| — |
| — |
| 64.6 |
| — |
| 64.6 |
| 1.8 |
| 66.4 |
| 0.4 |
| ||||||||||||||
Other comprehensive income, net |
| — |
| — |
| — |
| 23.9 |
| 23.9 |
| — |
| 23.9 |
| — |
| |||||||||||||||||||||||||||||||
Other comprehensive loss, net |
| — |
| — |
| — |
| (1.6 | ) |
| (1.6 | ) |
| — |
| (1.6 | ) |
| — |
| ||||||||||||||||||||||||||||
Noncontrolling interest adjustments |
| — |
| (7.9 | ) |
| — |
| — |
| (7.9 | ) |
| (2.0 | ) |
| (9.9 | ) |
| — |
|
| — |
| — |
| — |
| — |
| — |
| 1.6 |
| 1.6 |
| — |
| ||||||||||
Joint venture partner |
| — |
| — |
| — |
| — |
| — |
| (8.9 | ) |
| (8.9 | ) |
| — |
|
| — |
| — |
| — |
| — |
| — |
| (4.4 | ) |
| (4.4 | ) |
| — |
| ||||||||||
Restricted stock awards (net of |
| 0.2 |
| 9.0 |
| — |
| — |
| 9.0 |
| — |
| 9.0 |
| — |
|
| 0.2 |
| 14.1 |
| — |
| — |
| 14.1 |
| — |
| 14.1 |
| — |
| ||||||||||||||
Unamortized restricted stock |
| — |
| (11.4 | ) |
| — |
| — |
| (11.4 | ) |
| — |
| (11.4 | ) |
| — |
|
| — |
| (19.2 | ) |
| — |
| — |
| (19.2 | ) |
| — |
| (19.2 | ) |
| — |
| ||||||||
Stock based compensation expense |
| — |
| 5.9 |
| — |
| — |
| 5.9 |
| — |
| 5.9 |
| — |
|
| — |
| 8.1 |
| — |
| — |
| 8.1 |
| — |
| 8.1 |
| — |
| ||||||||||||||
Repurchase of stock |
| (0.5 | ) |
| (17.4 | ) |
| — |
| — |
| (17.4 | ) |
| — |
| (17.4 | ) |
| — |
|
| — |
| (1.3 | ) |
| — |
| — |
| (1.3 | ) |
| — |
| (1.3 | ) |
| — |
| |||||||
Cash dividends ($0.54 per share) |
| — |
|
| — |
|
| (18.1 | ) |
| — |
|
| (18.1 | ) |
| — |
|
| (18.1 | ) |
|
| |||||||||||||||||||||||||
Balance February 28, 2023 |
| 32.3 |
| $ | 403.0 |
| $ | 896.0 |
| $ | (21.7 | ) | $ | 1,277.3 |
| $ | 144.6 |
| $ | 1,421.9 |
| $ | 27.5 |
| ||||||||||||||||||||||||
Cash dividends ($0.60 per share) |
| — |
|
| — |
|
| (19.4 | ) |
| — |
|
| (19.4 | ) |
| — |
|
| (19.4 | ) |
| — |
| ||||||||||||||||||||||||
Balance February 29, 2024 |
| 31.1 |
| $ | 366.1 |
| $ | 942.7 |
| $ | (8.9 | ) | $ | 1,299.9 |
| $ | 154.6 |
| $ | 1,454.5 |
| $ | 56.0 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| |||||||||
Balance November 30, 2022 |
| 32.8 |
| $ | 425.6 |
| $ | 871.9 |
| $ | (31.7 | ) | $ | 1,265.8 |
| $ | 152.1 |
| $ | 1,417.9 |
| $ | 27.7 |
|
Net earnings |
| — |
|
| — |
|
| 33.1 |
|
| — |
|
| 33.1 |
|
| 3.9 |
|
| 37.0 |
|
| (0.2 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 10.0 |
|
| 10.0 |
|
| — |
|
| 10.0 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| (7.9 | ) |
| — |
|
| — |
|
| (7.9 | ) |
| (7.5 | ) |
| (15.4 | ) |
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3.9 | ) |
| (3.9 | ) |
| — |
|
Restricted stock awards (net of |
| — |
|
| 0.5 |
|
| — |
|
| — |
|
| 0.5 |
|
| — |
|
| 0.5 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (0.5 | ) |
| — |
|
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
Stock based compensation expense |
| — |
|
| 2.7 |
|
| — |
|
| — |
|
| 2.7 |
|
| — |
|
| 2.7 |
|
| — |
|
Repurchase of stock |
| (0.5 | ) |
| (17.4 | ) |
|
|
|
|
| (17.4 | ) |
|
|
| (17.4 | ) |
|
| ||||
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
Balance February 28, 2023 |
| 32.3 |
| $ | 403.0 |
| $ | 896.0 |
| $ | (21.7 | ) | $ | 1,277.3 |
| $ | 144.6 |
| $ | 1,421.9 |
| $ | 27.5 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| |||||||||
Balance November 30, 2023 |
| 31.1 |
| $ | 361.3 |
| $ | 919.1 |
| $ | (6.4 | ) | $ | 1,274.0 |
| $ | 157.1 |
| $ | 1,431.1 |
| $ | 56.5 |
|
Net earnings |
| — |
|
| — |
|
| 33.4 |
|
| — |
|
| 33.4 |
|
| 0.7 |
|
| 34.1 |
|
| (0.5 | ) |
Other comprehensive loss, net |
| — |
|
| — |
|
| — |
|
| (2.5 | ) |
| (2.5 | ) |
| — |
|
| (2.5 | ) |
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1.2 |
|
| 1.2 |
|
| — |
|
Joint venture partner distribution |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (4.4 | ) |
| (4.4 | ) |
| — |
|
Restricted stock awards (net of |
| — |
|
| 3.7 |
|
| — |
|
| — |
|
| 3.7 |
|
| — |
|
| 3.7 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (3.6 | ) |
| — |
|
| — |
|
| (3.6 | ) |
| — |
|
| (3.6 | ) |
| — |
|
Stock based compensation expense |
| — |
|
| 4.7 |
|
| — |
|
| — |
|
| 4.7 |
|
| — |
|
| 4.7 |
|
| — |
|
Cash dividends ($0.30 per share) |
| — |
|
| — |
|
| (9.8 | ) |
| — |
|
| (9.8 | ) |
| — |
|
| (9.8 | ) |
| — |
|
Balance February 29, 2024 |
| 31.1 |
| $ | 366.1 |
| $ | 942.7 |
| $ | (8.9 | ) | $ | 1,299.9 |
| $ | 154.6 |
| $ | 1,454.5 |
| $ | 56.0 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||||||||||
Balance August 31, 2021 |
| 32.4 |
| $ | 469.7 |
| $ | 881.7 |
| $ | (43.7 | ) | $ | 1,307.7 |
| $ | 168.7 |
| $ | 1,476.4 |
| $ | 29.7 |
| ||||||||||||||||||||||||
Cumulative effect adjustment due |
| — |
| (58.8 | ) |
| 4.9 |
| — |
| (53.9 | ) |
| — |
| (53.9 | ) |
| — |
| ||||||||||||||||||||||||||||
Balance August 31, 2022 |
| 32.6 |
| $ | 424.8 |
| $ | 897.7 |
| $ | (45.6 | ) | $ | 1,276.9 |
| $ | 152.2 |
| $ | 1,429.1 |
| $ | 27.7 |
| ||||||||||||||||||||||||
Net earnings |
| — |
| — |
| 23.6 |
| — |
| 23.6 |
| (5.6 | ) |
| 18.0 |
| (1.2 | ) |
| — |
| — |
| 16.4 |
| — |
| 16.4 |
| 3.3 |
| 19.7 |
| (0.2 | ) | |||||||||||||
Other comprehensive income, net |
| — |
| — |
| — |
| (9.6 | ) |
| (9.6 | ) |
| — |
| (9.6 | ) |
| — |
|
| — |
| — |
| — |
| 23.9 |
| 23.9 |
| — |
| 23.9 |
| — |
| |||||||||||
Noncontrolling interest adjustments |
| — |
| — |
| — |
| — |
| — |
| (0.6 | ) |
| (0.6 | ) |
| — |
|
| — |
| (7.9 | ) |
| — |
| — |
| (7.9 | ) |
| (2.0 | ) |
| (9.9 | ) |
| — |
| ||||||||
Joint venture partner |
| — |
| — |
| — |
| — |
| — |
| (8.4 | ) |
| (8.4 | ) |
| — |
|
| — |
| — |
| — |
| — |
| — |
| (8.9 | ) |
| (8.9 | ) |
| — |
| ||||||||||
Restricted stock awards (net of |
| 0.2 |
| 11.9 |
| — |
| — |
| 11.9 |
| — |
| 11.9 |
| — |
|
| 0.2 |
| 9.0 |
| — |
| — |
| 9.0 |
| — |
| 9.0 |
| — |
| ||||||||||||||
Unamortized restricted stock |
| — |
| (15.3 | ) |
| — |
| — |
| (15.3 | ) |
| — |
| (15.3 | ) |
| — |
|
| — |
| (11.4 | ) |
| — |
| — |
| (11.4 | ) |
| — |
| (11.4 | ) |
| — |
| ||||||||
Stock based compensation expense |
| — |
| 5.9 |
| — |
| — |
| 5.9 |
| — |
| 5.9 |
| — |
|
| — |
| 5.9 |
| — |
| — |
| 5.9 |
| — |
| 5.9 |
| — |
| ||||||||||||||
Repurchase of stock |
| (0.5 | ) |
| (17.4 | ) |
| — |
| — |
| (17.4 | ) |
| — |
| (17.4 | ) |
| — |
| |||||||||||||||||||||||||||
Cash dividends ($0.54 per share) |
| — |
|
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
| — |
|
| — |
|
| — |
|
| (18.1 | ) |
| — |
|
| (18.1 | ) |
| — |
|
| (18.1 | ) |
| — |
|
Balance February 28, 2022 |
| 32.6 |
| $ | 413.4 |
| $ | 892.5 |
| $ | (53.3 | ) | $ | 1,252.6 |
| $ | 154.1 |
| $ | 1,406.7 |
| $ | 28.5 |
| ||||||||||||||||||||||||
Balance February 28, 2023 |
| 32.3 |
| $ | 403.0 |
| $ | 896.0 |
| $ | (21.7 | ) | $ | 1,277.3 |
| $ | 144.6 |
| $ | 1,421.9 |
| $ | 27.5 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| |||||||||||||||||
Balance November 30, 2021 |
| 32.5 |
| $ | 408.5 |
| $ | 888.7 |
| $ | (59.9 | ) | $ | 1,237.3 |
| $ | 162.7 |
| $ | 1,400.0 |
| $ | 29.7 |
| ||||||||||||||||||||||||
Balance November 30, 2022 |
| 32.8 |
| $ | 425.6 |
| $ | 871.9 |
| $ | (31.7 | ) | $ | 1,265.8 |
| $ | 152.1 |
| $ | 1,417.9 |
| $ | 27.7 |
| ||||||||||||||||||||||||
Net earnings |
| — |
| — |
| 12.8 |
| — |
| 12.8 |
| (0.4 | ) |
| 12.4 |
| (1.2 | ) |
| — |
| — |
| 33.1 |
| — |
| 33.1 |
| 3.9 |
| 37.0 |
| (0.2 | ) | |||||||||||||
Other comprehensive income, net |
| — |
| — |
| — |
| 6.6 |
| 6.6 |
| — |
| 6.6 |
| — |
|
| — |
| — |
| — |
| 10.0 |
| 10.0 |
| — |
| 10.0 |
| — |
| ||||||||||||||
Noncontrolling interest adjustments |
| — |
| — |
| — |
| — |
| — |
| (0.4 | ) |
| (0.4 | ) |
| — |
|
| — |
| (7.9 | ) |
| — |
| — |
| (7.9 | ) |
| (7.5 | ) |
| (15.4 | ) |
| — |
| ||||||||
Joint venture partner |
| — |
| — |
| — |
| — |
| — |
| (7.8 | ) |
| (7.8 | ) |
| — |
|
| — |
| — |
| — |
| — |
| — |
| (3.9 | ) |
| (3.9 | ) |
| — |
| ||||||||||
Restricted stock awards (net of |
| 0.1 |
| 1.4 |
| — |
| — |
| 1.4 |
| — |
| 1.4 |
| — |
|
| — |
| 0.5 |
| — |
| — |
| 0.5 |
| — |
| 0.5 |
| — |
| ||||||||||||||
Unamortized restricted stock |
| — |
| (1.3 | ) |
| — |
| — |
| (1.3 | ) |
| — |
| (1.3 | ) |
| — |
|
| — |
| (0.5 | ) |
| — |
| — |
| (0.5 | ) |
| — |
| (0.5 | ) |
| — |
| ||||||||
Restricted stock amortization |
| — |
| 4.8 |
| — |
| — |
| 4.8 |
| — |
| 4.8 |
| — |
| |||||||||||||||||||||||||||||||
Stock based compensation expense |
| — |
| 2.7 |
| — |
| — |
| 2.7 |
| — |
| 2.7 |
| — |
| |||||||||||||||||||||||||||||||
Repurchase of stock |
| (0.5 | ) |
| (17.4 | ) |
| — |
| — |
| (17.4 | ) |
| — |
| (17.4 | ) |
| — |
| |||||||||||||||||||||||||||
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
| — |
|
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
Balance February 28, 2022 |
| 32.6 |
| $ | 413.4 |
| $ | 892.5 |
| $ | (53.3 | ) | $ | 1,252.6 |
| $ | 154.1 |
| $ | 1,406.7 |
| $ | 28.5 |
| ||||||||||||||||||||||||
Balance February 28, 2023 |
| 32.3 |
| $ | 403.0 |
| $ | 896.0 |
| $ | (21.7 | ) | $ | 1,277.3 |
| $ | 144.6 |
| $ | 1,421.9 |
| $ | 27.5 |
|
The accompanying notes are an integral part of these financial statements
7
Condensed Consolidated Statements of Cash Flows
(In millions, unaudited)
|
| Six Months Ended |
| |||||
|
| February 29, |
|
| February 28, |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net earnings |
| $ | 66.8 |
|
| $ | 19.5 |
|
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
|
|
|
|
|
| ||
Deferred income taxes |
|
| (35.5 | ) |
|
| (33.9 | ) |
Depreciation and amortization |
|
| 54.3 |
|
|
| 52.9 |
|
Net gain on disposition of equipment |
|
| (4.8 | ) |
|
| (12.9 | ) |
Stock based compensation expense |
|
| 8.1 |
|
|
| 5.9 |
|
Impairment of long-lived assets |
|
| — |
|
|
| 24.2 |
|
Noncontrolling interest adjustments |
|
| 1.6 |
|
|
| 2.3 |
|
Other |
|
| 2.0 |
|
|
| 1.9 |
|
Decrease (increase) in assets: |
|
|
|
|
|
| ||
Accounts receivable, net |
|
| 12.2 |
|
|
| (57.8 | ) |
Income tax receivable |
|
| 21.3 |
|
|
| 17.4 |
|
Inventories |
|
| (8.4 | ) |
|
| (90.4 | ) |
Leased railcars for syndication |
|
| (6.7 | ) |
|
| (40.1 | ) |
Other assets |
|
| 2.5 |
|
|
| (12.8 | ) |
Increase (decrease) in liabilities: |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| (93.8 | ) |
|
| (9.7 | ) |
Deferred revenue |
|
| 34.8 |
|
|
| 37.1 |
|
Net cash provided by (used in) operating activities |
|
| 54.4 |
|
|
| (96.4 | ) |
Cash flows from investing activities |
|
|
|
|
|
| ||
Proceeds from sales of assets |
|
| 25.9 |
|
|
| 62.1 |
|
Capital expenditures |
|
| (190.5 | ) |
|
| (169.7 | ) |
Investments in and advances to / repayments from unconsolidated affiliates |
|
| — |
|
|
| (3.5 | ) |
Cash distribution from unconsolidated affiliates and other |
|
| 1.5 |
|
|
| 5.9 |
|
Net cash used in investing activities |
|
| (163.1 | ) |
|
| (105.2 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Net change in revolving notes with maturities of 90 days or less |
|
| 28.5 |
|
|
| (64.4 | ) |
Proceeds from revolving notes with maturities longer than 90 days |
|
| 114.5 |
|
|
| 220.0 |
|
Repayments of revolving notes with maturities longer than 90 days |
|
| (140.2 | ) |
|
| (145.0 | ) |
Proceeds from issuance of notes payable |
|
| 178.6 |
|
|
| 75.0 |
|
Repayments of notes payable |
|
| (68.2 | ) |
|
| (18.2 | ) |
Debt issuance costs |
|
| (2.9 | ) |
|
| (0.2 | ) |
Repurchase of stock |
|
| (1.3 | ) |
|
| (16.7 | ) |
Dividends |
|
| (19.7 | ) |
|
| (18.1 | ) |
Cash distribution to joint venture partner |
|
| (4.4 | ) |
|
| (6.4 | ) |
Tax payments for net share settlement of restricted stock |
|
| (5.2 | ) |
|
| (2.3 | ) |
Net cash provided by financing activities |
|
| 79.7 |
|
|
| 23.7 |
|
Effect of exchange rate changes |
|
| (1.7 | ) |
|
| 18.4 |
|
Decrease in Cash and cash equivalents and Restricted cash |
|
| (30.7 | ) |
|
| (159.5 | ) |
Cash and cash equivalents and restricted cash |
|
|
|
|
|
| ||
Beginning of period |
|
| 302.7 |
|
|
| 559.1 |
|
End of period |
| $ | 272.0 |
|
| $ | 399.6 |
|
Balance sheet reconciliation |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 252.0 |
|
| $ | 379.9 |
|
Restricted cash |
|
| 20.0 |
|
|
| 19.7 |
|
Total cash and cash equivalents and restricted cash as presented above |
| $ | 272.0 |
|
| $ | 399.6 |
|
Cash paid during the period for |
|
|
|
|
|
| ||
Interest |
| $ | 42.5 |
|
| $ | 31.3 |
|
Income taxes paid, net |
| $ | 31.7 |
|
| $ | 19.5 |
|
Non-cash activity |
|
|
|
|
|
| ||
Transfers between Leased railcars for syndication and Inventories and |
| $ | 64.8 |
|
| $ | 39.7 |
|
Capital expenditures accrued in Accounts payable and accrued liabilities |
| $ | 13.0 |
|
| $ | 4.4 |
|
Change in Accounts payable and accrued liabilities associated with dividends declared |
| $ | 0.3 |
|
| $ | 0.1 |
|
Change in Accounts payable and accrued liabilities associated with cash |
| $ | — |
|
| $ | 2.5 |
|
Repurchase of stock accrued in Accounts payable and accrued liabilities |
| $ | — |
|
| $ | 0.7 |
|
The accompanying notes are an integral part of these financial statements
8
Condensed Consolidated Statements of Cash Flows
(In millions, unaudited)
|
| Six Months Ended |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net earnings |
| $ | 19.5 |
|
| $ | 16.8 |
|
Adjustments to reconcile net earnings to net cash used in operating activities: |
|
|
|
|
|
| ||
Deferred income taxes |
|
| (33.9 | ) |
|
| (4.3 | ) |
Depreciation and amortization |
|
| 52.9 |
|
|
| 50.9 |
|
Net gain on disposition of equipment |
|
| (12.9 | ) |
|
| (33.6 | ) |
Stock based compensation expense |
|
| 5.9 |
|
|
| 5.9 |
|
Impairment of long-lived assets |
|
| 24.2 |
|
|
| — |
|
Noncontrolling interest adjustments |
|
| 2.3 |
|
|
| (0.6 | ) |
Other |
|
| 1.9 |
|
|
| 2.4 |
|
Decrease (increase) in assets: |
|
|
|
|
|
| ||
Accounts receivable, net |
|
| (57.8 | ) |
|
| (93.5 | ) |
Income tax receivable |
|
| 17.4 |
|
|
| 6.2 |
|
Inventories |
|
| (90.4 | ) |
|
| (166.5 | ) |
Leased railcars for syndication |
|
| (40.1 | ) |
|
| (12.2 | ) |
Other assets |
|
| (12.8 | ) |
|
| (8.5 | ) |
Increase (decrease) in liabilities: |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| (9.7 | ) |
|
| 15.2 |
|
Deferred revenue |
|
| 37.1 |
|
|
| 1.5 |
|
Net cash used in operating activities |
|
| (96.4 | ) |
|
| (220.3 | ) |
Cash flows from investing activities |
|
|
|
|
|
| ||
Proceeds from sales of assets |
|
| 62.1 |
|
|
| 148.6 |
|
Capital expenditures |
|
| (169.7 | ) |
|
| (198.0 | ) |
Investments in and advances to / repayments from unconsolidated affiliates |
|
| (3.5 | ) |
|
| (4.2 | ) |
Cash distribution from unconsolidated affiliates and other |
|
| 5.9 |
|
|
| 1.2 |
|
Net cash used in investing activities |
|
| (105.2 | ) |
|
| (52.4 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Net change in revolving notes with maturities of 90 days or less |
|
| (64.4 | ) |
|
| (75.6 | ) |
Proceeds from revolving notes with maturities longer than 90 days |
|
| 220.0 |
|
|
| — |
|
Repayments of revolving notes with maturities longer than 90 days |
|
| (145.0 | ) |
|
| — |
|
Proceeds from issuance of notes payable |
|
| 75.0 |
|
|
| 323.3 |
|
Repayments of notes payable |
|
| (18.2 | ) |
|
| (7.6 | ) |
Debt issuance costs |
|
| (0.2 | ) |
|
| (5.2 | ) |
Repurchase of stock |
|
| (16.7 | ) |
|
| — |
|
Dividends |
|
| (18.1 | ) |
|
| (18.1 | ) |
Cash distribution to joint venture partner |
|
| (6.4 | ) |
|
| (8.5 | ) |
Tax payments for net share settlement of restricted stock |
|
| (2.3 | ) |
|
| (3.5 | ) |
Net cash provided by financing activities |
|
| 23.7 |
|
|
| 204.8 |
|
Effect of exchange rate changes |
|
| 18.4 |
|
|
| (1.0 | ) |
Decrease in cash and cash equivalents and restricted cash |
|
| (159.5 | ) |
|
| (68.9 | ) |
Cash and cash equivalents and restricted cash |
|
|
|
|
|
| ||
Beginning of period |
|
| 559.1 |
|
|
| 671.4 |
|
End of period |
| $ | 399.6 |
|
| $ | 602.5 |
|
Balance sheet reconciliation |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 379.9 |
|
| $ | 586.8 |
|
Restricted cash |
|
| 19.7 |
|
|
| 15.7 |
|
Total cash and cash equivalents and restricted cash as presented above |
| $ | 399.6 |
|
| $ | 602.5 |
|
Cash paid during the period for |
|
|
|
|
|
| ||
Interest |
| $ | 31.3 |
|
| $ | 14.9 |
|
Income taxes paid, net |
| $ | 19.5 |
|
| $ | 1.7 |
|
Non-cash activity |
|
|
|
|
|
| ||
Transfers between Leased railcars for syndication and Inventories and |
| $ | 39.7 |
|
| $ | 10.5 |
|
Capital expenditures accrued in Accounts payable and accrued liabilities |
| $ | 4.4 |
|
| $ | 2.6 |
|
Change in Accounts payable and accrued liabilities associated with dividends declared |
| $ | 0.1 |
|
| $ | 0.4 |
|
Change in Accounts payable and accrued liabilities associated with cash |
| $ | 2.5 |
|
| $ | 0.1 |
|
Repurchase of stock accrued in Accounts payable and accrued liabilities |
| $ | 0.7 |
|
| $ | — |
|
The accompanying notes are an integral part of these financial statements
9
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Interim Financial Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of February 28, 202329, 2024 and for the three and six months ended February 29, 2024 and February 28, 2023 and 2022 have been prepared to reflect all adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for a fair presentation of the financial position, operating results and cash flows for the periods indicated. All references to years refer to the fiscal years ended August 31st unless otherwise noted. The results of operations for the three and six months ended February 28, 202329, 2024 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2023.2024.
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 unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2022.2023.
Management Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) 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.
Share Repurchase Program – The Board of Directors has authorized the Company to repurchase in aggregate up to $100.0 million of the Company’s common stock. The program may be modified, suspended, or discontinued at any time without prior notice.notice and currently has an expiration date of January 31, 2025. Under the share repurchase program, shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. The timing and amount of purchases will beis based upon market conditions, securities law limitations and other factors. The
During the six months ended February 29, 2024, the Company purchased a total of 38 thousand shares for $1.3 million. There were no share repurchases during the three months ended February 29, 2024. As of February 29, 2024, the amount remaining for repurchase under the share repurchase program does not obligate the Company to acquire any specific number of shares in any period. The prior authorization was set to expire on $January 31, 202345.1. On January 5, 2023, the Board of Directors authorized the extension of the existing share repurchase program to January 31, 2025.
million. During the three and six months ended February 28, 2023, the Company purchased a total of 575 thousand shares for $17.4 million, of which million.
478Reclassifications thousand shares for $14.1 million were purchased under- Certain immaterial reclassifications have been made to the accompanying prior year Condensed Consolidated Financial Statements to conform to the current authorization of the share repurchase program. As of February 28, 2023, the amount remaining for repurchase under the share repurchase program was $year presentation.
85.9 million. There were no shares repurchased under the share repurchase program during the six months ended February 28, 2022.Recent Accounting Pronouncements
Initial Adoption of Accounting Standards
Reference Rate ReformImprovements to Reportable Segment Disclosures
In March 2020,November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2020-04,2023-07, Reference Rate ReformSegment Reporting (Topic 848)280): Facilitation of Effects of Reference Rate Reform on Financial ReportingImprovements to Reportable Segment Disclosures (ASU 2020-04)(ASU 2023-07), which provides practical expedientsrequires disclosure of incremental segment information on an annual and exceptionsinterim basis, primarily through enhanced disclosures of significant segment expenses. ASU 2023-07 is effective for applying GAAPfiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to contracts, hedging relationships,all periods presented upon adoption. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2023-07 will have on its consolidated financial statements and other transactions affected by reference rate reform if certain criteria are met. The elective amendments provide expedientsdisclosures.
Improvements to contract modification, affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (LIBOR) or another reference rate expected to be discontinued as a result of reference rate reform. Income Tax Disclosures
In December 2022,2023, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, to extend the temporary accounting rules under Topic 848 from December 31, 20222023-09, Income Taxes (Topic 740): Improvements to December 31, 2024. This guidanceIncome Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is not applicable to contract modifications made and hedging relationships entered into or evaluatedeffective for fiscal years beginning after December 31,15, 2024. During the fourth quarter of fiscal year 2022, the Company adopted the optional relief guidance provided under ASU 2020-04 after modifying certain debt to update the reference rate from LIBOR to the Secured Overnight Financing Rate (SOFR). This caused a temporary mismatch in our interest rate swap and debt for a period of time. The application of this expedient preserves the presentation of the derivatives consistent with past presentation.Early adoption is permitted. The Company will continue to assessis currently evaluating the impact of the guidancethat ASU 2023-09 will have on its consolidated financial statements and may apply other elections as applicable going forward.disclosures.
109
Note 2 – Revenue Recognition
Contract balances
Contract assets primarily consist of unbilled receivables related to marine vessel constructionwork completed for which the respective contracts dorailcar maintenance but not yet permit billingbilled at the reporting date, and railcar maintenance inventories.date. Contract liabilities primarily consist of customer prepayments for manufacturing, maintenance,new railcars and other management-type services, for which the Company has not yet satisfied the related performance obligations.
The contract balances are as follows:
(in millions) |
| Balance sheet classification |
| February 28, |
|
| August 31, |
|
| $ |
|
| Balance sheet classification |
| February 29, |
|
| August 31, |
|
| $ |
| ||||||
Contract assets |
| Accounts receivable, net |
| $ | 2.4 |
|
| $ | 13.0 |
|
| $ | (10.6 | ) |
| Accounts Receivable |
| $ | 0.7 |
|
| $ | 0.1 |
|
| $ | 0.6 |
|
Contract assets |
| Inventories |
| $ | 8.2 |
|
| $ | 6.0 |
|
| $ | 2.2 |
|
| Inventories |
| $ | 10.3 |
|
| $ | 7.0 |
|
| $ | 3.3 |
|
Contract liabilities 1 |
| Deferred revenue |
| $ | 65.7 |
|
| $ | 30.5 |
|
| $ | 35.2 |
| ||||||||||||||
Contract liabilities (1) |
| Deferred revenue |
| $ | 77.7 |
|
| $ | 43.3 |
|
| $ | 34.4 |
|
1(1) Contract liabilities balance includes deferred revenue within the scope of Revenue from Contracts with Customers (Topic 606).
For the three and six months ended February 28, 2023,29, 2024, the Company recognized $2.36.8 million and $10.013.4 million of revenue that was included in Contract liabilities as of August 31, 2022.2023.
Performance obligations
As of February 28, 2023,29, 2024, the Company has entered into contracts with customers for which revenue has not yet been recognized. The following table outlines estimated revenue related to performance obligations wholly or partially unsatisfied, that the Company anticipates will be recognized in future periods.
(in millions) |
| February 28, |
|
| February 29, |
| ||
Revenue type: |
|
|
|
|
|
| ||
Manufacturing – Railcar sales |
| $ | 2,321.9 |
|
| $ | 2,725.8 |
|
Manufacturing – Marine |
| $ | 43.2 |
| ||||
Manufacturing – Sustainable conversions |
| $ | 103.8 |
|
| $ | 52.6 |
|
Management services |
| $ | 130.1 |
|
| $ | 133.4 |
|
Other |
| $ | 11.5 |
|
| $ | 13.0 |
|
Based on current production and delivery schedules and existing contracts, approximately $1.31.1 billion of Railcar sales are expected to be recognized in the remaining six monthsremainder of 20232024 while the remaining amount is expected to be recognized into calendar 2024.
Marine revenue is expected to be recognized into 2024 as vessel construction is completed.through 2026.
Sustainable conversions represent orders to modernize existing railcars and are expected to be recognized through 2023.in 2024.
Management services includes management and maintenance servicesservice contracts of which approximately 5055% are expected to be performed through 20272028 and the remaining amount through 2037.
11
Note 3 – Inventories
Inventories are valued at the lower of cost or net realizable value using the first-in first-out method. Work-in-process includes material, labor and overhead. Finished goods includes completed wheels, parts and railcars not on lease or in transit. The following table summarizes the Company’s inventoryInventories balance:
(in millions) |
| February 29, |
|
| August 31, |
| ||
Manufacturing supplies and raw materials |
| $ | 600.1 |
|
| $ | 638.2 |
|
Work-in-process |
|
| 133.1 |
|
|
| 138.2 |
|
Finished goods |
|
| 99.7 |
|
|
| 64.4 |
|
Excess and obsolete adjustment |
|
| (5.9 | ) |
|
| (17.2 | ) |
|
| $ | 827.0 |
|
| $ | 823.6 |
|
(in millions) |
| February 28, |
|
| August 31, |
| ||
Manufacturing supplies and raw materials |
| $ | 686.7 |
|
| $ | 570.2 |
|
Work-in-process |
|
| 140.3 |
|
|
| 183.3 |
|
Finished goods |
|
| 99.2 |
|
|
| 75.9 |
|
Excess and obsolete adjustment |
|
| (15.6 | ) |
|
| (14.1 | ) |
|
| $ | 910.6 |
|
| $ | 815.3 |
|
Note 4 – Gunderson Facility10
On November 17, 2022, as part of the Company's strategic review of the global business capacity footprint, the Company decided to permanently cease rail production at the Company’s Gunderson facility during 2023 and to explore alternatives to exit marine barge production in the first part of calendar 2024. Due to the change in future use of the facility, management assessed recoverability of Gunderson assets in accordance with the Company’s policy on impairment of long-lived assets.Based on an analysis of future undiscounted cash flows associated with these assets, management determined that the carrying value was not recoverable. The carrying amount of the Company’s long-lived assets at the Gunderson facility was $44.0 million and the fair value was $19.8 million as of the impairment date. The fair value was primarily determined based on estimated market prices of the assets and represented a Level 3 valuation in the fair value hierarchy. In the first quarter of fiscal 2023, the Company concluded that an impairment charge was necessary and $24.2 million was recorded in the Manufacturing segment as Impairment of long-lived assets within the Condensed Consolidated Statements of Income. Although it is possible that costs and charges related to the cessation of production at the facility, such as exit costs and termination benefits may be incurred in future periods, the amount of any such costs and charges is not estimable at this time and the Company does not yet know if the amount of any such costs and charges will be material.
Note 54 – 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 IntangibleIntangibles and other assets, net balance:
(in millions) |
| February 28, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Customer relationships |
| $ | 87.5 |
|
| $ | 87.5 |
|
| $ | 87.5 |
|
| $ | 87.5 |
|
Accumulated amortization |
|
| (67.6 | ) |
|
| (66.1 | ) |
|
| (70.6 | ) |
|
| (69.1 | ) |
Other intangibles |
|
| 42.7 |
|
|
| 42.4 |
|
|
| 41.8 |
|
|
| 43.0 |
|
Accumulated amortization |
|
| (19.6 | ) |
|
| (16.5 | ) |
|
| (23.8 | ) |
|
| (22.3 | ) |
|
| 43.0 |
|
|
| 47.3 |
|
|
| 34.9 |
|
|
| 39.1 |
| |
Intangible assets not subject to amortization |
|
| 2.4 |
|
|
| 2.4 |
|
|
| 2.3 |
|
|
| 2.3 |
|
Prepaid and other assets |
|
| 76.4 |
|
|
| 32.4 |
|
|
| 50.5 |
|
|
| 56.4 |
|
Operating lease ROU assets |
|
| 50.0 |
|
|
| 54.2 |
| ||||||||
Operating lease right-of-use assets |
|
| 70.7 |
|
|
| 70.6 |
| ||||||||
Nonqualified savings plan investments |
|
| 45.1 |
|
|
| 40.3 |
|
|
| 56.4 |
|
|
| 47.7 |
|
Debt issuance costs, net |
|
| 6.8 |
|
|
| 8.7 |
|
|
| 6.4 |
|
|
| 6.3 |
|
Assets held for sale |
|
| 0.3 |
|
|
| 3.8 |
|
|
| 0.3 |
|
|
| 0.3 |
|
Deferred tax assets |
|
| 34.1 |
|
|
| 33.1 |
| ||||||||
|
| $ | 224.0 |
|
| $ | 189.1 |
|
| $ | 255.6 |
|
| $ | 255.8 |
|
Amortization expense was $2.0 million and $4.0 million for the three and six months ended February 28, 2023, respectively and $2.3 million and $5.4 million for the three and six months ended February 28, 2022, respectively. Amortization expense for the years ending August 31, 2023, 2024, 2025, 2026 and 2027 is expected to be $8.3 million, $7.5 million, $6.5 million, $6.1 million and $5.3 million, respectively.
12
Note 65 – Revolving Notes
Senior secured credit facilities aggregated to $1.11.4 billion as of February 28, 2023.29, 2024. The Company had an aggregate of $436.0329.3 million available to draw down under committed credit facilities as of February 28, 2023.29, 2024. This amount consists of $364.1214.6 million available on the North American credit facility, $36.943.7 million on the European credit facilities and $35.071.0 million on the Mexican credit facilities.
Nonrecourse credit facilities
GBX Leasing –As of February 29, 2024, a $550.0 million nonrecourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under this facility bear interest at the Secured Overnight Financing Rate (SOFR) plus 1.85% plus 0.11% as a SOFR adjustment. Interest rate swap agreements cover approximately 99% of the outstanding balance to swap the floating interest rate to a fixed rate. The warehouse credit facility converts to a term loan in August 2025 and matures in August 2027.
Other credit facilities
North America – As of February 28, 2023,29, 2024, a $600.0 million revolving line of credit, maturing August 2026, secured by substantially all the Company’s U.S. assets not otherwise pledged as security for term loans or the warehouse credit facility, existed to provide working capital and interim financing of equipment, principally for the Company’s U.S. and Mexican operations. Advances under this North American credit facility bear interest at SOFR plus 1.75% plus 0.10% as a SOFR adjustment or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
GBX Leasing –As of February 28, 2023, a $350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under this facility bear interest at SOFR plus 1.85% plus 0.11% as a SOFR adjustment. The warehouse credit facility converts to a term loan in August 2025 and matures in August 2027.
Europe – As of February 28, 2023,29, 2024, lines of credit totaling $71.775.3 million secured by certain of the Company’s European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.6% and Euro Interbank Offered Rate (EURIBOR) plus 1.1% to EURIBOR plus 1.51.9%, were available for working capital needs of the Company’s European manufacturing operations. The European lines of credit include $35.032.5 million which is guaranteed by the Company. European credit facilities are regularly renewed. Currently, these European credit facilities have maturities that range from June 20232024 through September 2024November 2025.
Mexico – As of February 28, 2023,29, 2024, the Company’s Mexican railcar manufacturing operations had threelines of credit totaling $120.0196.0 million for working capital needs. The first line of credit provides up toneeds, $50.0 million and matures in October 2024. Advances under this facility bear interest at LIBOR plus 4.25%. The second line of credit provides up to $40.096.0 million of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facilitythese facilities bear interest at variable rates that range from SOFR plus 2.55%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through February 2025. The third line of credit provides up to $30.0 million, of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 3.752.22% to SOFR plus 4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility throughcredit facilities have maturities that range from June 2024 through January 2027.
11
Revolving notes consisted of the following balances:
(in millions) |
| February 28, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||
Nonrecourse credit facility balances |
|
|
|
|
|
| ||||||||||
GBX Leasing |
| $ | 89.2 |
|
| $ | 139.9 |
| ||||||||
Other credit facility balances |
|
|
|
|
| |||||||||||
North America |
| $ | 125.0 |
|
| $ | 160.0 |
|
|
| 55.0 |
|
|
| — |
|
GBX Leasing |
|
| 65.5 |
|
|
| — |
| ||||||||
Europe |
|
| 34.8 |
|
|
| 51.6 |
|
|
| 31.6 |
|
|
| 47.2 |
|
Mexico |
|
| 85.0 |
|
|
| 85.0 |
|
|
| 125.0 |
|
|
| 110.0 |
|
|
| $ | 310.3 |
|
| $ | 296.6 |
| ||||||||
Total Revolving notes |
| $ | 300.8 |
|
| $ | 297.1 |
|
Outstanding commitments under the North American credit facility included letters of credit which totaled $5.57.1 million and $6.94.9 million as of February 28, 202329, 2024 and August 31, 2022,2023, respectively.
13
Note 76 – Accounts Payable and Accrued Liabilities
(in millions) |
| February 28, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||
Trade payables |
| $ | 408.0 |
|
| $ | 401.5 |
|
| $ | 303.4 |
|
| $ | 396.8 |
|
Accrued payroll and related liabilities |
|
| 147.9 |
|
|
| 158.6 |
| ||||||||
Accrued liabilities and other |
|
| 109.4 |
|
|
| 102.8 |
|
|
| 97.1 |
|
|
| 87.3 |
|
Operating lease liabilities |
|
| 52.0 |
|
|
| 56.4 |
|
|
| 71.9 |
|
|
| 72.2 |
|
Accrued payroll and related liabilities |
|
| 128.7 |
|
|
| 140.4 |
| ||||||||
Accrued warranty |
|
| 24.5 |
|
|
| 24.0 |
|
|
| 23.0 |
|
|
| 25.6 |
|
Income taxes payable |
|
| 6.0 |
|
|
| 3.0 |
| ||||||||
| $ | 722.6 |
|
| $ | 725.1 |
|
| $ | 649.3 |
|
| $ | 743.5 |
|
Note 87 – Warranty Accruals
Warranty costsaccruals 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 Condensed Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirationsSheets. Warranty accrual activity consisted of warranty periods.the following:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||
Balance at beginning of period |
| $ | 24.0 |
|
| $ | 23.7 |
|
| $ | 25.6 |
|
| $ | 24.0 |
|
Charged to cost of revenue, net |
|
| 1.1 |
|
|
| 1.7 |
|
|
| 4.7 |
|
|
| 2.9 |
|
Payments |
|
| (2.1 | ) |
|
| (1.0 | ) |
|
| (7.7 | ) |
|
| (2.6 | ) |
Currency translation effect |
|
| — |
|
|
| 0.1 |
|
|
| 0.4 |
|
|
| 0.2 |
|
Balance at end of period |
| $ | 23.0 |
|
| $ | 24.5 |
|
| $ | 23.0 |
|
| $ | 24.5 |
|
Note 8 – Notes Payable, net
(In millions) |
| February 29, |
|
| August 31, |
| ||
Leasing nonrecourse term loans |
| $ | 806.0 |
|
| $ | 640.2 |
|
Senior term debt |
|
| 259.0 |
|
|
| 266.4 |
|
2.875% Convertible senior notes, due 2028 |
|
| 373.8 |
|
|
| 373.8 |
|
2.875% Convertible senior notes, due 2024 |
|
| — |
|
|
| 47.7 |
|
Other notes payable |
|
| 1.6 |
|
|
| 1.8 |
|
|
| $ | 1,440.4 |
|
| $ | 1,329.9 |
|
Debt discount and issuance costs |
|
| (18.6 | ) |
|
| (18.2 | ) |
|
| $ | 1,421.8 |
|
| $ | 1,311.7 |
|
Warranty accrual activity:12
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Balance at beginning of period |
| $ | 23.7 |
|
| $ | 27.5 |
|
| $ | 24.0 |
|
| $ | 27.9 |
|
Charged to cost of revenue, net |
|
| 1.7 |
|
|
| 5.5 |
|
|
| 2.9 |
|
|
| 6.4 |
|
Payments |
|
| (1.0 | ) |
|
| (2.8 | ) |
|
| (2.6 | ) |
|
| (3.8 | ) |
Currency translation effect |
|
| 0.1 |
|
|
| (0.1 | ) |
|
| 0.2 |
|
|
| (0.4 | ) |
Balance at end of period |
| $ | 24.5 |
|
| $ | 30.1 |
|
| $ | 24.5 |
|
| $ | 30.1 |
|
Leasing nonrecourse term loans include:
The Company's 2.875% Convertible senior notes, due 2024 (2024 Convertible Notes), matured on February 1, 2024. The outstanding principal balance of $47.7 million plus accrued interest was settled in cash on the maturity date to retire the 2024 Convertible Notes.
Terms and conditions, including recourse and nonrecourse provisions and scheduled maturities, and other long-term debt are described in Note 13 of our 2023 Annual Report on Form 10-K.
Asset-backed term notes
GBX Leasing 2022-1 LLC (GBXL I) was formed as a wholly owned special purpose entity of GBX Leasing to securitize the leasing assets of GBX Leasing. On November 20, 2023, GBXL I (Issuer) issued $178.5 million of term notes secured by a portfolio of railcars and associated operating leases and other assets, acquired and owned by GBXL I (the 2023 GBXL Notes). Issued debt of GBXL I as of February 29, 2024 includes the $323.3 million GBXL I Series 2022-1 Notes, as described in Note 3 of our 2023 Annual Report on Form 10-K, and the 2023 GBXL Notes, collectively the GBXL Notes. GBX Leasing used the net proceeds received from the issuance of the term notes to pay down the GBX Leasing warehouse credit facility.
The 2023 GBXL Notes include $158.9 million of GBXL I Series 2023-1 Class A Secured Railcar Equipment Notes (2023 Class A Notes) and $19.6 million of GBXL I Series 2023-1 Class B Secured Railcar Equipment Notes (2023 Class B Notes). The 2023 GBXL Notes bear interest at fixed rates of 6.42% and 7.28% for the 2023 Class A Notes and 2023 Class B Notes, respectively. The 2023 GBXL Notes are payable monthly and have a legal maturity date of November 20, 2053. The Company incurred $2.2 million in debt issuance costs, which will be amortized to interest expense through the expected repayment period. Both 2023 Class A and Class B Notes have an anticipated repayment date of November 20, 2030 and a legal maturity date. While the legal maturity date is in 2053, the cash flows generated from the railcar assets will pay down the 2023 GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the legal maturity date. If the principal amount of the 2023 GBXL Notes has not been repaid in full by the anticipated repayment date, then the Issuer will also be required to pay additional interest to the holders at a rate equal to 4.00% per annum.
The GBXL Notes are obligations of the Issuer only and are nonrecourse to Greenbrier. The GBXL Notes are subject to a Master Indenture between the Issuer and U.S. Bank Trust Company, National Association, as trustee, as supplemented by the Series 2022-1 Supplement dated February 9, 2022 and the Series 2023-1 Supplement dated November 20, 2023. The GBXL Notes may be subject to acceleration upon the occurrence of certain events of default.
The following table summarizes the Issuer's net carrying amount of the debt and related assets.
(in millions) |
| February 29, |
|
| August 31, |
| ||
Assets |
|
|
|
|
|
| ||
Restricted cash |
| $ | 7.4 |
|
| $ | 6.7 |
|
Equipment on operating leases, net |
| $ | 645.2 |
|
| $ | 388.9 |
|
Liabilities |
|
|
|
|
|
| ||
Notes payable, net |
| $ | 472.0 |
|
| $ | 302.1 |
|
Note 9 – Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
(in millions) |
| Unrealized |
|
| Foreign |
|
| Other |
|
| Accumulated |
|
| Unrealized |
|
| Foreign |
|
| Other |
|
| Accumulated |
| ||||||||
Balance, August 31, 2022 |
| $ | 13.0 |
|
| $ | (57.4 | ) |
| $ | (1.2 | ) |
| $ | (45.6 | ) | ||||||||||||||||
Balance, August 31, 2023 |
| $ | 27.0 |
|
| $ | (32.1 | ) |
| $ | (2.2 | ) |
| $ | (7.3 | ) | ||||||||||||||||
Other comprehensive gain before reclassifications |
|
| 15.0 |
|
|
| 10.9 |
|
|
| 0.1 |
|
|
| 26.0 |
|
|
| 7.1 |
|
|
| (1.8 | ) |
|
| 0.6 |
|
|
| 5.9 |
|
Amounts reclassified from Accumulated other |
|
| (2.1 | ) |
|
| — |
|
|
| — |
|
|
| (2.1 | ) |
|
| (7.5 | ) |
|
| — |
|
|
| — |
|
|
| (7.5 | ) |
Balance, February 28, 2023 |
| $ | 25.9 |
|
| $ | (46.5 | ) |
| $ | (1.1 | ) |
| $ | (21.7 | ) | ||||||||||||||||
Balance, February 29, 2024 |
| $ | 26.6 |
|
| $ | (33.9 | ) |
| $ | (1.6 | ) |
| $ | (8.9 | ) |
13
The amounts reclassified out of Accumulated other comprehensive loss into the Condensed Consolidated Statements of Income, with financial statement caption, were as follows:
|
| Three Months Ended |
|
|
|
| Three Months Ended |
|
|
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| Financial Statement Caption |
| February 29, |
|
| February 28, |
|
| Financial Statement Caption | ||||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange contracts |
| $ | 0.1 |
|
| $ | 0.2 |
|
| Revenue and Cost of revenue |
| $ | (0.8 | ) |
| $ | 0.1 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| (2.4 | ) |
|
| 1.3 |
|
| Interest and foreign exchange |
|
| (4.2 | ) |
|
| (2.4 | ) |
| Interest and foreign exchange |
|
| (2.3 | ) |
|
| 1.5 |
|
| Total before tax |
|
| (5.0 | ) |
|
| (2.3 | ) |
|
| |
|
| 0.7 |
|
|
| (0.2 | ) |
| Income tax expense |
|
| 1.0 |
|
|
| 0.7 |
|
| Income tax expense | |
|
| $ | (1.6 | ) |
| $ | 1.3 |
|
| Net of tax |
| $ | (4.0 | ) |
| $ | (1.6 | ) |
|
|
14
|
| Six Months Ended |
|
|
|
| Six Months Ended |
|
|
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| Financial Statement Caption |
| February 29, |
|
| February 28, |
|
| Financial Statement Caption | ||||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign exchange contracts |
| $ | 0.3 |
|
| $ | 0.4 |
|
| Revenue and Cost of revenue |
| $ | (0.9 | ) |
| $ | 0.3 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| (3.4 | ) |
|
| 2.6 |
|
| Interest and foreign exchange |
|
| (8.5 | ) |
|
| (3.4 | ) |
| Interest and foreign exchange |
|
| (3.1 | ) |
|
| 3.0 |
|
| Total before tax |
|
| (9.4 | ) |
|
| (3.1 | ) |
|
| |
|
| 1.0 |
|
|
| (0.7 | ) |
| Income tax expense |
|
| 1.9 |
|
|
| 1.0 |
|
| Income tax expense | |
|
| $ | (2.1 | ) |
| $ | 2.3 |
|
| Net of tax |
| $ | (7.5 | ) |
| $ | (2.1 | ) |
|
|
Note 10 – Earnings Per Share
The shares used in the computation of basic and diluted earnings per common share are reconciled as follows:
Three Months Ended |
|
| Six Months Ended |
| |||||||||||
(In thousands) | 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Weighted average basic common shares outstanding (1) |
| 32,588 |
|
|
| 32,582 |
|
|
| 32,654 |
|
|
| 32,546 |
|
Dilutive effect of 2.875% convertible notes due 2024 (2) |
| 821 |
|
|
| 815 |
|
|
| — |
|
|
| — |
|
Dilutive effect of 2.875% convertible notes due 2028 (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Dilutive effect of restricted stock units (4) |
| 991 |
|
|
| 1,066 |
|
|
| 1,000 |
|
|
| 1,063 |
|
Weighted average diluted common shares outstanding |
| 34,400 |
|
|
| 34,463 |
|
|
| 33,654 |
|
|
| 33,609 |
|
Three Months Ended |
|
| Six Months Ended |
| |||||||||||
(In thousands) | February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||
Weighted average basic common shares outstanding |
| 31,117 |
|
|
| 32,588 |
|
|
| 31,071 |
|
|
| 32,654 |
|
Dilutive effect of 2.875% convertible notes due 2024 (1) |
| 563 |
|
|
| 821 |
|
|
| 694 |
|
|
| — |
|
Dilutive effect of 2.875% convertible notes due 2028 (2) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Dilutive effect of restricted stock units (3) |
| 890 |
|
|
| 991 |
|
|
| 911 |
|
|
| 1,000 |
|
Weighted average diluted common shares outstanding |
| 32,570 |
|
|
| 34,400 |
|
|
| 32,676 |
|
|
| 33,654 |
|
(1) Restricted stock grants and restricted stock units that are considered participating securities, 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.
(2) The dilutive effect of the 2.875% Convertible notes due 2024 was excluded for the six months ended February 28, 2023 and 2022 as they were considered anti-dilutive under the “if converted” method as further discussed below. These notes were retired on February 1, 2024.
(3)(2) The dilutive effect of the 2.875% Convertible notes due 2028 was excluded for the three and six months ended February 29, 2024 and February 28, 2023 and 2022 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive. As these notes require cash settlement for the principal, only a premium is potentially dilutive under the "if converted" method as further discussed below.
(4)(3) Restricted stock units that are not considered participating securities and restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position.
Basic earnings per common share (EPS) is computed by dividing Net earnings attributable to Greenbrier by weighted average basic common shares outstanding, which includes restricted stock grants and restricted stock units that are considered participating securities when the Company is in a net earnings position.outstanding.
For the three and six months ended February 29, 2024 and February 28, 2023, and 2022, diluted EPS was calculated using the more dilutive of two methods. The first method includes the dilutive effect, using the treasury stock method, associated with restricted stock units that are not considered participating securities and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second method supplements the first by also including the “if converted” effect of the 2.875% Convertible notes due 2024 during the periods in which they were outstanding and shares underlying the 2.875% Convertible notes due 2028, when there is a conversion premium. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes due 2024 are added back to net earnings and the share count is increased by the shares underlying the convertible notes.
1514
| Three Months Ended |
|
| Six Months Ended |
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
(in millions, except shares which are reflected in thousands, and per share amounts) | 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| |||||||||||||||||||
(in millions, except number of shares which are reflected in thousands, and per share amounts) | February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| |||||||||||||||||||
Net earnings attributable to Greenbrier | $ | 33.1 |
|
| $ | 12.8 |
|
| $ | 16.4 |
|
| $ | 23.6 |
| $ | 33.4 |
|
| $ | 33.1 |
|
| $ | 64.6 |
|
| $ | 16.4 |
|
Weighted average basic common shares outstanding |
| 32,588 |
|
|
| 32,582 |
|
|
| 32,654 |
|
|
| 32,546 |
|
| 31,117 |
|
|
| 32,588 |
|
|
| 31,071 |
|
|
| 32,654 |
|
Basic earnings per share | $ | 1.01 |
|
| $ | 0.39 |
|
| $ | 0.50 |
|
| $ | 0.72 |
| $ | 1.08 |
|
| $ | 1.01 |
|
| $ | 2.08 |
|
| $ | 0.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net earnings attributable to Greenbrier | $ | 33.1 |
|
| $ | 12.8 |
|
| $ | 16.4 |
|
| $ | 23.6 |
| $ | 33.4 |
|
| $ | 33.1 |
|
| $ | 64.6 |
|
| $ | 16.4 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest and debt issuance costs on the 2.875% |
| 0.3 |
|
|
| 0.3 |
|
| n/a |
|
| n/a |
|
| 0.2 |
|
|
| 0.3 |
|
|
| 0.5 |
|
| n/a |
| |||
Earnings before interest and debt issuance costs | $ | 33.4 |
|
| $ | 13.1 |
|
| n/a |
|
| n/a |
| |||||||||||||||||
Earnings before interest and debt issuance costs | $ | 33.6 |
|
| $ | 33.4 |
|
| $ | 65.1 |
|
| n/a |
| ||||||||||||||||
Weighted average diluted common shares outstanding |
| 34,400 |
|
|
| 34,463 |
|
|
| 33,654 |
|
|
| 33,609 |
|
| 32,570 |
|
|
| 34,400 |
|
|
| 32,676 |
|
|
| 33,654 |
|
Diluted earnings per share | $ | 0.97 |
| (1) | $ | 0.38 |
| (1) | $ | 0.49 |
|
| $ | 0.70 |
| $ | 1.03 |
| (1) | $ | 0.97 |
| (1) | $ | 1.99 |
| (1) | $ | 0.49 |
|
(1) Diluted earnings per share was calculated as follows:
Earnings before interest and debt issuance costs on the 2.875% convertible notes due 2024
Weighted average diluted common shares outstanding
Note 11 – Stock Based Compensation
The value of stock based compensation awards is amortized as compensation expense from the date of grant through the earlier of the vesting period or in some instances the recipient’s eligible retirement date. Stock based compensation expense consists of restricted stock unit awards.
Stock based compensation expense was $2.7 million and $5.9 million for the three and six months ended February 28, 2023, respectively and $4.9 million and $5.9 million for the three and six months ended February 28, 2022, respectively. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Condensed Consolidated Statements of Income.
Note 1211 – 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. Interest rate swap agreements are used to reduce the impact of changes in interest rates on certain current and probable future 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.
At February 28, 202329, 2024 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $89.1110.9 million. The fair value of the contracts is included on the Condensed Consolidated Balance Sheets as Accounts payable and accrued liabilities when in a loss position, or as Accounts receivable, net when in a gain position. As the contracts mature at various dates through August 2024,April 2026, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying 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 results of operations in Interest and foreign exchange at the time of occurrence. At February 28, 202329, 2024 exchange rates, approximately $($0.42.1 million) of lossmillion would be reclassified to revenue or cost of revenue in the next year.
At February 28, 2023,29, 2024, interest rate swap agreements maturing from September 2023June 2024 through January 2032 had notional amounts that aggregated to $468.4608.6 million. The fair value of the contracts is included on the Condensed Consolidated Balance Sheets in Accounts payable and accrued liabilities when in a loss position, or in Accounts receivable, net when in a gain position. 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 February 28, 202329, 2024 interest rates, approximately $13.513.7 million of gain would be reclassified to reduce interest expense in the next year.
16
Fair Values of Derivative Instruments
(in millions)
|
| Asset Derivatives |
|
| Liability Derivatives |
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||||||||||||||||||||||||
|
|
|
| February 28, |
|
| August 31, |
|
| February 28, |
|
| August 31, |
|
|
|
| February 29, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||||||||||
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
| ||||||||
Derivatives designated |
|
|
|
|
|
|
|
|
| Derivatives designated as hedging instruments |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Foreign forward |
| Accounts receivable, |
| $ | 1.5 |
|
| $ | 0.6 |
|
| Accounts payable and |
| $ | 0.4 |
|
| $ | 2.9 |
|
| Accounts |
| $ | 5.3 |
|
| $ | 2.5 |
|
| Accounts payable |
| $ | 0.1 |
|
| $ | 0.1 |
|
Interest rate swap |
| Accounts receivable, |
|
| 36.4 |
|
|
| 20.8 |
|
| Accounts payable and |
|
| — |
|
|
| - |
|
| Accounts |
|
| 32.1 |
|
|
| 34.9 |
|
| Accounts payable |
|
| 0.1 |
|
|
| 0.1 |
|
|
|
| $ | 37.9 |
|
| $ | 21.4 |
|
|
|
| $ | 0.4 |
|
| $ | 2.9 |
|
|
|
| $ | 37.4 |
|
| $ | 37.4 |
|
|
|
| $ | 0.2 |
|
| $ | 0.2 |
| |
Derivatives not |
|
|
|
|
|
|
|
|
| Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Foreign forward |
| Accounts receivable, |
| $ | — |
|
| $ | — |
|
| Accounts payable and |
| $ | — |
|
| $ | 0.1 |
|
| Accounts |
| $ | — |
|
| $ | 0.5 |
|
| Accounts payable |
| $ | — |
|
| $ | — |
|
15
The Effect of Derivative Instruments on the Statements of Income
(in millions)
Three Months Endedmonths ended February 29, 2024 and February 28, 2023 and 2022
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2023 |
|
| 2022 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (0.3 | ) |
| $ | (0.1 | ) |
Derivatives in cash flow hedging relationships | Location of gain (loss) recognized | Gain (loss) recognized in income on | ||||||||
February 29, | February 28, | |||||||||
Foreign forward exchange contract | Interest and foreign exchange | $ | — | $ | (0.3 | ) |
Derivatives in | Gain (loss) recognized |
| Location of gain | Gain (loss) reclassified |
| Location of gain | Gain (loss) recognized |
| Gain (loss) recognized in |
| Location of | Gain (loss) reclassified |
| Location of gain | Gain (loss) recognized on |
| ||||||||||||||||||||||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||||||||||
Foreign | $ | 0.5 |
|
| $ | (0.4 | ) | Revenue | $ | (0.5 | ) |
| $ | (0.2 | ) | Revenue | $ | 0.5 |
|
| $ | 0.3 |
| $ | 0.5 |
|
| $ | 0.5 |
| Revenue | $ | 0.8 |
|
| $ | (0.5 | ) | Revenue | $ | 0.6 |
|
| $ | 0.5 |
|
Foreign |
| 0.8 |
|
|
| 1.4 |
| Cost of |
| 0.4 |
|
|
| — |
| Cost of |
| 0.3 |
|
|
| 0.3 |
|
| 0.2 |
|
|
| 0.8 |
| Cost of |
| — |
|
|
| 0.4 |
| Cost of |
| 0.3 |
|
|
| 0.3 |
|
Interest rate |
| 8.6 |
|
|
| 0.6 |
| Interest and |
| 2.4 |
|
|
| (1.3 | ) | Interest and |
| — |
|
|
| — |
|
| 2.9 |
|
|
| 8.6 |
| Interest and |
| 4.2 |
|
|
| 2.4 |
| Interest and |
| — |
|
|
| — |
|
| $ | 9.9 |
|
| $ | 1.6 |
|
| $ | 2.3 |
|
| $ | (1.5 | ) |
| $ | 0.8 |
|
| $ | 0.6 |
| $ | 3.6 |
|
| $ | 9.9 |
|
| $ | 5.0 |
|
| $ | 2.3 |
|
| $ | 0.9 |
|
| $ | 0.8 |
|
17
The following table presents the amounts in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the three months ended February 29, 2024 and February 28, 2023 and 2022:2023:
|
| For The Three Months Ended February 28, |
|
| For the Three Months Ended |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||||||||||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||||||
Revenue |
| $ | 1,122.0 |
|
| $ | (0.5 | ) |
| $ | 682.8 |
|
| $ | (0.2 | ) |
| $ | 862.7 |
|
| $ | 0.8 |
|
| $ | 1,122.0 |
|
| $ | (0.5 | ) |
Cost of revenue |
| $ | 1,005.2 |
|
| $ | 0.4 |
|
| $ | 628.0 |
|
| $ | — |
|
| $ | 740.5 |
|
| $ | — |
|
| $ | 1,005.2 |
|
| $ | 0.4 |
|
Interest and foreign exchange |
| $ | 21.6 |
|
| $ | 2.4 |
|
| $ | 11.8 |
|
| $ | (1.3 | ) |
| $ | 24.6 |
|
| $ | 4.2 |
|
| $ | 21.6 |
|
| $ | 2.4 |
|
Six Months Ended February 28, 2023 and 2022The Effect of Derivative Instruments on the Statements of Income
(in millions)
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2023 |
|
| 2022 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (0.3 | ) |
| $ | (0.4 | ) |
Six months ended February 29, 2024 and February 28, 2023
Derivatives in |
| Gain (loss) recognized |
|
| Location of gain |
| Gain (loss) reclassified |
|
| Location of gain |
| Gain (loss) recognized |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
|
|
|
| 2023 |
|
| 2022 |
| ||||||
Foreign |
| $ | 2.0 |
|
| $ | (5.0 | ) |
| Revenue |
| $ | (0.9 | ) |
| $ | (0.4 | ) |
| Revenue |
| $ | 0.8 |
|
| $ | 0.5 |
|
Foreign |
|
| 1.1 |
|
|
| 0.1 |
|
| Cost of |
|
| 0.6 |
|
|
| — |
|
| Cost of |
|
| 0.4 |
|
|
| 0.4 |
|
Interest rate |
|
| 19.0 |
|
|
| 2.3 |
|
| Interest and |
|
| 3.4 |
|
|
| (2.6 | ) |
| Interest and |
|
| — |
|
|
| — |
|
|
| $ | 22.1 |
|
| $ | (2.6 | ) |
|
|
| $ | 3.1 |
|
| $ | (3.0 | ) |
|
|
| $ | 1.2 |
|
| $ | 0.9 |
|
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| February 29, |
|
| February 28, |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | 0.2 |
|
| $ | (0.3 | ) |
16
Derivatives in |
| Gain (loss) recognized |
|
| Location of gain |
| Gain (loss) reclassified |
|
| Location of gain |
| Gain (loss) recognized |
| |||||||||||||||
|
| February 29, |
|
| February 28, |
|
|
|
| February 29, |
|
| February 28, |
|
|
|
| February 29, |
|
| February 28, |
| ||||||
Foreign |
| $ | 2.9 |
|
| $ | 2.0 |
|
| Revenue |
| $ | 1.0 |
|
| $ | (0.9 | ) |
| Revenue |
| $ | 1.2 |
|
| $ | 0.8 |
|
Foreign |
|
| — |
|
|
| 1.1 |
|
| Cost of |
|
| (0.1 | ) |
|
| 0.6 |
|
| Cost of |
|
| 0.6 |
|
|
| 0.4 |
|
Interest rate |
|
| 6.0 |
|
|
| 19.0 |
|
| Interest and |
|
| 8.5 |
|
|
| 3.4 |
|
| Interest and |
|
| — |
|
|
| — |
|
|
| $ | 8.9 |
|
| $ | 22.1 |
|
|
|
| $ | 9.4 |
|
| $ | 3.1 |
|
|
|
| $ | 1.8 |
|
| $ | 1.2 |
|
The following table presents the amounts in the Condensed Consolidated Statements of Income in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the six months ended February 29, 2024 and February 28, 2023 and 2022:2023:
|
| For The Six Months Ended February 28, |
|
| For the Six Months Ended |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||||||||||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||||||
Revenue |
| $ | 1,888.5 |
|
| $ | (0.9 | ) |
| $ | 1,233.5 |
|
| $ | (0.4 | ) |
| $ | 1,671.5 |
|
| $ | 1.0 |
|
| $ | 1,888.5 |
|
| $ | (0.9 | ) |
Cost of revenue |
| $ | 1,702.2 |
|
| $ | 0.6 |
|
| $ | 1,131.1 |
|
| $ | — |
|
| $ | 1,428.0 |
|
| $ | (0.1 | ) |
| $ | 1,702.2 |
|
| $ | 0.6 |
|
Interest and foreign exchange |
| $ | 41.2 |
|
| $ | 3.4 |
|
| $ | 24.4 |
|
| $ | (2.6 | ) |
| $ | 47.8 |
|
| $ | 8.5 |
|
| $ | 41.2 |
|
| $ | 3.4 |
|
Note 1312 – Segment Information
The Company operates in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management 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 Annual Report on Form 10-K for the year ended August 31, 2022. Performance is evaluated based on Earnings (loss) from operations. Corporate includes selling and
18
administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or Income tax 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.
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 February 29, 2024:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 735.8 |
|
| $ | 61.5 |
|
| $ | 797.3 |
|
| $ | 58.8 |
|
| $ | 3.7 |
|
| $ | 62.5 |
|
Maintenance Services |
|
| 75.2 |
|
|
| 9.1 |
|
|
| 84.3 |
|
|
| 4.6 |
|
|
| — |
|
|
| 4.6 |
|
Leasing & Management Services |
|
| 51.7 |
|
|
| 0.3 |
|
|
| 52.0 |
|
|
| 33.2 |
|
|
| 0.1 |
|
|
| 33.3 |
|
Eliminations |
|
| — |
|
|
| (70.9 | ) |
|
| (70.9 | ) |
|
| — |
|
|
| (3.8 | ) |
|
| (3.8 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33.1 | ) |
|
| — |
|
|
| (33.1 | ) |
|
| $ | 862.7 |
|
| $ | — |
|
| $ | 862.7 |
|
| $ | 63.5 |
|
| $ | — |
|
| $ | 63.5 |
|
17
For the six months ended February 29, 2024:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,411.7 |
|
| $ | 120.0 |
|
| $ | 1,531.7 |
|
| $ | 113.1 |
|
| $ | 8.4 |
|
| $ | 121.5 |
|
Maintenance Services |
|
| 159.0 |
|
|
| 18.3 |
|
|
| 177.3 |
|
|
| 15.2 |
|
|
| — |
|
|
| 15.2 |
|
Leasing & Management Services |
|
| 100.8 |
|
|
| 0.5 |
|
|
| 101.3 |
|
|
| 59.5 |
|
|
| 0.1 |
|
|
| 59.6 |
|
Eliminations |
|
| — |
|
|
| (138.8 | ) |
|
| (138.8 | ) |
|
| — |
|
|
| (8.5 | ) |
|
| (8.5 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (59.4 | ) |
|
| — |
|
|
| (59.4 | ) |
|
| $ | 1,671.5 |
|
| $ | — |
|
| $ | 1,671.5 |
|
| $ | 128.4 |
|
| $ | — |
|
| $ | 128.4 |
|
For the three months ended February 28, 2023:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 968.6 |
|
| $ | 96.8 |
|
| $ | 1,065.4 |
|
| $ | 46.6 |
|
| $ | 8.8 |
|
| $ | 55.4 |
|
Maintenance Services |
|
| 98.0 |
|
|
| 6.2 |
|
|
| 104.2 |
|
|
| 6.8 |
|
|
| — |
|
|
| 6.8 |
|
Leasing & Management Services |
|
| 55.4 |
|
|
| 0.5 |
|
|
| 55.9 |
|
|
| 40.7 |
|
|
| 0.1 |
|
|
| 40.8 |
|
Eliminations |
|
| — |
|
|
| (103.5 | ) |
|
| (103.5 | ) |
|
| — |
|
|
| (8.9 | ) |
|
| (8.9 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26.7 | ) |
|
| — |
|
|
| (26.7 | ) |
|
| $ | 1,122.0 |
|
| $ | — |
|
| $ | 1,122.0 |
|
| $ | 67.4 |
|
| $ | — |
|
| $ | 67.4 |
|
For the six months ended February 28, 2023:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,615.1 |
|
| $ | 141.3 |
|
| $ | 1,756.4 |
|
| $ | 43.2 |
|
| $ | 12.8 |
|
| $ | 56.0 |
|
Maintenance Services |
|
| 183.5 |
|
|
| 14.7 |
|
|
| 198.2 |
|
|
| 12.3 |
|
|
| — |
|
|
| 12.3 |
|
Leasing & Management Services |
|
| 89.9 |
|
|
| 0.7 |
|
|
| 90.6 |
|
|
| 56.3 |
|
|
| 0.1 |
|
|
| 56.4 |
|
Eliminations |
|
| — |
|
|
| (156.7 | ) |
|
| (156.7 | ) |
|
| — |
|
|
| (12.9 | ) |
|
| (12.9 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (49.2 | ) |
|
| — |
|
|
| (49.2 | ) |
|
| $ | 1,888.5 |
|
| $ | — |
|
| $ | 1,888.5 |
|
| $ | 62.6 |
|
| $ | — |
|
| $ | 62.6 |
|
For the three months ended February 28, 2022:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 555.7 |
|
| $ | 1.8 |
|
| $ | 557.5 |
|
| $ | 1.8 |
|
| $ | — |
|
| $ | 1.8 |
|
Maintenance Services |
|
| 86.6 |
|
|
| 6.1 |
|
|
| 92.7 |
|
|
| 2.9 |
|
|
| — |
|
|
| 2.9 |
|
Leasing & Management Services |
|
| 40.5 |
|
|
| 0.4 |
|
|
| 40.9 |
|
|
| 47.6 |
|
|
| — |
|
|
| 47.6 |
|
Eliminations |
|
| — |
|
|
| (8.3 | ) |
|
| (8.3 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27.1 | ) |
|
| — |
|
|
| (27.1 | ) |
|
| $ | 682.8 |
|
| $ | — |
|
| $ | 682.8 |
|
| $ | 25.2 |
|
| $ | — |
|
| $ | 25.2 |
|
For the six months ended February 28, 2022:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,008.2 |
|
| $ | 41.2 |
|
| $ | 1,049.4 |
|
| $ | 14.1 |
|
| $ | 0.3 |
|
| $ | 14.4 |
|
Maintenance Services |
|
| 159.0 |
|
|
| 8.8 |
|
|
| 167.8 |
|
|
| 1.8 |
|
|
| — |
|
|
| 1.8 |
|
Leasing & Management Services |
|
| 66.3 |
|
|
| 0.7 |
|
|
| 67.0 |
|
|
| 64.8 |
|
|
| — |
|
|
| 64.8 |
|
Eliminations |
|
| — |
|
|
| (50.7 | ) |
|
| (50.7 | ) |
|
| — |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43.7 | ) |
|
| — |
|
|
| (43.7 | ) |
|
| $ | 1,233.5 |
|
| $ | — |
|
| $ | 1,233.5 |
|
| $ | 37.0 |
|
| $ | — |
|
| $ | 37.0 |
|
19
|
| Total assets |
|
| Total assets |
| ||||||||||
(in millions) |
| February 28, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||
Manufacturing |
| $ | 1,923.0 |
|
| $ | 1,853.9 |
|
| $ | 1,814.5 |
|
| $ | 1,847.0 |
|
Maintenance Services |
|
| 313.9 |
|
|
| 284.8 |
|
|
| 309.5 |
|
|
| 294.4 |
|
Leasing & Management Services |
|
| 1,267.2 |
|
|
| 1,152.2 |
|
|
| 1,592.2 |
|
|
| 1,458.1 |
|
Unallocated, including cash |
|
| 448.4 |
|
|
| 560.6 |
|
|
| 327.4 |
|
|
| 378.9 |
|
| $ | 3,952.5 |
|
| $ | 3,851.5 |
|
| $ | 4,043.6 |
|
| $ | 3,978.4 |
|
Reconciliation of Earnings from operations to Earnings before income tax and earnings from unconsolidated affiliates:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||||||
Earnings from operations |
| $ | 67.4 |
|
| $ | 25.2 |
|
| $ | 62.6 |
|
| $ | 37.0 |
|
| $ | 63.5 |
|
| $ | 67.4 |
|
| $ | 128.4 |
|
| $ | 62.6 |
|
Interest and foreign exchange |
|
| 21.6 |
|
|
| 11.8 |
|
|
| 41.2 |
|
|
| 24.4 |
|
|
| 24.6 |
|
|
| 21.6 |
|
|
| 47.8 |
|
|
| 41.2 |
|
Earnings before income tax and earnings |
| $ | 45.8 |
|
| $ | 13.4 |
|
| $ | 21.4 |
|
| $ | 12.6 |
|
| $ | 38.9 |
|
| $ | 45.8 |
|
| $ | 80.6 |
|
| $ | 21.4 |
|
18
Note 1413 – Leases
Lessor
Equipment on operating leases is reported net of accumulated depreciation of $55.280.7 million and $48.668.0 million as of February 28, 202329, 2024 and August 31, 2022,2023, respectively. Depreciation expense was $8.4 million and $16.2 million for the three and six months ended February 29, 2024, respectively and $6.8 million and $12.8 million for the three and six months ended February 28, 2023, respectively and $5.4 million and $10.5 million for the three and six months ended February 28, 2022, respectively. In addition, certain railcar equipment leased-in by the Company on operating leases is subleased to customers under non-cancelable operating leases with lease terms ranging from one to approximately thirteentwelve years. Operating lease rental revenues included in the Company’s Condensed Consolidated Statements of Income for the three and six months ended February 29, 2024 was $30.5 million and $58.1 million, respectively, which included $5.1 million and $10.5 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements. Operating lease rental revenues included in the Company’s Condensed Consolidated Statements of Income for the three and six months ended February 28, 2023 was $23.8 million and $43.4 million, respectively, which included $4.9 million and $9.7 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements.Operating lease rental revenues included in the Company's Condensed Consolidated Statements of Income for the three and six months ended February 28, 2022 was $16.3 million and $31.3 million, respectively, which included $3.9 million and $8.5 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements.
Aggregate minimum future amounts receivable under all non-cancelable operating leases and subleases at February 28, 2023,29, 2024, will mature as follows:
(in millions) |
|
|
| |
Remaining six months of 2023 |
| $ | 33.6 |
|
2024 |
|
| 58.4 |
|
2025 |
|
| 50.4 |
|
2026 |
|
| 44.0 |
|
2027 |
|
| 38.4 |
|
Thereafter |
|
| 77.7 |
|
| $ | 302.5 |
|
20
(in millions) |
|
|
| |
Remaining six months of 2024 |
| $ | 48.5 |
|
2025 |
|
| 87.9 |
|
2026 |
|
| 79.0 |
|
2027 |
|
| 69.3 |
|
2028 |
|
| 53.3 |
|
Thereafter |
|
| 107.7 |
|
| $ | 445.7 |
|
Lessee
The Company leases railcars, real estate, and certain equipment under operating and, to a lesser extent, finance lease arrangements. As of and for the three and six months ended February 28, 202329, 2024 and February 28, 2022,2023, finance leases were not a material component of the Company's lease portfolio. The Company’s real estate and equipment leases have remaining lease terms ranging from less than one year to 7675 years, with some including options to extend up to 157 years. The Company recognizes a lease liability and corresponding right-of-use (ROU) asset based on the present value of lease payments. To determine the present value of lease payments, as most of its leases do not provide a readily determinable implicit rate, the Company’s incremental borrowing rate is used to discount the lease payments based on information available at each lease commencement date. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when estimating its incremental borrowing rate.
The components of operating lease costs were as follows:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
|
| February 29, |
|
| February 28, |
| ||||||||
Operating lease expense |
| $ | 3.1 |
|
| $ | 2.5 |
|
| $ | 6.4 |
|
| $ | 5.2 |
|
| $ | 4.2 |
|
| $ | 3.1 |
|
| $ | 8.4 |
|
| $ | 6.4 |
|
Short-term lease expense |
|
| 2.6 |
|
|
| 1.4 |
|
|
| 4.4 |
|
|
| 2.7 |
|
|
| 1.7 |
|
|
| 2.6 |
|
|
| 3.8 |
|
|
| 4.4 |
|
Total |
| $ | 5.7 |
|
| $ | 3.9 |
|
| $ | 10.8 |
|
| $ | 7.9 |
|
| $ | 5.9 |
|
| $ | 5.7 |
|
| $ | 12.2 |
|
| $ | 10.8 |
|
19
Aggregate minimum future amounts payable under operating leases having initial or remaining non-cancelable terms at February 28, 202329, 2024, will mature as follows:
(in millions) |
|
|
|
|
|
| ||
Remaining six months of 2023 |
| $ | 6.6 |
| ||||
2024 |
|
| 11.5 |
| ||||
Remaining six months of 2024 |
| $ | 7.7 |
| ||||
2025 |
|
| 8.7 |
|
|
| 14.2 |
|
2026 |
|
| 7.5 |
|
|
| 13.4 |
|
2027 |
|
| 4.7 |
|
|
| 10.6 |
|
2028 |
|
| 9.7 |
| ||||
Thereafter |
|
| 17.7 |
|
|
| 23.9 |
|
Total lease payments |
| $ | 56.7 |
|
| $ | 79.5 |
|
Less: Imputed interest |
|
| (4.7 | ) |
|
| (7.6 | ) |
Total lease obligations |
| $ | 52.0 |
|
| $ | 71.9 |
|
The table below presents additional information related to the Company’s leases:
Weighted average remaining lease term (years): |
|
|
| |
Operating leases |
|
|
|
|
|
|
| ||
Weighted average discount rate: |
|
|
| |
Operating leases |
|
|
| % |
Supplemental cash flow information related to leases were as follows:
(in millions) |
| Six months ended |
| |
Cash paid for amounts included in the measurement |
|
|
| |
Operating cash flows from operating leases |
| $ | 6.7 |
|
ROU assets obtained in exchange for new operating |
| $ | 1.1 |
|
21
(in millions) |
| Six Months Ended February 29, 2024 | ||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 8.8 | ||
ROU assets obtained in exchange for new operating lease liabilities | $ | 7.6 |
Note 1514 – Commitments and Contingencies
Portland Harbor Superfund Site
The Company’s former Portland, Oregon manufacturing facility (the Portland Property) is located adjacent to the Willamette River. In December 2000, the U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as 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. Ten private and public entities, including the Company (the Lower Willamette Group or LWG), 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 did not sign such consent, but nevertheless contributed financially to the effort. The EPA-mandated RI/FS was produced by the LWG and cost over $110 million during a 17-year period. The Company bore a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’s aggregate expenditure during the 17-year period was not material. Some or all of any such outlay may be recoverable from other responsible parties. The EPA issued its Record of Decision (ROD) for the Portland Harbor Site on January 6, 2017 and accordingly on October 26, 2017, the AOC was terminated.
Separate from the process described above, which focused on the type of remediation to be performed at the Portland Harbor Site and the schedule for such remediation, 96 parties, including the State of Oregon and the federal government, are participating in a non-judicial, mediated allocation process to try to allocate costs associated with remediation of the Portland Harbor Site. The Company will continue to participate in the allocation process. Approximately 110 additional parties 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, U.S. 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 been stayed by the court until January 14, 2025.
20
The EPA's January 6, 2017 ROD identifies a clean-up remedy that the EPA estimates will take 13 years of active remediation, followed by 30 years of monitoring with an estimated undiscounted cost of $1.7 billion. The EPA typically expects its cost estimates to be accurate within a range of -30% to +50%, but this ROD states that changes in costs are likely to occur. The EPA has identified several Sediment Decision Units within the ROD cleanup area. One of the units, RM9W, includes the nearshore area of the river sediments offshore of the Portland Property as well as downstream of the facility. It also includes a portion of the Company’sPortland Property's riverbank. The ROD does not break down total remediation costs by Sediment Decision Unit. The EPA requested that potentially responsible parties enter AOCs during 2019 agreeing to conduct remedial design studies. Some parties have signed AOCs, including one party with respect to RM9W which includes the area offshore of the Portland Property. The Company has not signed an AOC in connection with remedial design, but is assisting in funding a portion of the RM9W remedial design.
The ROD does not address responsibility for the costs of clean-up, nor does it allocate such costs among the potentially responsible parties. Responsibility for funding and implementing the EPA's selected cleanup remedy will be determined at an unspecified later date. Based on the investigation to date, the Company believes that it did not contribute in any material way to contaminants of concern in the river sediments or 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 propertythe Portland Property precedes the Company’s ownership of the Portland Property. 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 or restoration 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 the Portland Property.
22
On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the federal government and the State of Oregon for costs it incurred in assessing alleged natural resource damages to the Columbia River from contaminants deposited in Portland Harbor. Confederated Tribes and Bands of the Yakama Nation v. Air Liquide America Corp., et al., U.S. Court for the District of Oregon Case No. 3i17-CV-00164-SB. The complaint does not specify the amount of damages the plaintiff will seek. The case has been stayed until January 14, 2025.
Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing OperationsProperty
The Company 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 has also signed an Order on Consent with the 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 the Company is discussing with the DEQ potential remedial actions which may be required. The Company’s aggregate expenditure has not been material, however it could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.
Sale of Portland Property
The Company sold the Portland Property in May 2023, but remains potentially liable with respect to the above matters. Any of these matters could adversely affect the Company's business and Consolidated Financial Statements. However, any contamination or exacerbation of contamination that occurs after the sale of the property will be the liability of the current and future owners and operators of the Portland Property.
Other Litigation, Commitments and Contingencies
From time to time, Greenbrierthe Company is involved as a defendant in litigation in the ordinary course of business, the outcomes of which cannot be predicted with certainty. While the ultimate outcome of such legal proceedings cannot be determined at this time, the Company believes that the resolution of pending litigation will not have a material adverse effect on the Company's Consolidated Financial Statements.
As of February 28, 2023,29, 2024, the Company had outstanding letters of credit aggregating to $5.57.1 million associated with performance guarantees, facility leases and workers compensation insurance.
21
Note 1615 – 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 February 28, 202329, 2024 were:
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 37.9 |
|
| $ | — |
|
| $ | 37.9 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 45.1 |
|
|
| 45.1 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 60.3 |
|
|
| 60.3 |
|
|
| — |
|
|
| — |
|
| $ | 143.3 |
|
| $ | 105.4 |
|
| $ | 37.9 |
|
| $ | — |
| |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 0.4 |
|
| $ | — |
|
| $ | 0.4 |
|
| $ | — |
|
23
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 37.4 |
|
| $ | — |
|
| $ | 37.4 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 56.4 |
|
|
| 56.4 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 52.0 |
|
|
| 52.0 |
|
|
| — |
|
|
| — |
|
| $ | 145.8 |
|
| $ | 108.4 |
|
| $ | 37.4 |
|
| $ | — |
| |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 0.2 |
|
| $ | — |
|
| $ | 0.2 |
|
| $ | — |
|
Assets and liabilities measured at fair value on a recurring basis as of August 31, 20222023 were:
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivative financial instruments |
| $ | 21.4 |
|
| $ | — |
|
| $ | 21.4 |
|
| $ | — |
|
| $ | 37.9 |
|
| $ | — |
|
| $ | 37.9 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 40.3 |
|
|
| 40.3 |
|
|
| — |
|
|
| — |
|
|
| 47.7 |
|
|
| 47.7 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 119.4 |
|
|
| 119.4 |
|
|
| — |
|
|
| — |
|
|
| 51.2 |
|
|
| 51.2 |
|
|
| — |
|
|
| — |
|
| $ | 181.1 |
|
| $ | 159.7 |
|
| $ | 21.4 |
|
| $ | — |
|
| $ | 136.8 |
|
| $ | 98.9 |
|
| $ | 37.9 |
|
| $ | — |
| |
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Derivative financial instruments |
| $ | 3.0 |
|
| $ | — |
|
| $ | 3.0 |
|
| $ | — |
|
| $ | 0.2 |
|
| $ | — |
|
| $ | 0.2 |
|
| $ | — |
|
Note 1716 – Related Party Transactions
The Company has a 41.9% interest in Axis, LLC (Axis), a joint venture. The Company purchased $1.82.5 million and $4.54.8 million of railcar components from Axis for the three and six months ended February 28, 2023,29, 2024, respectively and $3.31.8 million and $6.14.5 million for the three and six months ended February 28, 2022,2023, respectively.
22
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We operate in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management Services. Our segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland, and Romania, and Turkey, produces double-stack intermodalfreight railcars, tank cars, conventionalintermodal railcars and automotive railcar products and marine vessels.products. The Maintenance Services segment performs wheel and axle servicing, railcar maintenance and produces a variety of parts for the rail industry in North America. The Leasing & Management Services segment owns approximately 12,30014,600 railcars as of February 28, 2023.29, 2024. We also provide management services for approximately 408,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America as of February 28, 2023. Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil.America.
Management identifies fivethe following trends impactingwhich continue to impact our business and our results for the six months ended February 28, 2023.29, 2024. Overall, demand in the marketplace remained strong. Inflation, rising interest rates, supply chain challenges, and rail service congestion persisted. Manufacturing was impacted by supply chain disruptions, negatively impacting gross margin in the first half of 2023. Notwithstanding these specific challenges and the concern of a general economic slowdown, management’s optimism about the current fiscal year is sustained by theremains strong demand for our products and services as well asservices. Supply chain challenges, rail service congestion, inflation, high interest rates, and labor shortages continue to impact our business. Despite this operating environment, we accomplished the following achievements fromduring the first half of 2023:six months ended February 29, 2024:
We acquiredbelieve our results highlight our continued focus on our strategic plan and we remain focused on increasing recurring revenue, expanding our aggregate gross margin, and raising our return on invested capital. Recurring revenue is defined as Leasing & Management Services revenue excluding the minority interest in GBX Leasing, and now wholly own our lease fleet.impact of syndication transactions.
Our backlog remains strong with railcar deliveries and marine deliveries into calendar 2024.2026. Our railcar backlog was 25,90029,200 units with an estimated value of $3.1$3.6 billion as of February 28, 2023.29, 2024. Our backlog includes unitsnearly $815 million of railcars intended for leasesyndication which are supported by lease agreements with external customers and may be syndicated to third parties or held in our lease fleet depending on a variety of factors. Multi-year supply agreements are a part of rail industry practice. A portion of the orders included in backlog reflects an assumed product mix. Under terms of the orders, the exact mix and pricing will be determined in the future, which may impact backlog. Approximately 4%3% of backlog units and 5%2% of estimated backlog value as of February 28, 202329, 2024 was associated with our Brazilian manufacturing operations which is accounted for under the equity method. Marine backlog as of February 28, 2023 was approximately $43 million.
Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Certain orders in backlog are subject to customary documentation and completion of terms. Customers may attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time to time.
On November 17, 2022, as part of our strategic review of the global business capacity footprint, we decided to permanently cease rail production at our Gunderson facility during 2023 and to explore alternatives to exit marine barge production in the first part of calendar 2024. Due to the change in future use of the facility, management assessed recoverability of Gunderson assets in accordance with our policy on impairment of long-lived assets.Based on an analysis of future undiscounted cash flows associated with these assets, we determined that the carrying value was not recoverable. In the first quarter of fiscal 2023, management concluded that an impairment charge was necessary and $24.2 million was recorded in the Manufacturing segment as Impairment of long-lived assets within the Condensed Consolidated Statements of Operations. Although it is possible that costs and charges related to the cessation of production at the facility, such as exit costs and termination benefits may be incurred in future periods, the amount of any such costs and charges is not estimable at this time and we do not yet know if the amount of any such costs and charges will be material.
As described in Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 20222023 the items described above may have a material negative impact on our business, liquidity, results of operations and stock price. Beyond these general observations, we are unable to predict when, how, or with what magnitude these items will impact our business.
2523
Three Months Ended February 28, 202329, 2024 Compared to the Three Months Ended February 28, 20222023
Overview
Revenue, Cost of revenue, Margin and Earnings from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
(in millions, except per share amounts) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
| $ | 968.6 |
|
| $ | 555.7 |
|
| $ | 735.8 |
|
| $ | 968.6 |
|
Maintenance Services |
|
| 98.0 |
|
|
| 86.6 |
|
|
| 75.2 |
|
|
| 98.0 |
|
Leasing & Management Services |
|
| 55.4 |
|
|
| 40.5 |
|
|
| 51.7 |
|
|
| 55.4 |
|
|
| 1,122.0 |
|
|
| 682.8 |
|
|
| 862.7 |
|
|
| 1,122.0 |
| |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
| ||||||
Manufacturing |
|
| 901.2 |
|
|
| 535.0 |
|
|
| 656.2 |
|
|
| 901.2 |
|
Maintenance Services |
|
| 89.6 |
|
|
| 81.7 |
|
|
| 69.2 |
|
|
| 89.6 |
|
Leasing & Management Services |
|
| 14.4 |
|
|
| 11.3 |
|
|
| 15.1 |
|
|
| 14.4 |
|
|
| 1,005.2 |
|
|
| 628.0 |
|
|
| 740.5 |
|
|
| 1,005.2 |
| |
Margin: |
|
|
|
|
|
|
|
|
|
| ||||||
Manufacturing |
|
| 67.4 |
|
|
| 20.7 |
|
|
| 79.6 |
|
|
| 67.4 |
|
Maintenance Services |
|
| 8.4 |
|
|
| 4.9 |
|
|
| 6.0 |
|
|
| 8.4 |
|
Leasing & Management Services |
|
| 41.0 |
|
|
| 29.2 |
|
|
| 36.6 |
|
|
| 41.0 |
|
|
| 116.8 |
|
|
| 54.8 |
|
|
| 122.2 |
|
|
| 116.8 |
| |
Selling and administrative |
|
| 59.0 |
|
|
| 54.7 |
|
|
| 63.6 |
|
|
| 59.0 |
|
Net gain on disposition of equipment |
|
| (9.6 | ) |
|
| (25.1 | ) |
|
| (4.9 | ) |
|
| (9.6 | ) |
Earnings from operations |
|
| 67.4 |
|
|
| 25.2 |
|
|
| 63.5 |
|
|
| 67.4 |
|
Interest and foreign exchange |
|
| 21.6 |
|
|
| 11.8 |
|
|
| 24.6 |
|
|
| 21.6 |
|
Earnings before income tax and earnings from unconsolidated affiliates |
|
| 45.8 |
|
|
| 13.4 |
|
|
| 38.9 |
|
|
| 45.8 |
|
Income tax expense |
|
| (11.9 | ) |
|
| (3.2 | ) |
|
| (9.3 | ) |
|
| (11.9 | ) |
Earnings before earnings from unconsolidated affiliates |
|
| 33.9 |
|
|
| 10.2 |
|
|
| 29.6 |
|
|
| 33.9 |
|
Earnings from unconsolidated affiliates |
|
| 2.9 |
|
|
| 1.0 |
|
|
| 4.0 |
|
|
| 2.9 |
|
Net earnings |
|
| 36.8 |
|
|
| 11.2 |
|
|
| 33.6 |
|
|
| 36.8 |
|
Net (earnings) loss attributable to noncontrolling interest |
|
| (3.7 | ) |
|
| 1.6 |
| ||||||||
Net earnings attributable to noncontrolling interest |
|
| (0.2 | ) |
|
| (3.7 | ) | ||||||||
Net earnings attributable to Greenbrier |
| $ | 33.1 |
|
| $ | 12.8 |
|
| $ | 33.4 |
|
| $ | 33.1 |
|
Diluted earnings per common share |
| $ | 0.97 |
|
| $ | 0.38 |
|
| $ | 1.03 |
|
| $ | 0.97 |
|
Performance for our segments is evaluated based on operating profit or loss. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Operating profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
| $ | 46.6 |
|
| $ | 1.8 |
|
| $ | 58.8 |
|
| $ | 46.6 |
|
Maintenance Services |
|
| 6.8 |
|
|
| 2.9 |
|
|
| 4.6 |
|
|
| 6.8 |
|
Leasing & Management Services |
|
| 40.7 |
|
|
| 47.6 |
|
|
| 33.2 |
|
|
| 40.7 |
|
Corporate |
|
| (26.7 | ) |
|
| (27.1 | ) |
|
| (33.1 | ) |
|
| (26.7 | ) |
|
| $ | 67.4 |
|
| $ | 25.2 |
|
| $ | 63.5 |
|
| $ | 67.4 |
|
26
24
Consolidated Results
|
| Three Months Ended |
|
| Increase |
| % |
|
| Three Months Ended |
|
|
|
|
|
| ||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 1,122.0 |
|
| $ | 682.8 |
|
| $ | 439.2 |
|
|
| 64.3 | % |
| $ | 862.7 |
|
| $ | 1,122.0 |
|
| $ | (259.3 | ) |
|
| (23.1 | %) |
Cost of revenue |
| $ | 1,005.2 |
|
| $ | 628.0 |
|
| $ | 377.2 |
|
|
| 60.1 | % |
| $ | 740.5 |
|
| $ | 1,005.2 |
|
| $ | (264.7 | ) |
|
| (26.3 | %) |
Margin (%) |
|
| 10.4 | % |
|
| 8.0 | % |
|
| 2.4 | % |
| * |
|
|
| 14.2 | % |
|
| 10.4 | % |
|
| 3.8 | % |
| * |
| ||
Net earnings attributable to Greenbrier |
| $ | 33.1 |
|
| $ | 12.8 |
|
| $ | 20.3 |
|
|
| 158.6 | % |
| $ | 33.4 |
|
| $ | 33.1 |
|
| $ | 0.3 |
|
|
| 0.9 | % |
* Not meaningful
Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.
The 64.3% increase23.1% decrease in revenueRevenue for the three months ended February 28, 202329, 2024 as compared to the three months ended February 28, 20222023 was primarily due to a 74.3% increase in Manufacturing revenue. The increase24.0% decrease in Manufacturing revenue wasand 23.3% decrease in Maintenance Services revenue. The decreases were primarily attributed todriven by a 63.6% increase26.4% decrease in railcar deliveries.deliveries including lower syndications and 22.0% lower volumes in our wheels business due to mild winter weather during the three months ended February 29, 2024.
The 60.1% increase26.3% decrease in costCost of revenue for the three months ended February 28, 202329, 2024 as compared to the three months ended February 28, 20222023 was primarily due to a 68.4% increase27.2% decrease in Manufacturing cost of revenue. The increasedecrease in Manufacturing cost of revenue was primarily attributed to a 63.6% increase26.4% decrease in railcar deliveries including lower syndications during the three months ended February 28, 2023.29, 2024.
Margin as a percentage of revenue was 10.4%14.2% and 8.0%10.4% for the three months ended February 29, 2024 and February 28, 2023, and 2022, respectively. The overall marginMargin as a percentage of revenue was positively impacted by higher syndication activityoperating efficiencies and improved margin as a percentage of revenue atfavorable product mix within our Manufacturing segment as a result of operating at higher volumes.during the three months ended February 29, 2024.
The $20.3$0.3 million increase in Net earnings attributable to Greenbrier for the three months ended February 28, 202329, 2024 as compared to the three months ended February 28, 20222023 was primarily due to anto:
These were partially offset by:by the following:
27
25
Manufacturing Segment
|
| Three Months Ended |
|
| Increase |
| % |
|
| Three Months Ended |
|
|
|
|
|
| ||||||||||||||||
(In millions, except railcar deliveries) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 968.6 |
|
| $ | 555.7 |
|
| $ | 412.9 |
|
|
| 74.3 | % |
| $ | 735.8 |
|
| $ | 968.6 |
|
| $ | (232.8 | ) |
|
| (24.0 | %) |
Cost of revenue |
| $ | 901.2 |
|
| $ | 535.0 |
|
| $ | 366.2 |
|
|
| 68.4 | % |
| $ | 656.2 |
|
| $ | 901.2 |
|
| $ | (245.0 | ) |
|
| (27.2 | %) |
Margin (%) |
|
| 7.0 | % |
|
| 3.7 | % |
|
| 3.3 | % |
| * |
|
|
| 10.8 | % |
|
| 7.0 | % |
|
| 3.8 | % |
| * |
| ||
Operating profit ($) |
| $ | 46.6 |
|
| $ | 1.8 |
|
| $ | 44.8 |
|
| * |
|
| $ | 58.8 |
|
| $ | 46.6 |
|
| $ | 12.2 |
|
|
| 26.2 | % | |
Operating profit (%) |
|
| 4.8 | % |
|
| 0.3 | % |
|
| 4.5 | % |
| * |
|
|
| 8.0 | % |
|
| 4.8 | % |
|
| 3.2 | % |
| * |
| ||
Deliveries |
|
| 7,200 |
|
|
| 4,400 |
|
|
| 2,800 |
|
|
| 63.6 | % |
|
| 5,300 |
|
|
| 7,200 |
|
|
| (1,900 | ) |
|
| (26.4 | %) |
* Not meaningful
Our Manufacturing segment primarily generates revenue from manufacturing a wide range of freight railcars and from the conversion of existing or in-service railcars through our facilities in North America and Europe. We also manufacture a broad range of ocean-going and river barges for transporting merchandise between ports within the United States.
Manufacturing revenue increased $412.9Revenue decreased $232.8 million or 74.3%24.0% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease in revenueRevenue was primarily attributed to a 63.6% increase26.4% decrease in railcar deliveries. The increase was also due to the additional revenue associated with an increase in material and other input costsdeliveries including lower syndications during the three months ended February 28, 2023, as many of our customer contracts include price escalation provisions when certain of our manufacturing costs increase.29, 2024.
Manufacturing costCost of revenue increased $366.2decreased $245.0 million or 68.4%27.2% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease in costCost of revenue was primarily attributed to a 63.6% increase26.4% decrease in the volume of railcar deliveries and higher costs associated with component outsourcing to support the volume and mix of productionincluding lower syndications during the three months ended February 28, 2023.29, 2024.
Manufacturing marginMargin as a percentage of revenue increased 3.3%3.8% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increase in margin percentage for the three months ended February 28, 202329, 2024 was primarily attributed to operating at higher production levels. This was partially offset by increased costs associated with outsourcing to supportefficiencies and favorable product mix during the higher volume and mix of production.three months ended February 29, 2024.
Manufacturing operatingOperating profit increased $44.8$12.2 million for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increase in operating profit was primarily attributed to increased deliveries forimproved Margin of $12.2 million during the three months ended February 28, 2023 at improved margins.29, 2024.
2826
Maintenance Services Segment
|
| Three Months Ended |
|
| Increase |
| % |
|
| Three Months Ended |
|
|
|
|
|
| ||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 98.0 |
|
| $ | 86.6 |
|
| $ | 11.4 |
|
|
| 13.2 | % |
| $ | 75.2 |
|
| $ | 98.0 |
|
| $ | (22.8 | ) |
|
| (23.3 | %) |
Cost of revenue |
| $ | 89.6 |
|
| $ | 81.7 |
|
| $ | 7.9 |
|
|
| 9.7 | % |
| $ | 69.2 |
|
| $ | 89.6 |
|
| $ | (20.4 | ) |
|
| (22.8 | %) |
Margin (%) |
|
| 8.6 | % |
|
| 5.7 | % |
|
| 2.9 | % |
| * |
|
|
| 8.0 | % |
|
| 8.6 | % |
|
| (0.6 | %) |
| * |
| ||
Operating profit ($) |
| $ | 6.8 |
|
| $ | 2.9 |
|
| $ | 3.9 |
|
|
| 134.5 | % |
| $ | 4.6 |
|
| $ | 6.8 |
|
| $ | (2.2 | ) |
|
| (32.4 | %) |
Operating profit (%) |
|
| 6.9 | % |
|
| 3.3 | % |
|
| 3.6 | % |
| * |
|
|
| 6.1 | % |
|
| 6.9 | % |
|
| (0.8 | %) |
| * |
|
* Not meaningful
Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.
Maintenance Services revenue increased $11.4Revenue decreased $22.8 million or 13.2%23.3% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease was primarily attributed to favorable pricing and higher22.0% lower volumes in our wheels business due to higher demand.mild winter weather during the three months ended February 29, 2024.
Maintenance Services costCost of revenue increased $7.9decreased $20.4 million or 9.7%22.8% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease was primarily due to higher costs associated with operating at higher volumes.lower volumes during the three months ended February 29, 2024.
Maintenance Services marginMargin as a percentage of revenue increased 2.9%decreased 0.6% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease in margin percentage was primarily attributed to favorable pricing and efficiencies. This was partially offset by lower scrap metal pricingoperating efficiencies as a result of operating at lower volumes during the three months ended February 28, 2023.29, 2024.
Maintenance Services operatingOperating profit increased $3.9decreased $2.2 million for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease in operating profit was primarily attributed to favorable pricing, higherlower operating efficiencies as a result of operating at lower volumes and improved efficiencies. This was partially offset by lower scrap metal pricing during the three months ended February 28, 2023.29, 2024.
2927
Leasing & Management Services Segment
|
| Three Months Ended |
|
| Increase |
| % |
|
| Three Months Ended |
|
|
|
|
|
| ||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 55.4 |
|
| $ | 40.5 |
|
| $ | 14.9 |
|
|
| 36.8 | % |
| $ | 51.7 |
|
| $ | 55.4 |
|
| $ | (3.7 | ) |
|
| (6.7 | %) |
Cost of revenue |
| $ | 14.4 |
|
| $ | 11.3 |
|
| $ | 3.1 |
|
|
| 27.4 | % |
| $ | 15.1 |
|
| $ | 14.4 |
|
| $ | 0.7 |
|
|
| 4.9 | % |
Margin (%) |
|
| 74.0 | % |
|
| 72.1 | % |
|
| 1.9 | % |
| * |
|
|
| 70.8 | % |
|
| 74.0 | % |
|
| (3.2 | %) |
| * |
| ||
Operating profit ($) |
| $ | 40.7 |
|
| $ | 47.6 |
|
| $ | (6.9 | ) |
|
| (14.5 | %) |
| $ | 33.2 |
|
| $ | 40.7 |
|
| $ | (7.5 | ) |
|
| (18.4 | %) |
Operating profit (%) |
|
| 73.5 | % |
|
| 117.5 | % |
|
| (44.1 | %) |
| * |
|
|
| 64.2 | % |
|
| 73.5 | % |
|
| (9.3 | %) |
| * |
|
* Not meaningful
Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet, providing various management services, syndication revenue associated with leases attached to new railcar sales, and interim rent on leased railcars for syndication.
Leasing & Management Services revenue increased $14.9Revenue decreased $3.7 million or 36.8%6.7% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease was primarily attributed to higherlower syndication revenue and higher leaseactivity. This was partially offset by an increase of $4.0 million in rents due to higher lease rates andassociated with a larger fleet.fleet during the three months ended February 29, 2024.
Leasing & Management Services costCost of revenue increased $3.1$0.7 million or 27.4%4.9% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increase was primarily due to higher costs from the additions to our lease fleet.larger fleet during the three months ended February 29, 2024.
Leasing & Management Services marginMargin as a percentage of revenue increased 1.9%decreased 3.2% for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The increasedecrease in margin percentage was primarily attributed to higherthe lower syndication activity and growth in and higher utilization ofduring the lease fleet.three months ended February 29, 2024.
Leasing & Management Services operatingOperating profit decreased $6.9$7.5 million for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 2022.2023. The decrease was primarily attributed to a reduction in netlower syndication activity and $2.9 million lower Net gain on disposition of equipment forduring the three months ended February 28, 2023.29, 2024.
3028
Selling and Administrative Expense
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
| ||||
Selling and administrative expense |
| $ | 59.0 |
|
| $ | 54.7 |
|
| $ | 4.3 |
|
|
| 7.9 | % |
|
| Three Months Ended |
|
|
|
|
|
|
| |||||||
(in millions) |
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||
Selling and administrative expense |
| $ | 63.6 |
|
| $ | 59.0 |
|
| $ | 4.6 |
|
|
| 7.8 | % |
Selling and administrative expense was $59.0$63.6 million or 5.3%7.4% of revenueRevenue for the three months ended February 28, 202329, 2024 compared to $54.7$59.0 million or 8.0%5.3% of revenueRevenue for the prior comparable period. The $4.3$4.6 million increase was primarily attributed to an increase in employee related costs due to higher incentive compensation expense as a result of timing of financial performance compared tofor the prior year.three months ended February 29, 2024.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment primarilytypically includes the sale of assets from our lease fleet (Equipment on operating leases, net) and disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to optimize our fleet and to manage risk and liquidity.
Net gain on disposition of equipment was $9.6$4.9 million for the three months ended February 28, 202329, 2024 compared to $25.1$9.6 million for the three months ended February 28, 2022.prior comparable period. The decrease in Net gain on disposition of equipment was primarily attributed to fewer sales of assets from our lease fleet during the three months ended February 28, 2023.29, 2024.
Interest and Foreign Exchange
Interest and foreign exchange expense was composed of the following:
|
| Three Months Ended |
|
| Increase |
|
| Three Months Ended |
|
|
|
| ||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| February 29, |
|
| February 28, |
|
| Increase |
| ||||||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest and other expense |
| $ | 20.9 |
|
| $ | 12.0 |
|
| $ | 8.9 |
|
| $ | 23.9 |
|
| $ | 20.9 |
|
| $ | 3.0 |
|
Foreign exchange (gain) loss |
|
| 0.7 |
|
|
| (0.2 | ) |
|
| 0.9 |
| ||||||||||||
Foreign exchange loss |
|
| 0.7 |
|
|
| 0.7 |
|
|
| — |
| ||||||||||||
|
| $ | 21.6 |
|
| $ | 11.8 |
|
| $ | 9.8 |
|
| $ | 24.6 |
|
| $ | 21.6 |
|
| $ | 3.0 |
|
The $9.8$3.0 million increase in Interest and foreign exchange expense for the three months ended February 28, 202329, 2024 compared to the three months ended February 28, 20222023 was attributed to an increase in interest expense from higher levels of borrowingsinterest rates and interest rates.borrowings.
29
Income Tax
For the three months ended February 29, 2024, we had Income tax expense of $9.3 million on pre-tax income of $38.9 million for an effective tax rate of 23.9%. The effective tax rate benefited from net favorable adjustments related to our foreign subsidiaries.
For the three months ended February 28, 2023, we had incomeIncome tax expense of $11.9 million on a pre-tax income of $45.8 million for an effective tax rate of 25.9%. Tax expense included net favorable discrete items in our foreign operations.
For the three months ended February 28, 2022, we had income tax expense of $3.2 million on pre-tax income of $13.4 million for an effective tax rate of 23.9%. Tax expense included net favorable discrete items.
The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year and may be positively or negatively impacted by adjustments that are required to be reported in the quarter. The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
31
Earnings From Unconsolidated Affiliates
Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from these unconsolidated affiliates on an after-tax basis.
Earnings from unconsolidated affiliates were $2.9$4.0 million and $1.0$2.9 million for the three months ended February 29, 2024 and February 28, 2023, and 2022, respectively. The increase was primarily related to increased volumes.$2.2 million in higher earnings at our Brazil operations for the three months ended February 29, 2024.
Noncontrolling Interest
Net (earnings) lossearnings attributable to noncontrolling interest was earnings of$0.2 million for the three months ended February 29, 2024 compared to $3.7 million for the three months ended February 28, 2023 compared to a loss of $1.6 million for the three months ended February 28, 2022.2023. Net (earnings) lossearnings attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations.
30
32
Six Months Ended February 28, 202329, 2024 Compared to the Six Months Ended February 28, 20222023
Overview
Revenue, Cost of revenue, Margin and Earnings from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
| For the Six Months |
|
| Six Months Ended |
| ||||||||||
(in millions, except per share amounts) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
| $ | 1,615.1 |
|
| $ | 1,008.2 |
|
| $ | 1,411.7 |
|
| $ | 1,615.1 |
|
Maintenance Services |
|
| 183.5 |
|
|
| 159.0 |
|
|
| 159.0 |
|
|
| 183.5 |
|
Leasing & Management Services |
|
| 89.9 |
|
|
| 66.3 |
|
|
| 100.8 |
|
|
| 89.9 |
|
|
| 1,888.5 |
|
|
| 1,233.5 |
|
|
| 1,671.5 |
|
|
| 1,888.5 |
| |
Cost of revenue: |
|
|
|
|
|
|
|
|
|
| ||||||
Manufacturing |
|
| 1,505.7 |
|
|
| 956.6 |
|
|
| 1,257.1 |
|
|
| 1,505.7 |
|
Maintenance Services |
|
| 169.2 |
|
|
| 152.9 |
|
|
| 140.8 |
|
|
| 169.2 |
|
Leasing & Management Services |
|
| 27.3 |
|
|
| 21.6 |
|
|
| 30.1 |
|
|
| 27.3 |
|
|
| 1,702.2 |
|
|
| 1,131.1 |
|
|
| 1,428.0 |
|
|
| 1,702.2 |
| |
Margin: |
|
|
|
|
|
|
|
|
|
| ||||||
Manufacturing |
|
| 109.4 |
|
|
| 51.6 |
|
|
| 154.6 |
|
|
| 109.4 |
|
Maintenance Services |
|
| 14.3 |
|
|
| 6.1 |
|
|
| 18.2 |
|
|
| 14.3 |
|
Leasing & Management Services |
|
| 62.6 |
|
|
| 44.7 |
|
|
| 70.7 |
|
|
| 62.6 |
|
|
| 186.3 |
|
|
| 102.4 |
|
|
| 243.5 |
|
|
| 186.3 |
| |
Selling and administrative |
|
| 112.4 |
|
|
| 99.0 |
|
|
| 119.9 |
|
|
| 112.4 |
|
Net gain on disposition of equipment |
|
| (12.9 | ) |
|
| (33.6 | ) |
|
| (4.8 | ) |
|
| (12.9 | ) |
Impairment of long-lived assets |
|
| 24.2 |
|
|
| — |
| ||||||||
Asset impairment, disposal, and exit costs |
|
| — |
|
|
| 24.2 |
| ||||||||
Earnings from operations |
|
| 62.6 |
|
|
| 37.0 |
|
|
| 128.4 |
|
|
| 62.6 |
|
Interest and foreign exchange |
|
| 41.2 |
|
|
| 24.4 |
|
|
| 47.8 |
|
|
| 41.2 |
|
Earnings before income taxes and earnings from |
|
| 21.4 |
|
|
| 12.6 |
|
|
| 80.6 |
|
|
| 21.4 |
|
Income tax expense |
|
| (8.1 | ) |
|
| (1.8 | ) |
|
| (19.3 | ) |
|
| (8.1 | ) |
Earnings before earnings from |
|
| 13.3 |
|
|
| 10.8 |
|
|
| 61.3 |
|
|
| 13.3 |
|
Earnings from unconsolidated affiliates |
|
| 6.2 |
|
|
| 6.0 |
|
|
| 5.5 |
|
|
| 6.2 |
|
Net earnings |
|
| 19.5 |
|
|
| 16.8 |
|
|
| 66.8 |
|
|
| 19.5 |
|
Net (earnings) loss attributable to noncontrolling interest |
|
| (3.1 | ) |
|
| 6.8 |
| ||||||||
Net earnings attributable to noncontrolling interest |
|
| (2.2 | ) |
|
| (3.1 | ) | ||||||||
Net earnings attributable to Greenbrier |
| $ | 16.4 |
|
| $ | 23.6 |
|
| $ | 64.6 |
|
| $ | 16.4 |
|
Diluted earnings per common share |
| $ | 0.49 |
|
| $ | 0.70 |
|
| $ | 1.99 |
|
| $ | 0.49 |
|
Performance for our segments is evaluated based on operating profit or loss. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.
|
| For the Six Months |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Operating profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
| $ | 43.2 |
|
| $ | 14.1 |
|
| $ | 113.1 |
|
| $ | 43.2 |
|
Maintenance Services |
|
| 12.3 |
|
|
| 1.8 |
|
|
| 15.2 |
|
|
| 12.3 |
|
Leasing & Management Services |
|
| 56.3 |
|
|
| 64.8 |
|
|
| 59.5 |
|
|
| 56.3 |
|
Corporate |
|
| (49.2 | ) |
|
| (43.7 | ) |
|
| (59.4 | ) |
|
| (49.2 | ) |
|
| $ | 62.6 |
|
| $ | 37.0 |
|
| $ | 128.4 |
|
| $ | 62.6 |
|
3331
Consolidated Results
|
| For the Six Months |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 1,888.5 |
|
| $ | 1,233.5 |
|
| $ | 655.0 |
|
|
| 53.1 | % |
Cost of revenue |
| $ | 1,702.2 |
|
| $ | 1,131.1 |
|
| $ | 571.1 |
|
|
| 50.5 | % |
Margin (%) |
|
| 9.9 | % |
|
| 8.3 | % |
|
| 1.6 | % |
| * |
| |
Net earnings attributable to |
| $ | 16.4 |
|
| $ | 23.6 |
|
| $ | (7.2 | ) |
|
| (30.5 | %) |
|
| Six Months Ended |
|
|
|
|
|
|
| |||||||
(in millions) |
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||
Revenue |
| $ | 1,671.5 |
|
| $ | 1,888.5 |
|
| $ | (217.0 | ) |
|
| (11.5 | %) |
Cost of revenue |
| $ | 1,428.0 |
|
| $ | 1,702.2 |
|
| $ | (274.2 | ) |
|
| (16.1 | %) |
Margin (%) |
|
| 14.6 | % |
|
| 9.9 | % |
|
| 4.7 | % |
| * |
| |
Net earnings attributable to Greenbrier |
| $ | 64.6 |
|
| $ | 16.4 |
|
| $ | 48.2 |
|
| * |
|
* Not meaningful
Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.
The 53.1% increase11.5% decrease in revenueRevenue for the six months ended February 28, 202329, 2024 as compared to the six months ended February 28, 20222023 was primarily due to a 60.2% increase12.6% decrease in Manufacturing revenue.Revenue. The increasedecrease in Manufacturing revenueRevenue was primarily attributed to a 44.4% increase10.3% decrease in railcar deliveries.deliveries during the six months ended February 29, 2024.
The 50.5% increase16.1% decrease in costCost of revenue for the six months ended February 28, 202329, 2024 as compared to the six months ended February 28, 20222023 was primarily due to a 57.4% increase16.5% decrease in Manufacturing costCost of revenue. The increasedecrease in Manufacturing costCost of revenue was primarily attributed to a 44.4% increase10.3% decrease in railcar deliveries and higher material costs during the six months ended February 28, 2023.29, 2024.
Margin as a percentage of revenue was 9.9%14.6% and 8.3%9.9% for the six months ended February 29, 2024 and February 28, 2023, and 2022, respectively. The overall marginMargin as a percentage of revenue was positively impacted by an increase in Manufacturing marginMargin from 5.1%6.8% to 6.8%11.0% primarily attributed to operating at higher volumesefficiencies and favorable product mix during the six months ended February 28, 2023.29, 2024.
The $7.2$48.2 million decreaseincrease in netNet earnings attributable to Greenbrier for the six months ended February 28, 202329, 2024 as compared to the six months ended February 28, 20222023 was primarily due to the following:
These were partially offset by the following:
These were partially offset by an increase in Margin primarily due to higher railcar deliveries and syndication revenue for the six months ended February 28, 2023.
3432
Manufacturing Segment
|
| For the Six Months |
|
| Increase |
| % |
|
| Six Months Ended |
|
|
|
|
|
| ||||||||||||||||
(In millions, except railcar deliveries) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 1,615.1 |
|
| $ | 1,008.2 |
|
| $ | 606.9 |
|
|
| 60.2 | % |
| $ | 1,411.7 |
|
| $ | 1,615.1 |
|
| $ | (203.4 | ) |
|
| (12.6 | %) |
Cost of revenue |
| $ | 1,505.7 |
|
| $ | 956.6 |
|
| $ | 549.1 |
|
|
| 57.4 | % |
| $ | 1,257.1 |
|
| $ | 1,505.7 |
|
| $ | (248.6 | ) |
|
| (16.5 | %) |
Margin (%) |
|
| 6.8 | % |
|
| 5.1 | % |
|
| 1.7 | % |
| * |
|
|
| 11.0 | % |
|
| 6.8 | % |
|
| 4.2 | % |
| * |
| ||
Operating profit ($) |
| $ | 43.2 |
|
| $ | 14.1 |
|
| $ | 29.1 |
|
|
| 206.4 | % |
| $ | 113.1 |
|
| $ | 43.2 |
|
| $ | 69.9 |
|
|
| 161.8 | % |
Operating profit (%) |
|
| 2.7 | % |
|
| 1.4 | % |
|
| 1.3 | % |
| * |
|
|
| 8.0 | % |
|
| 2.7 | % |
|
| 5.3 | % |
| * |
| ||
Deliveries |
|
| 11,700 |
|
|
| 8,100 |
|
|
| 3,600 |
|
|
| 44.4 | % |
|
| 10,500 |
|
|
| 11,700 |
|
|
| (1,200 | ) |
|
| (10.3 | %) |
* Not meaningful
Our Manufacturing segment primarily generates revenue from manufacturing a wide range of freight railcars and from the conversion of existing or in-service railcars through our facilities in North America and Europe. We also manufacture a broad range of ocean-going and river barges for transporting merchandise between ports within the United States.
Manufacturing revenue increased $606.9Revenue decreased $203.4 million or 60.2%12.6% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increasedecrease in revenueRevenue was primarily attributed to a 44.4% increase10.3% decrease in railcar deliveries. The increase was also due to the additional revenue associated with an increase in material and other input costsdeliveries during the six months ended February 28, 2023, as many of our customer contracts include price escalation provisions when certain of our manufacturing costs increase.29, 2024.
Manufacturing costCost of revenue increased $549.1decreased $248.6 million or 57.4%16.5% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increasedecrease in costCost of revenue was primarily attributed to a 44.4% increase10.3% decrease in the volume of railcar deliveries and higher material and other input costsoperating efficiencies during the six months ended February 28, 2023.29, 2024.
Manufacturing marginMargin as a percentage of revenue increased 1.7%4.2% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase in margin percentage for the six months ended February 28, 202329, 2024 was primarily attributed to operating at higher production levels. This was partially offset by increased costs associated with component outsourcing to supportefficiencies and favorable product mix during the higher volume and mix of production.six months ended February 29, 2024.
Manufacturing operatingOperating profit increased $29.1$69.9 million for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase in operatingOperating profit was primarily attributed to an increase in railcar deliveries at improved margins. This increase was partially offset byMargin during the six months ended February 29, 2024 as well as a $24.2 million impairment of long-lived assets at our Gunderson facility.loss during the six months ended February 28, 2023.
3533
Maintenance Services Segment
|
| For the Six Months |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 183.5 |
|
| $ | 159.0 |
|
| $ | 24.5 |
|
|
| 15.4 | % |
Cost of revenue |
| $ | 169.2 |
|
| $ | 152.9 |
|
| $ | 16.3 |
|
|
| 10.7 | % |
Margin (%) |
|
| 7.8 | % |
|
| 3.8 | % |
|
| 4.0 | % |
| * |
| |
Operating profit ($) |
| $ | 12.3 |
|
| $ | 1.8 |
|
| $ | 10.5 |
|
| * |
| |
Operating profit (%) |
|
| 6.7 | % |
|
| 1.1 | % |
|
| 5.6 | % |
| * |
|
|
| Six Months Ended |
|
|
|
|
|
|
| |||||||
(in millions) |
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||
Revenue |
| $ | 159.0 |
|
| $ | 183.5 |
|
| $ | (24.5 | ) |
|
| (13.4 | %) |
Cost of revenue |
| $ | 140.8 |
|
| $ | 169.2 |
|
| $ | (28.4 | ) |
|
| (16.8 | %) |
Margin (%) |
|
| 11.4 | % |
|
| 7.8 | % |
|
| 3.6 | % |
| * |
| |
Operating profit ($) |
| $ | 15.2 |
|
| $ | 12.3 |
|
| $ | 2.9 |
|
|
| 23.6 | % |
Operating profit (%) |
|
| 9.6 | % |
|
| 6.7 | % |
|
| 2.9 | % |
| * |
|
* Not meaningful
Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.
Maintenance Services revenue increasedRevenue decreased $24.5 million or 15.4%13.4% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increasedecrease was primarily attributed to favorable pricing and higher19.3% lower volumes in our wheels business due to increased demand.mild winter weather despite higher average selling prices during the six months ended February 29, 2024.
Maintenance Services costCost of revenue increased $16.3decreased $28.4 million or 10.7%16.8% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increasedecrease was primarily due to higher costs associated with operating at higher volumes.lower volumes during the six months ended February 29, 2024.
Maintenance Services marginMargin as a percentage of revenue increased 4.0%3.6% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase in margin percentage was primarily attributed to favorable pricing and efficiencies during the six months ended February 28, 2023. This was partially offset by a decrease in scrap metal pricing and volumes during the six months ended February 28, 2023.29, 2024.
Maintenance Services operatingOperating profit increased $10.5$2.9 million for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase in operatingOperating profit was primarily attributed to favorable pricing and efficiencies during the six months ended February 28, 2023. This was partially offset by a decrease in scrap metal pricing and volumes during the six months ended February 28, 2023.29, 2024.
36
34
Leasing & Management Services Segment
|
| For the Six Months |
|
| Increase |
| % |
|
| Six Months Ended |
|
|
|
|
|
| ||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Revenue |
| $ | 89.9 |
|
| $ | 66.3 |
|
| $ | 23.6 |
|
|
| 35.6 | % |
| $ | 100.8 |
|
| $ | 89.9 |
|
| $ | 10.9 |
|
|
| 12.1 | % |
Cost of revenue |
| $ | 27.3 |
|
| $ | 21.6 |
|
| $ | 5.7 |
|
|
| 26.4 | % |
| $ | 30.1 |
|
| $ | 27.3 |
|
| $ | 2.8 |
|
|
| 10.3 | % |
Margin (%) |
|
| 69.6 | % |
|
| 67.4 | % |
|
| 2.2 | % |
| * |
|
|
| 70.1 | % |
|
| 69.6 | % |
|
| 0.5 | % |
| * |
| ||
Operating profit ($) |
| $ | 56.3 |
|
| $ | 64.8 |
|
| $ | (8.5 | ) |
|
| (13.1 | %) |
| $ | 59.5 |
|
| $ | 56.3 |
|
| $ | 3.2 |
|
|
| 5.7 | % |
Operating profit (%) |
|
| 62.6 | % |
|
| 97.7 | % |
|
| (35.1 | %) |
| * |
|
|
| 59.0 | % |
|
| 62.6 | % |
|
| (3.6 | %) |
| * |
|
* Not meaningful
Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet, providing various management services, syndication revenue associated with leases attached to new railcar sales, and interim rent on leased railcars for syndication.
Leasing & Management Services revenueRevenue increased $23.6$10.9 million or 35.6%12.1% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase was primarily attributed to higher lease rents due to higher lease rates and a larger fleet and higher syndication revenue from an increase inimproved lease rates during the volume of new railcar sales with leases attached.six months ended February 29, 2024.
Leasing & Management Services costCost of revenue increased $5.7$2.8 million or 26.4%10.3% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase was primarily due to higher costs from the larger fleet.fleet during the six months ended February 29, 2024.
Leasing & Management Services marginMargin as a percentage of revenue increased 2.2%0.5% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The increase in margin percentage was primarily attributed to the higher syndication activity.lease rents during the six months ended February 29, 2024.
Leasing & Management Services operatingOperating profit decreased $8.5increased $3.2 million or 13.1%5.7% for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 2022.2023. The decreaseincrease was primarily attributed to a reduction in netthe larger fleet and improved lease rates during the six months ended February 29, 2024. This was partially offset by $4.8 million lower Net gain on disposition of equipment forduring the six months ended February 28, 2023.29, 2024.
37
35
Selling and Administrative Expense
|
| For the Six Months |
|
| Increase |
| % |
|
| Six Months Ended |
|
|
|
|
|
| ||||||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| Change |
|
| February 29, |
|
| February 28, |
|
| Increase |
|
| % |
| ||||||||
Selling and administrative expense |
| $ | 112.4 |
|
| $ | 99.0 |
|
| $ | 13.4 |
|
|
| 13.5 | % |
| $ | 119.9 |
|
| $ | 112.4 |
|
| $ | 7.5 |
|
|
| 6.7 | % |
Selling and administrative expense was $112.4$119.9 million or 6.0%7.2% of revenueRevenue for the six months ended February 28, 202329, 2024 compared to $99.0$112.4 million or 8.0%6.0% of revenueRevenue for the prior comparable period. The $13.4$7.5 million increase was primarily attributed to higheran increase in employee related costs revenue-based fees paid to our joint venture partner in Mexico and IT support costs.during the six months ended February 29, 2024.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment primarilytypically includes the sale of assets from our lease fleet (Equipment on operating leases, net) and disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to optimize our fleet and to manage risk and liquidity.
Net gain on disposition of equipment was $12.9 million and $33.6$4.8 million for the six months ended February 28, 2023 and 2022, respectively.29, 2024 compared to a gain of $12.9 million for the prior comparable period. The decrease in Net gain on disposition of equipment was primarily attributed to fewer sales of assets from our lease fleet during the six months ended February 28, 2023.29, 2024.
Impairment of Long-livedLong-Lived Assets
The six months ended February 28, 2023 included an Impairment of Long-lived Assets ofa $24.2 million related to our change in the future useimpairment of long-lived assets at our Gunderson facility. For additional information, see Note 4 to the Condensed Consolidated Financial Statements.
Interest and Foreign Exchange
Interest and foreign exchange expense was composed of the following:
|
| For the Six Months |
|
| Increase |
|
| Six Months Ended |
|
|
|
| ||||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| (Decrease) |
|
| February 29, |
|
| February 28, |
|
| Increase |
| ||||||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest and other expense |
| $ | 38.7 |
|
| $ | 23.3 |
|
| $ | 15.4 |
|
| $ | 45.8 |
|
| $ | 38.7 |
|
| $ | 7.1 |
|
Foreign exchange loss |
|
| 2.5 |
|
|
| 1.1 |
|
|
| 1.4 |
|
|
| 2.0 |
|
|
| 2.5 |
|
|
| (0.5 | ) |
|
| $ | 41.2 |
|
| $ | 24.4 |
|
| $ | 16.8 |
|
| $ | 47.8 |
|
| $ | 41.2 |
|
| $ | 6.6 |
|
The $16.8$6.6 million increase in Interest and foreign exchange expense for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 20222023 was primarily attributed to an increase in interest expense from higher levels of borrowingsinterest rates and interest rates.borrowings.
Income Tax
For the six months ended February 29, 2024, we had Income tax expense of $19.3 million on pre-tax income of $80.6 million for an effective tax rate of 23.9%. The effective tax rate benefited from net favorable adjustments related to our foreign subsidiaries.
For the six months ended February 28, 2023, we had incomeIncome tax expense of $8.1 million on pre-tax income of $21.4 million for an effective tax rate of 37.8%. Tax expense was negatively impacted by the geographic mix of earnings as well as net unfavorable discrete items including changes in foreign currency exchange rates for our U.S. Dollar denominated foreign operations.
ForThe provision for income taxes during interim quarterly reporting periods is based on our estimates of the six months ended February 28, 2022, we had income tax expense of $1.8 million on pre-tax income of $12.6 million for an effective tax rate of 14.3%. Tax expense included net favorable discrete items primarily relatedrates for the full fiscal year and may be positively or negatively impacted by adjustments that are required to amendments to prior year tax returns.
be reported in the quarter. The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar
38
manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in Earningsearnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
Earnings From Unconsolidated Affiliates
Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from these unconsolidated affiliates on an after-tax basis.
36
Earnings from unconsolidated affiliates waswere $5.5 million and $6.2 million for the six months ended February 29, 2024 and February 28, 2023, comparedrespectively. The decrease was primarily related to a loss at a temporarily idle facility during the six months ended February 29, 2024.
Noncontrolling Interest
Net earnings from unconsolidated affiliates of $6.0attributable to noncontrolling interest was $2.2 million for the six months ended February 28, 2022. The increase was primarily related29, 2024 compared to higher sales volumes, partially offset by lower profitability at our Brazil operations.
Noncontrolling Interest
Net (earnings) loss attributable to noncontrolling interest was earnings of $3.1 million for the six months ended February 28, 2023 compared to a loss of $6.8 million for the six months ended February 28, 2022.2023. Net (earnings) lossearnings attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations. The increase of $9.9 million from the prior year is primarily a result of an increase in earnings due to higher volumes of railcar deliveries at our Mexican railcar manufacturing joint venture.
39
37
Liquidity and Capital Resources
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Net cash used in operating activities |
| $ | (96.4 | ) |
| $ | (220.3 | ) | ||||||||
Net cash provided by (used in) operating activities |
| $ | 54.4 |
|
| $ | (96.4 | ) | ||||||||
Net cash used in investing activities |
|
| (105.2 | ) |
|
| (52.4 | ) |
|
| (163.1 | ) |
|
| (105.2 | ) |
Net cash provided by financing activities |
|
| 23.7 |
|
|
| 204.8 |
|
|
| 79.7 |
|
|
| 23.7 |
|
Effect of exchange rate changes |
|
| 18.4 |
|
|
| (1.0 | ) |
|
| (1.7 | ) |
|
| 18.4 |
|
Decrease in cash and cash equivalents and restricted cash |
| $ | (159.5 | ) |
| $ | (68.9 | ) | ||||||||
Decrease in Cash and cash equivalents and Restricted cash |
| $ | (30.7 | ) |
| $ | (159.5 | ) |
We have been financed through cash generated from operations and borrowings. At February 28, 202329, 2024 Cash and cash equivalents and Restricted cash were $399.6$272.0 million, aan decrease of $159.5$30.7 million from $559.1$302.7 million at August 31, 2022.2023.
Cash Flows From Operating Activities
The change$150.8 million increase in cash used infrom operating activities for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 20222023 was primarily due to a moderation$71.8 million net change in working capital increases when compared to the prior year.and a $47.3 million increase in Net earnings.
Cash Flows From Investing Activities
Cash used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets and investment activity with our unconsolidated affiliates. The change$57.9 million increase in cash used in investing activities for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 20222023 was primarily attributable to a $36.2 million decrease in proceeds from sales of assets when compared to the six months ended February 28, 2023. Proceeds from the sale of assets primarily relate to fleet sales that outpaced a decrease in capital expenditures in our Leasing & Management Services segment.
|
| Six Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2023 |
|
| 2022 |
|
| February 29, |
|
| February 28, |
| ||||
Capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Leasing & Management Services |
| $ | (142.6 | ) |
| $ | (183.6 | ) |
| $ | (132.3 | ) |
| $ | (142.6 | ) |
Manufacturing |
|
| (22.3 | ) |
|
| (12.2 | ) |
|
| (47.9 | ) |
|
| (22.3 | ) |
Maintenance Services |
|
| (4.8 | ) |
|
| (2.2 | ) |
|
| (10.3 | ) |
|
| (4.8 | ) |
Total capital expenditures (gross) |
| $ | (169.7 | ) |
| $ | (198.0 | ) |
| $ | (190.5 | ) |
| $ | (169.7 | ) |
Proceeds from sales of assets |
|
| 62.1 |
|
|
| 148.6 |
|
|
| 25.9 |
|
|
| 62.1 |
|
Total capital expenditures (net of proceeds) |
| $ | (107.6 | ) |
| $ | (49.4 | ) |
| $ | (164.6 | ) |
| $ | (107.6 | ) |
Capital expenditures primarily relate to additions to our lease fleet and on-going investments into the safety and productivity of our facilities. Proceeds from the sale of assets primarily relate to sales of railcars from our lease fleet within Leasing & Management Services. Assets from our lease fleet are periodically sold in the normal course of business to accommodate customer demand and to manage risk and liquidity. Proceeds from sales of assets are expected to be approximately $70$75 million for 2023.2024.
CapitalGross capital expenditures for 20232024 are expected to be approximately $290$280 million for Leasing & Management Services, approximately $80$140 million for Manufacturing and approximately $15 million for Maintenance Services. Capital expenditures for 20232024 primarily relate to additions to our lease fleet reflecting our enhanced leasing strategy and continued investments into the safety and productivity of our facilities.
Cash Flows From Financing Activities
The change$56.0 million increase in cash provided byflow from financing activities for the six months ended February 28, 202329, 2024 compared to the six months ended February 28, 20222023 was primarily attributed to fewer$53.6 million higher proceeds from debt,the issuance of notes payable, net of repayments when compared to February 28, 2022.repayments. During the six months ended February 28, 202329, 2024 we issued $178.5 million of asset backed securities and used proceeds to pay down $139.9 million of our GBX Leasing warehouse facility. We also drew the remaining $75$89.2 million on the GBX Leasing warehouse facility to grow the fleet. In February 2024, we paid $47.7 million to retire our term facility.2024 Convertible Notes.
38
40
Dividend & Share Repurchase Program
A quarterly dividend of $0.27$0.30 per share was declared on April 3, 2023.2, 2024.
The Board of Directors has authorized our company to repurchase shares of our common stock. The share repurchase program has an expiration date of January 31, 2025. As of February 28, 2023, the amount remaining for repurchase was $85.9 million. Under the share repurchase program, shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. The timing and amount of purchases will beis based upon market conditions, securities law limitations and other factors. The program may be modified, suspended or discontinued at any time without prior notice. The share repurchase program does not obligate us to acquire any specific number of shares in any period.
During the three andsix months ended February 29, 2024, we purchased a total of 38 thousand shares for $1.3 million. As of February 29, 2024, the amount remaining for repurchase under the share repurchase program was $45.1 million. During the six months ended February 28, 2023, we purchased a total of 575 thousand shares for $17.4 million. There were no shares repurchased under the share repurchase program during the six months ended February 28, 2022.
Cash, Borrowing Availability and Credit Facilities
As of February 28, 2023,29, 2024, we had $379.9$252.0 million in Cash and cash equivalents and $436.0$329.3 million in available borrowings. Our current cashThe available balance is part of our strategy to maintain strong liquidity to respond to current uncertainties.draw under committed credit facilities includes $214.6 million on the North American credit facility, $43.7 million on the European credit facilities and $71.0 million on the Mexican credit facilities.
Senior secured credit facilities aggregated to $1.1$1.4 billion as of February 28, 2023. We had an aggregate29, 2024 which consisted of $436.0 million available to draw down under committed credit facilities asthe following components:
GBX Leasing –As of February 28, 2023. This amount consists of $364.129, 2024, a $550.0 million available on the North Americannon-recourse warehouse credit facility $36.9 million onexisted to support the Europeanoperations of GBX Leasing. Advances under this facility bear interest at SOFR plus 1.85% plus 0.11% as a SOFR adjustment. Interest rate swap agreements cover approximately 99% of the outstanding balance to swap the floating interest rate to a fixed rate. The warehouse credit facilitiesfacility converts to a term loan in August 2025 and $35.0 million on the Mexican credit facilities.matures in August 2027.
North America – As of February 28, 2023,29, 2024, a $600.0 million revolving line of credit, maturing August 2026, secured by substantially all our U.S. assets not otherwise pledged as security for term loans or the warehouse credit facility, existed to provide working capital and interim financing of equipment, principally for our U.S. and Mexican operations. Advances under this North American credit facility bear interest at SOFR plus 1.75% plus 0.10% as a SOFR adjustment or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
GBX Leasing –As of February 28, 2023, a $350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under this facility bear interest at SOFR plus 1.85% plus 0.11% as a SOFR adjustment. The warehouse credit facility converts to a term loan in August 2025 and matures in August 2027.
Europe – As of February 28, 2023,29, 2024, lines of credit totaling $71.7$75.3 million secured by certain of our European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR)WIBOR plus 1.2% to WIBOR plus 1.6% and Euro Interbank Offered Rate (EURIBOR) plus 1.1% to EURIBOR plus 1.5%1.9%, were available for working capital needs of our European manufacturing operations. The European lines of credit include $35.0$32.5 million which areis guaranteed by us. European credit facilities are regularly renewed. Currently, these European credit facilities have maturities that range from June 20232024 through September 2024.
November 2025.
Mexico – As of February 28, 2023,29, 2024, our Mexican railcar manufacturing operations had three lines of credit totaling $120.0$196.0 million for working capital needs. The first line of credit provides up to $50.0 million and matures in October 2024. Advances under this facility bear interest at LIBOR plus 4.25%. The second line of credit provides up to $40.0 million,needs, $96.0 of which we and our joint venture partner have each guaranteed 50%. Advances under this facilitythese facilities bear interest at variable rates that range from SOFR plus 2.55%. The Mexican railcar manufacturing joint venture will be able2.22% to draw amounts available under this facility through February 2025. The third line of credit provides up to $30.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBORSOFR plus 3.75% to 4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facilitycredit facilities have maturities that range from June 2024 through June 2024.
41
January 2027.
Credit facility balances:
(in millions) |
| February 28, |
|
| August 31, |
|
| February 29, |
|
| August 31, |
| ||||
Nonrecourse credit facility balances |
|
|
|
|
|
| ||||||||||
GBX Leasing |
| $ | 89.2 |
|
| $ | 139.9 |
| ||||||||
Other credit facility balances |
|
|
|
|
| |||||||||||
North America |
| $ | 125.0 |
|
| $ | 160.0 |
|
|
| 55.0 |
|
|
| — |
|
GBX Leasing |
|
| 65.5 |
|
|
| — |
| ||||||||
Europe |
|
| 34.8 |
|
|
| 51.6 |
|
|
| 31.6 |
|
|
| 47.2 |
|
Mexico |
|
| 85.0 |
|
|
| 85.0 |
|
|
| 125.0 |
|
|
| 110.0 |
|
|
| $ | 310.3 |
|
| $ | 296.6 |
| ||||||||
Total Revolving notes |
| $ | 300.8 |
|
| $ | 297.1 |
|
Outstanding commitments under the North American credit facility included letters of credit which totaled $5.5$7.1 million and $6.9$4.9 million as of February 28, 202329, 2024 and August 31, 2022,2023, respectively.
39
Other Information
The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into financing leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of February 28, 2023,29, 2024, we were in compliance with all such restrictive covenants.
From time to time, we may seek to repurchase or otherwise retire or exchange securities, including outstanding convertible notes, borrowings and equity securities, and take other steps to reduce our debt, extend the maturities of our debt or otherwise improve our balance sheet. These actions may include open market repurchases, unsolicited or solicited privately negotiated transactions or other retirements, repurchases or exchanges. Such retirements, repurchases or exchanges of one note or security for another note or security (now or hereafter existing), if any, will depend on a number of factors, including, but not limited to, prevailing market conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable. The amounts involved in any such transactions may, individually or in the aggregate, be material and may involve all or a portion of a particular series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other indebtedness which remain outstanding.
We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency, we enter into foreign currency forward exchange contracts with established financial institutions to protect the margin on a portion of foreign currency sales in firm backlog. Given the strong credit standing of the counterparties, no provision has been made for credit loss due to counterparty non-performance.
To mitigate the exposure to changes in interest rates, we have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $468.4$608.6 million of variable rate debt to fixed rate debt as of February 28, 2023.29, 2024.
Given the strong credit standing of the counterparties, no provision has been made for credit loss due to counterparty non-performance.
We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit facilities and long-term financings, to be sufficient to fund expected debt repayments, working capital needs, planned capital expenditures, additional investments in our unconsolidated affiliates and dividends during the next twelve months.
Off-Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our Consolidated Financial Statements.
42
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAPaccounting principles generally accepted in the U.S. 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.
Impairment of long-lived assets - We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed based upon estimated undiscounted cash flows expected to be realized over the remaining useful life of the asset group. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group.
An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, and the determination of the fair value of real and personal property. Estimates of future cash flows are by nature highly uncertain and contemplate factors that may change over time. During the first quarter of fiscal 2023, a $24.2 million pre-tax impairment charge was recorded as Impairment of long-lived assets and is included within the Condensed Consolidated Statements of Operations. For further information, see Note 4 to the Condensed Consolidated Financial Statements.
Goodwill - In accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles–Goodwill and Other (ASC 350), the Company evaluatesWe evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amountamounts of such assets may not be recoverable. The Company uses a two-step process to assessour reporting units exceed their fair value. We determine the realizabilityfair value of goodwill. The first step is a qualitative assessment that analyzes macroeconomic considerations and industry indicators, financial performance and cost estimates associated with a particularour reporting unit. This assessment requires subjectivityunits based on cumulative information available ata weighting of income and market approaches. Under the assessment date. If a qualitative assessment indicates it is more likely than not thatincome approach, we calculate the fair value of a reporting unit is less than its carrying amount,based on the Company will proceed topresent value of estimated future cash flows which incorporates forecasted revenues, long-term growth rate, gross margin percentages,
40
operating expenses, and the quantitative second step whereuse of discount rates. Under the market approach, we estimate the fair value of a reporting unit is calculated based on weighted income and market-based approaches.
observed market multiples for comparable businesses. If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit.
We performed a quantitative assessment for our annual goodwill impairment test during the third quarter of 20222023. Based on the results of our assessment, the estimated fair values of all reporting units with goodwill increased from our prior quantitative assessment, and exceeded their carrying values; therefore, we concluded that goodwill for all reporting units was not impaired.
As of February 28, 2023, our goodwill balance was $128.3 million of which $85.3 million related to our Manufacturing segment and $43.0 million related to our Maintenance Services segment. Our Manufacturing segment includes the North America Manufacturing reporting unit with a goodwill balance of $56.6 million; and the Europe Manufacturing reporting unit with a goodwill balance of $28.7 million.
Pursuant to the authoritative guidance, we make certain estimates and assumptions to determine our reporting units and whether the fair value for each reporting unit is greater than its carrycarrying value. The above highlighted judgments contemplated estimates and effects of macroeconomic trends that are inherently uncertain. Changes in these estimates, which may include the effects of inflation and policy reactions thereto, continued increases in pricing of materials and components, changes in demand, or potential macroeconomic events may cause future assessment conclusions to differ.
As of February 29, 2024, our goodwill balance was $128.0 million, of which $85.4 million related to our Manufacturing segment and $42.6 million related to our Maintenance Services segment. Our Manufacturing segment includes the North America Manufacturing reporting unit with a goodwill balance of $56.3 million and the Europe Manufacturing reporting unit with a goodwill balance of $29.1 million.
Income taxes -The asset and liability method is used to account for income taxes. We are required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for each tax jurisdiction to determine the amount of deferred tax assets and liabilities. Deferred income taxes are provided for the temporary effects of differences between assets and liabilities recognized for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. We recognize liabilities fora tax benefit from uncertain tax positions based on whether evidence indicates thatin the financial statements only when it is more likely than not that the position will be sustained on audit.upon examination by relevant tax authorities.
43
ItOur annual tax rate is inherently difficultbased on our income, statutory tax rates, and subjective to estimate whether a valuation allowance or uncertain tax position is necessary. In making this assessment, management may analyze future taxable income, reversing temporary differences and/or ongoing tax planning strategies. Shouldopportunities available to us in the various jurisdictions in which we operate. Judgment is required in determining our tax expense and in evaluating our tax positions, as tax laws are complex and subject to different interpretations by taxpayers and government taxing authorities. Our income tax rate is affected by the tax rates that apply to our foreign earnings and could be adversely impacted by higher or lower earnings than anticipated in a change in circumstances leadparticular jurisdiction. In addition to a change in judgment aboutlocal country tax laws and regulations, our income tax rate depends on the realizability ofextent that our foreign earnings are taxed by the U.S. through provisions such as the global intangible low-taxed income (GILTI) tax and base erosion and anti-abuse tax (BEAT). We review our deferred tax assets in future years,and tax positions quarterly and adjust the Company would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. Changes in tax law or court interpretations may result in the recognition of a tax benefit or an additional charge to the tax provision.
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. Forbalances as new product types without a warranty history, preliminary estimates are based on historical information for similar product types.
These estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products. If warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may exceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we cannot predict future claims, the potential exists for the difference in any one reporting period to be material. For further information regarding our warranty accrual, see Note 8 to the Condensed Consolidated Financial Statements.
becomes available.
Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made.
Judgments used in determining if a liability is estimable are subjective and based on known facts and our historic experience. If further developments in or resolution of an environmental matter result in facts and circumstances that differ from those assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. Due to the uncertain nature of environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us. For further information regarding our environmental costs, see Note 1514 to the Condensed Consolidated Financial Statements.
4441
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protect revenue or margin on a portion of forecasted foreign currency sales and expenses. At February 28, 202329, 2024 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $89.1$110.9 million. Because of the variety of currencies in which purchases and sales are transacted and the interaction between currency rates, it is not possible to predict the impact ofthat a movement in a single foreign currency exchange rate would have on future operating results.
In addition to exposure to transaction gains or losses, we are also exposed to foreign currency exchange risk related to the net asset position of our foreign subsidiaries. At February 28, 2023,29, 2024, net assets of foreign subsidiaries aggregated $156.6to $153.6 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $15.7$15.4 million, or 1.2% of Total equity - Greenbrier. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. Dollar.
Interest Rate Risk
We have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $468.4$608.6 million of variable rate debt to fixed rate debt. Notwithstanding these interest rate swap agreements, we are still exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At February 28, 2023, 74%29, 2024, 84% of our outstanding debt had fixed rates and 26%16% had variable rates. At February 28, 2023,29, 2024, a uniform increase by 10% increase in variable interest rates would result in approximately $2.6$1.4 million of additional annual interest expense.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Principal Executive Officer and Principal Financial and Accounting Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act).report. Based on that evaluation, our Principal Executive Officer and Principal Financial and Accounting Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective as of such date due to athe material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022.2023.
Ongoing Remediation of Previously Identified Material Weakness
With
The Company’s management, under the oversight of seniorthe Audit Committee, is designing and implementing corrective actions to remediate the control deficiencies contributing to the material weakness. These remediation actions are ongoing and include:
As we continue to evaluate and enhance our Audit Committee,internal control over financial reporting, we have identified controls and implementation of our remediation plan is underwaymay determine that additional measures to address the material weakness mentioned above. The material weakness will notweaknesses or adjustments to the remediation plan may be considered remediated untilrequired. Once controls are designed and implemented, the applicable controls operatemust be operating effectively for a sufficient period of time and be tested by management has concluded, through testing, that these controls are operating effectively. We expectin order to consider them remediated and conclude that the remediationdesign is effective to address the risks of this material weakness will be completed prior to the end of fiscal 2023.misstatement.
Changes in Internal Control over Financial Reporting
Except for the changes in connection with our implementation of the remediation plans above, there have been no changes in our internal control over financial reporting during the quarter ended February 28, 202329, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
42
45
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is hereby incorporated by reference the information disclosed in Note 1514 to the Condensed Consolidated Financial Statements, Part I of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2022 and our subsequent Quarterly Report on Form 10-Q.2023. There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended August 31, 2022 and our subsequent Quarterly Report on Form 10-Q.2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Board of Directors has authorized the Company to repurchase shares of the Company’s common stock. On January 5, 2023, theThe share repurchase program has an expiration date of this share repurchase program was extended to January 31, 2025. ShareThe amount remaining for purchase was $45.1 million as of February 29, 2024. There were no share repurchases under this program during the three months ended February 28, 2023 were29, 2024.
Item 5. Other Information
Trading Plan Arrangements
During the three months ended February 29, 2024 the following officer, as defined in Rule 16a-1(f) of the Exchange Act, adopted a “Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, as follows:
On January 22, 2024, Brian Comstock, Executive Vice President and President, The Americas, adopted a Rule 10b5-1 trading arrangement providing for the sale of an aggregate of up to 10,000 shares of our common stock acquired by Mr. Comstock pursuant to our Stock Incentive Plan. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The first date that sales of any shares are permitted to be sold under the trading arrangement will be April 27, 2024, and subsequent sales under the trading arrangement may occur on a regular basis for the duration of the trading arrangement until January 15, 2026, or earlier if all transactions under the trading arrangement are completed.
(in millions, except shares which are reflected in thousands, and per share amounts) |
| Total Number of Shares Purchased |
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| Average Price Paid per Share |
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| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
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| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
December 1, 2022 - December 31, 2022 |
|
| 75 |
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| $ | 34.35 |
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|
| 75 |
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| $ | 97.4 |
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January 1, 2023 - January 31, 2023 |
|
| 287 |
|
| $ | 29.27 |
|
|
| 287 |
|
| $ | 92.4 |
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February 1, 2023 - February 28, 2023 |
|
| 213 |
|
| $ | 30.32 |
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|
| 213 |
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| $ | 85.9 |
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No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended February 29, 2024.
Executive Transitions
On April 2, 2024, Ms. Tekorius confirmed to the Board that Mr. Downes would cease serving as Senior Vice President, Chief Financial Officer (principal financial officer) on April 8, 2024. In connection therewith, Mr. Downes provided a release to the Company and will receive continued base salary and benefits for 12 months and continued eligibility for an annual bonus for 2024. On April 2, 2024, the Company entered into a Transition and Consulting Agreement with Mr. Downes (the “Consulting Agreement”). The Consulting Agreement provides that Mr. Downes will serve as a strategic adviser to our Chief Executive Officer through March 31, 2025. In exchange for such services, Mr. Downes will continue to vest in his outstanding equity awards through the term of the Consulting Agreement. The foregoing description does not purport to be complete and is qualified in entirety by reference to the full text of the Consulting Agreement, which will be filed as an exhibit to the Company’s Form 10-Q for the quarter ended May 31, 2024. Also on April 2, 2024, the Board designated the Company’s Chief Executive Officer and President, Lorie L. Tekorius, as the Company’s principal financial officer, effective April 8, 2024. Ms. Tekorius will serve as principal financial officer until a successor is appointed by the Board.
Amendment to Bylaws
On April 2, 2024, the Board of Directors (the “Board”) of the Company approved and adopted the amendment and restatement of the Bylaws of the Company (as so amended and restated, the “Bylaws”). The Bylaws revise the requirements for committees of the Board: (i) to permit the Board to establish committees consisting of one or more members of the Board, instead of requiring committees of two or more members of the Board, providing the Board with flexibility in creating committees consistent with current Oregon law, and (ii) to remove from the Bylaws the prescriptive requirements regarding the membership and duties of the audit committee, compensation committee and nominating and corporate governance committee of the Board, as such requirements are provided for in the charters for each such committee, which are publicly available on the Company’s investor relations website. The revisions also include certain technical, conforming, modernizing, or clarifying changes to the Bylaws.
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The foregoing description of the changes contained in the Bylaws does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, a copy of which is attached hereto as Exhibit 3.1 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
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Item 6. Exhibits
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10.1* | ||
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31.1 |
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31.2 |
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32.1 |
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32.2 |
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101.INS |
| Inline XBRL Instance Document. |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema |
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104 |
| Cover Page Interactive Data File (Formatted as inline XBRL and contained in Exhibit 101). |
* Management contract or compensatory plan or arrangement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| THE GREENBRIER COMPANIES, INC. | |
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Date: | April |
| By: | /s/ Adrian J. Downes |
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| Adrian J. Downes |
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| Senior Vice President and Chief Financial Officer |
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| (Principal Financial |
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