UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended November 30, 2017May 31, 2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from ______ to ______
Commission FileNo. 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 |
One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices) (Zip Code)
(503)684-7000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationsRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See definitiondefinitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||
Emerging growth company | ☐ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act) Yes ☐ No ☒
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 December 29, 2017July 5, 2022 was 28,700,61232,587,686 shares.
THE GREENBRIER COMPANIES, INC.
FORM 10-Q
Table of Contents
Page | ||
3 | ||
PART I. | 4 | |
Item 1. | 4 | |
4 | ||
5 | ||
6 | ||
7 | ||
9 | ||
10 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 |
Item 3. | 48 | |
Item 4. | 48 | |
PART II. | 49 | |
Item 1. | 49 | |
Item 1A. | 49 | |
Item 2. | 50 | |
Item 6. | 51 | |
52 |
Forward-Looking Statements
From time to time, The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) or their representatives have made or may make
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Private Securities Litigation Reform Act of 1933,1995. Forward-looking statements provide current expectations of future events and include any statement that does not relate to any historical or current fact. We use words such as amended,“anticipates,” “believes,” “can,” “could,” “estimates,” “expects,” “future,” “intends,” “likely,” “may,” “potential,” “trend,” “seeks,” “should,” “strategy,” “will,” “would,” and Section 21E of the Securities Exchange Act of 1934, as amended, including, without limitation, statements assimilar expressions to expectations, beliefs and strategies regarding the future. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us with the Securities and Exchange Commission, including this Quarterly Report on Form10-Q. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by theidentify forward-looking statements. Investors should not place undue reliance on forward-lookingForward-looking statements which speak only as of the date they are made and are not guarantees of future performance. We undertake no obligations
Forward-looking statements are based on currently available operating, financial and market information and are subject to update or revise publicly any forward-looking statements, whether as a result of new information,various risks and uncertainties. Actual future events or otherwise.
These forward-looking statements relyresults and trends may differ materially depending on a numbervariety of assumptions concerning future eventsfactors, including, but not limited to:
The following factors, among others, could cause actual results or outcomes to differ materially fromQuarterly Report on Form 10-Q of the forward-looking statements:
2
THE GREENBRIER COMPANIES, INC.
3
THE GREENBRIER COMPANIES, INC.
The foregoing risks are described in more detail in Part I Item 1A “Risk Factors” in our ability to effectively executemost recent Annual Report on Form 10-K and our business and operating strategies if we become the target of shareholder activism; and
Any forward-looking statements should be considered in light of these factors. Words such as “anticipates,” “believes,” “forecast,” “potential,” “goal,” “contemplates,” “expects,” “intends,” “plans,” “projects,” “hopes,” “seeks,” “estimates,” “strategy,” “could,” “would,” “should,” “likely,” “will,” “may,” “can,” “designed to,” “future,” “foreseeable future” and similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability to control or predict.reference. 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 31st31st unless otherwise noted.
3
4
THE GREENBRIER COMPANIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements Condensed |
Consolidated Balance Sheets
(In millions, except number of shares which are reflected in thousands, unaudited)
November 30, 2017 | August 31, 2017 |
| May 31, |
|
| August 31, |
| |||||||||
Assets |
|
|
|
|
|
| ||||||||||
Cash and cash equivalents | $ | 591,406 | $ | 611,466 |
| $ | 449.7 |
|
| $ | 646.8 |
| ||||
Restricted cash | 8,839 | 8,892 |
|
| 16.1 |
|
|
| 24.6 |
| ||||||
Accounts receivable, net | 315,393 | 279,964 |
|
| 464.8 |
|
|
| 306.4 |
| ||||||
Income tax receivable |
|
| 129.4 |
|
|
| 112.1 |
| ||||||||
Inventories | 411,371 | 400,127 |
|
| 781.7 |
|
|
| 573.6 |
| ||||||
Leased railcars for syndication | 130,991 | 91,272 |
|
| 142.9 |
|
|
| 51.6 |
| ||||||
Equipment on operating leases, net | 274,598 | 315,941 |
|
| 676.1 |
|
|
| 609.8 |
| ||||||
Property, plant and equipment, net | 426,961 | 428,021 |
|
| 642.7 |
|
|
| 670.2 |
| ||||||
Investment in unconsolidated affiliates | 101,529 | 108,255 |
|
| 96.2 |
|
|
| 79.9 |
| ||||||
Intangibles and other assets, net | 83,819 | 85,177 |
|
| 177.8 |
|
|
| 183.6 |
| ||||||
Goodwill | 67,783 | 68,590 |
|
| 128.7 |
|
|
| 132.1 |
| ||||||
|
|
| $ | 3,706.1 |
|
| $ | 3,390.7 |
| |||||||
$ | 2,412,690 | $ | 2,397,705 | |||||||||||||
|
| |||||||||||||||
Liabilities and Equity |
|
|
|
|
|
| ||||||||||
Revolving notes | $ | 6,885 | $ | 4,324 |
| $ | 303.3 |
|
| $ | 372.2 |
| ||||
Accounts payable and accrued liabilities | 441,373 | 415,061 |
|
| 639.0 |
|
|
| 569.8 |
| ||||||
Deferred income taxes | 69,984 | 75,791 |
|
| 72.9 |
|
|
| 73.3 |
| ||||||
Deferred revenue | 120,044 | 129,260 |
|
| 33.3 |
|
|
| 42.8 |
| ||||||
Notes payable, net | 558,987 | 558,228 |
|
| 1,202.6 |
|
|
| 826.5 |
| ||||||
|
|
|
|
|
| |||||||||||
Commitments and contingencies (Note 13) | ||||||||||||||||
Commitments and contingencies (Note 15) |
|
|
|
|
|
| ||||||||||
|
|
|
|
|
| |||||||||||
Contingently redeemable noncontrolling interest | 35,209 | 36,148 |
|
| 27.8 |
|
|
| 29.7 |
| ||||||
|
|
|
|
|
| |||||||||||
Equity: |
|
|
|
|
|
| ||||||||||
Greenbrier |
|
|
|
|
|
| ||||||||||
Preferred stock - without par value; 25,000 shares authorized; none outstanding | — | — | ||||||||||||||
Common stock - without par value; 50,000 shares authorized; 28,701 and 28,503 shares outstanding at November 30, 2017 and August 31, 2017 | — | — | ||||||||||||||
Preferred stock - without par value; 25,000 shares |
|
| — |
|
|
| — |
| ||||||||
Common stock - without par value; 50,000 shares |
|
| — |
|
|
| — |
| ||||||||
Additionalpaid-in capital | 312,789 | 315,306 |
|
| 420.5 |
|
|
| 469.7 |
| ||||||
Retained earnings | 728,755 | 709,103 |
|
| 886.5 |
|
|
| 881.7 |
| ||||||
Accumulated other comprehensive loss | (8,987 | ) | (6,279 | ) |
|
| (36.6 | ) |
|
| (43.7 | ) | ||||
|
| |||||||||||||||
Total equity – Greenbrier | 1,032,557 | 1,018,130 |
|
| 1,270.4 |
|
|
| 1,307.7 |
| ||||||
Noncontrolling interest | 147,651 | 160,763 |
|
| 156.8 |
|
|
| 168.7 |
| ||||||
|
| |||||||||||||||
Total equity | 1,180,208 | 1,178,893 |
|
| 1,427.2 |
|
|
| 1,476.4 |
| ||||||
|
|
| $ | 3,706.1 |
|
| $ | 3,390.7 |
| |||||||
$ | 2,412,690 | $ | 2,397,705 | |||||||||||||
|
|
The accompanying notes are an integral part of these financial statements
4
5
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Income
(In millions, except number of shares which are reflected in thousands exceptand per share amounts, unaudited)
Three Months Ended November 30, | ||||||||
2017 | 2016 | |||||||
Revenue | ||||||||
Manufacturing | $ | 451,485 | $ | 454,033 | ||||
Wheels & Parts | 78,011 | 69,635 | ||||||
Leasing & Services | 30,039 | 28,646 | ||||||
|
|
|
| |||||
559,535 | 552,314 | |||||||
Cost of revenue | ||||||||
Manufacturing | 380,850 | 356,555 | ||||||
Wheels & Parts | 72,506 | 64,978 | ||||||
Leasing & Services | 16,865 | 18,030 | ||||||
|
|
|
| |||||
470,221 | 439,563 | |||||||
Margin | 89,314 | 112,751 | ||||||
Selling and administrative expense | 47,043 | 41,213 | ||||||
Net gain on disposition of equipment | (19,171 | ) | (1,122 | ) | ||||
|
|
|
| |||||
Earnings from operations | 61,442 | 72,660 | ||||||
Other costs | ||||||||
Interest and foreign exchange | 7,020 | 1,724 | ||||||
|
|
|
| |||||
Earnings before income taxes and loss from unconsolidated affiliates | 54,422 | 70,936 | ||||||
Income tax expense | (18,135 | ) | (20,386 | ) | ||||
|
|
|
| |||||
Earnings before loss from unconsolidated affiliates | 36,287 | 50,550 | ||||||
Loss from unconsolidated affiliates | (2,910 | ) | (2,584 | ) | ||||
|
|
|
| |||||
Net earnings | 33,377 | 47,966 | ||||||
Net earnings attributable to noncontrolling interest | (7,124 | ) | (23,004 | ) | ||||
|
|
|
| |||||
Net earnings attributable to Greenbrier | $ | 26,253 | $ | 24,962 | ||||
|
|
|
| |||||
Basic earnings per common share: | $ | 0.90 | $ | 0.86 | ||||
Diluted earnings per common share: | $ | 0.83 | $ | 0.79 | ||||
Weighted average common shares: | ||||||||
Basic | 29,332 | 29,097 | ||||||
Diluted | 32,696 | 32,412 | ||||||
Dividends declared per common share | $ | 0.23 | $ | 0.21 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
| $ | 650.9 |
|
| $ | 339.7 |
|
| $ | 1,659.1 |
|
| $ | 845.7 |
|
Maintenance Services |
|
| 101.5 |
|
|
| 80.9 |
|
|
| 260.5 |
|
|
| 218.1 |
|
Leasing & Management Services |
|
| 41.1 |
|
|
| 29.6 |
|
|
| 107.4 |
|
|
| 85.0 |
|
|
|
| 793.5 |
|
|
| 450.2 |
|
|
| 2,027.0 |
|
|
| 1,148.8 |
|
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Manufacturing |
|
| 611.3 |
|
|
| 292.4 |
|
|
| 1,567.9 |
|
|
| 775.1 |
|
Maintenance Services |
|
| 91.1 |
|
|
| 73.7 |
|
|
| 244.0 |
|
|
| 203.4 |
|
Leasing & Management Services |
|
| 14.8 |
|
|
| 8.9 |
|
|
| 36.4 |
|
|
| 36.8 |
|
|
|
| 717.2 |
|
|
| 375.0 |
|
|
| 1,848.3 |
|
|
| 1,015.3 |
|
Margin |
|
| 76.3 |
|
|
| 75.2 |
|
|
| 178.7 |
|
|
| 133.5 |
|
Selling and administrative expense |
|
| 57.4 |
|
|
| 49.3 |
|
|
| 156.4 |
|
|
| 136.4 |
|
Net (gain) loss on disposition of equipment |
|
| (0.7 | ) |
|
| 0.2 |
|
|
| (34.3 | ) |
|
| (0.8 | ) |
Earnings (loss) from operations |
|
| 19.6 |
|
|
| 25.7 |
|
|
| 56.6 |
|
|
| (2.1 | ) |
Other costs |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and foreign exchange |
|
| 14.9 |
|
|
| 10.2 |
|
|
| 39.3 |
|
|
| 30.9 |
|
Net loss on extinguishment of debt |
|
| — |
|
|
| 4.8 |
|
|
| — |
|
|
| 4.8 |
|
Earnings (loss) before income tax and earnings |
|
| 4.7 |
|
|
| 10.7 |
|
|
| 17.3 |
|
|
| (37.8 | ) |
Income tax (expense) benefit |
|
| (1.1 | ) |
|
| 6.9 |
|
|
| (2.9 | ) |
|
| 36.0 |
|
Earnings (loss) before earnings from |
|
| 3.6 |
|
|
| 17.6 |
|
|
| 14.4 |
|
|
| (1.8 | ) |
Earnings from unconsolidated affiliates |
|
| 4.0 |
|
|
| 2.4 |
|
|
| 10.0 |
|
|
| 1.3 |
|
Net earnings (loss) |
|
| 7.6 |
|
|
| 20.0 |
|
|
| 24.4 |
|
|
| (0.5 | ) |
Net (earnings) loss attributable to noncontrolling interest |
|
| (4.5 | ) |
|
| (0.3 | ) |
|
| 2.3 |
|
|
| 1.2 |
|
Net earnings attributable to Greenbrier |
| $ | 3.1 |
|
| $ | 19.7 |
|
| $ | 26.7 |
|
| $ | 0.7 |
|
Basic earnings per common share |
| $ | 0.10 |
|
| $ | 0.61 |
|
| $ | 0.82 |
|
| $ | 0.02 |
|
Diluted earnings per common share |
| $ | 0.09 |
|
| $ | 0.59 |
|
| $ | 0.79 |
|
| $ | 0.02 |
|
Weighted average common shares: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 32,588 |
|
|
| 32,573 |
|
|
| 32,560 |
|
|
| 32,726 |
|
Diluted |
|
| 33,661 |
|
|
| 33,605 |
|
|
| 33,626 |
|
|
| 33,747 |
|
The accompanying notes are an integral part of these financial statements
5
6
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Comprehensive Income
(In thousands,millions, unaudited)
Three Months Ended November 30, | ||||||||
2017 | 2016 | |||||||
Net earnings | $ | 33,377 | $ | 47,966 | ||||
Other comprehensive income | ||||||||
Translation adjustment | (3,187 | ) | (6,720 | ) | ||||
Reclassification of derivative financial instruments recognized in net earnings1 | (328 | ) | 323 | |||||
Unrealized gain (loss) on derivative financial instruments2 | 822 | (4,904 | ) | |||||
Other (net of tax effect) | (19 | ) | (1 | ) | ||||
|
|
|
| |||||
(2,712 | ) | (11,302 | ) | |||||
|
|
|
| |||||
Comprehensive income | 30,665 | 36,664 | ||||||
Comprehensive income attributable to noncontrolling interest | (7,120 | ) | (23,004 | ) | ||||
|
|
|
| |||||
Comprehensive income attributable to Greenbrier | $ | 23,545 | $ | 13,660 | ||||
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net earnings (loss) |
| $ | 7.6 |
|
| $ | 20.0 |
|
| $ | 24.4 |
|
| $ | (0.5 | ) |
|
|
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Other comprehensive income (loss) |
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| ||||
Translation adjustment |
|
| 2.2 |
|
|
| 4.8 |
|
|
| (7.4 | ) |
|
| 9.3 |
|
Reclassification of derivative financial instruments |
|
| 1.5 |
|
|
| 1.4 |
|
|
| 3.8 |
|
|
| 3.9 |
|
Unrealized gain (loss) on derivative financial |
|
| 13.1 |
|
|
| 0.7 |
|
|
| 10.7 |
|
|
| (0.2 | ) |
Other (net of tax effect) |
|
| — |
|
|
| (0.2 | ) |
|
| 0.1 |
|
|
| (0.2 | ) |
|
|
| 16.8 |
|
|
| 6.7 |
|
|
| 7.2 |
|
|
| 12.8 |
|
Comprehensive income |
|
| 24.4 |
|
|
| 26.7 |
|
|
| 31.6 |
|
|
| 12.3 |
|
Comprehensive (earnings) loss attributable to |
|
| (4.6 | ) |
|
| (0.3 | ) |
|
| 2.2 |
|
|
| 1.2 |
|
Comprehensive income attributable to Greenbrier |
| $ | 19.8 |
|
| $ | 26.4 |
|
| $ | 33.8 |
|
| $ | 13.5 |
|
1 Net of tax effect of ($0.7 million) and ($0.4 million) for the three months ended May 31, 2022 and 2021 and ($1.4 million) and ($1.2 million) for the nine months ended May 31, 2022 and 2021.
2 Net of tax effect of ($4.5 million) and ($0.4 million) for the three months ended May 31, 2022 and 2021 and ($4.3 million) and $0.3 million for the nine months ended May 31, 2022 and 2021.
The accompanying notes are an integral part of these financial statements
6
7
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Equity
(In thousands,millions, except per share amounts, unaudited)
Attributable to Greenbrier | ||||||||||||||||||||||||||||||||
Common Stock Shares | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Attributable to Greenbrier | Attributable to Noncontrolling Interest | Total Equity | Contingently Redeemable Noncontrolling Interest | |||||||||||||||||||||||||
Balance September 1, 2017 | 28,503 | $ | 315,306 | $ | 709,103 | $ | (6,279 | ) | $ | 1,018,130 | $ | 160,763 | $ | 1,178,893 | $ | 36,148 | ||||||||||||||||
Net earnings | — | — | 26,253 | — | 26,253 | 8,063 | 34,316 | (939 | ) | |||||||||||||||||||||||
Other comprehensive loss, net | — | — | — | (2,708 | ) | (2,708 | ) | (4 | ) | (2,712 | ) | — | ||||||||||||||||||||
Noncontrolling interest adjustments | — | — | — | — | — | (882 | ) | (882 | ) | — | ||||||||||||||||||||||
Joint venture partner distribution declared | — | — | — | — | — | (26,789 | ) | (26,789 | ) | — | ||||||||||||||||||||||
Investment by joint venture partner | — | — | — | — | — | 6,500 | 6,500 | |||||||||||||||||||||||||
Restricted stock awards (net of cancellations) | 198 | (5,061 | ) | — | — | (5,061 | ) | — | (5,061 | ) | — | |||||||||||||||||||||
Restricted stock amortization | — | 2,544 | — | — | 2,544 | — | 2,544 | — | ||||||||||||||||||||||||
Cash dividends | — | — | (6,601 | ) | — | (6,601 | ) | — | (6,601 | ) | — | |||||||||||||||||||||
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Balance November 30, 2017 | 28,701 | $ | 312,789 | $ | 728,755 | $ | (8,987 | ) | $ | 1,032,557 | $ | 147,651 | $ | 1,180,208 | $ | 35,209 | ||||||||||||||||
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Attributable to Greenbrier | ||||||||||||||||||||||||||||||||
Common Stock Shares | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Attributable to Greenbrier | Attributable to Noncontrolling Interest | Total Equity | ||||||||||||||||||||||||||
Balance September 1, 2016 | 28,205 | $ | 282,886 | $ | 618,178 | $ | (26,753 | ) | $ | 874,311 | $ | 142,516 | $ | 1,016,827 | ||||||||||||||||||
Net earnings | — | — | 24,962 | — | 24,962 | 23,004 | 47,966 | |||||||||||||||||||||||||
Other comprehensive loss, net | — | — | — | (11,302 | ) | (11,302 | ) | — | (11,302 | ) | ||||||||||||||||||||||
Noncontrolling interest adjustments | — | — | — | — | — | (3,781 | ) | (3,781 | ) | |||||||||||||||||||||||
Joint venture partner distribution declared | — | — | — | — | — | (10,702 | ) | (10,702 | ) | |||||||||||||||||||||||
Restricted stock awards (net of cancellations) | 163 | (2,945 | ) | — | — | (2,945 | ) | — | (2,945 | ) | ||||||||||||||||||||||
Unamortized restricted stock | — | 125 | — | — | 125 | — | 125 | |||||||||||||||||||||||||
Restricted stock amortization | — | 4,152 | — | — | 4,152 | — | 4,152 | |||||||||||||||||||||||||
Tax deficiency from restricted stock awards | — | (2,464 | ) | — | — | (2,464 | ) | — | (2,464 | ) | ||||||||||||||||||||||
Cash dividends | — | — | (6,114 | ) | — | (6,114 | ) | — | (6,114 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance November 30, 2016 | 28,368 | $ | 281,754 | $ | 637,026 | $ | (38,055 | ) | $ | 880,725 | $ | 151,037 | $ | 1,031,762 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| 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 |
| — |
|
| (58.9 | ) |
| 4.9 |
|
| — |
|
| (54.0 | ) |
| — |
|
| (54.0 | ) |
| — |
|
Net earnings |
| — |
|
| — |
|
| 26.7 |
|
| — |
|
| 26.7 |
|
| (0.4 | ) |
| 26.3 |
|
| (1.9 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 7.1 |
|
| 7.1 |
|
| 0.1 |
|
| 7.2 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| 2.2 |
|
| — |
|
| — |
|
| 2.2 |
|
| (1.5 | ) |
| 0.7 |
|
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (10.1 | ) |
| (10.1 | ) |
| — |
|
Restricted stock awards (net of |
| 0.2 |
|
| 11.9 |
|
| — |
|
| — |
|
| 11.9 |
|
| — |
|
| 11.9 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (15.3 | ) |
| — |
|
| — |
|
| (15.3 | ) |
| — |
|
| (15.3 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 10.9 |
|
| — |
|
| — |
|
| 10.9 |
|
| — |
|
| 10.9 |
|
| — |
|
Cash dividends ($0.81 per share) |
| — |
|
| — |
|
| (26.8 | ) |
| — |
|
| (26.8 | ) |
| — |
|
| (26.8 | ) |
|
| |
Balance May 31, 2022 |
| 32.6 |
| $ | 420.5 |
| $ | 886.5 |
| $ | (36.6 | ) | $ | 1,270.4 |
| $ | 156.8 |
| $ | 1,427.2 |
| $ | 27.8 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance February 28, 2022 |
| 32.6 |
| $ | 413.4 |
| $ | 892.5 |
| $ | (53.3 | ) | $ | 1,252.6 |
| $ | 154.1 |
| $ | 1,406.7 |
| $ | 28.5 |
|
Cumulative effect adjustment due |
| — |
|
| (0.1 | ) |
| — |
|
| — |
|
| (0.1 | ) |
| — |
|
| (0.1 | ) |
| — |
|
Net earnings |
| — |
|
| — |
|
| 3.1 |
|
| — |
|
| 3.1 |
|
| 5.2 |
|
| 8.3 |
|
| (0.7 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 16.7 |
|
| 16.7 |
|
| 0.1 |
|
| 16.8 |
|
| — |
|
Noncontrolling interest |
| — |
|
| 2.2 |
|
| — |
|
| — |
|
| 2.2 |
|
| (0.9 | ) |
| 1.3 |
|
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1.7 | ) |
| (1.7 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 5.0 |
|
| — |
|
| — |
|
| 5.0 |
|
| — |
|
| 5.0 |
|
| — |
|
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (9.1 | ) |
| — |
|
| (9.1 | ) |
| — |
|
| (9.1 | ) |
| — |
|
Balance May 31, 2022 |
| 32.6 |
| $ | 420.5 |
| $ | 886.5 |
| $ | (36.6 | ) | $ | 1,270.4 |
| $ | 156.8 |
| $ | 1,427.2 |
| $ | 27.8 |
|
7
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance August 31, 2020 |
| 32.7 |
| $ | 460.4 |
| $ | 885.5 |
| $ | (52.8 | ) | $ | 1,293.1 |
| $ | 180.0 |
| $ | 1,473.1 |
| $ | 31.1 |
|
Cumulative effect adjustment due |
| — |
|
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
Net earnings |
| — |
|
| — |
|
| 0.7 |
|
| — |
|
| 0.7 |
|
| (0.4 | ) |
| 0.3 |
|
| (0.8 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 12.8 |
|
| 12.8 |
|
| — |
|
| 12.8 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 0.3 |
|
| 0.3 |
|
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (23.0 | ) |
| (23.0 | ) |
| — |
|
Investment by joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7.0 |
|
| 7.0 |
|
| — |
|
Restricted stock awards (net of |
| 0.1 |
|
| 15.0 |
|
| — |
|
| — |
|
| 15.0 |
|
| — |
|
| 15.0 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (17.9 | ) |
| — |
|
| — |
|
| (17.9 | ) |
| — |
|
| (17.9 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 12.5 |
|
| — |
|
| — |
|
| 12.5 |
|
| — |
|
| 12.5 |
|
| — |
|
Repurchase of stock |
| (0.4 | ) |
| (20.0 | ) |
| — |
|
| — |
|
| (20.0 | ) |
| — |
|
| (20.0 | ) |
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| 56.3 |
|
| — |
|
| — |
|
| 56.3 |
|
| — |
|
| 56.3 |
|
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| (1.8 | ) |
| — |
|
| — |
|
| (1.8 | ) |
| — |
|
| (1.8 | ) |
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| (28.5 | ) |
| — |
|
| — |
|
| (28.5 | ) |
| — |
|
| (28.5 | ) |
| — |
|
2.25% Convertible senior notes, due |
| — |
|
| (8.2 | ) |
| — |
|
| — |
|
| (8.2 | ) |
| — |
|
| (8.2 | ) |
| — |
|
Cash dividends ($0.81 per share) |
| — |
|
| — |
|
| (26.7 | ) |
| — |
|
| (26.7 | ) |
| — |
|
| (26.7 | ) |
| — |
|
Balance May 31, 2021 |
| 32.4 |
| $ | 467.8 |
| $ | 859.0 |
| $ | (40.0 | ) | $ | 1,286.8 |
| $ | 163.9 |
| $ | 1,450.7 |
| $ | 30.3 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance February 28, 2021 |
| 32.8 |
| $ | 467.0 |
| $ | 848.2 |
| $ | (46.7 | ) | $ | 1,268.5 |
| $ | 175.9 |
| $ | 1,444.4 |
| $ | 30.0 |
|
Net earnings |
| — |
|
| — |
|
| 19.7 |
|
| — |
|
| 19.7 |
|
| — |
|
| 19.7 |
|
| 0.3 |
|
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 6.7 |
|
| 6.7 |
|
| — |
|
| 6.7 |
|
| — |
|
Noncontrolling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1.6 |
|
| 1.6 |
|
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (20.6 | ) |
| (20.6 | ) |
| — |
|
Investment by joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7.0 |
|
| 7.0 |
|
| — |
|
Restricted stock awards (net of |
| — |
|
| (0.5 | ) |
| — |
|
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 3.5 |
|
| — |
|
| — |
|
| 3.5 |
|
| — |
|
| 3.5 |
|
| — |
|
Repurchase of stock |
| (0.4 | ) |
| (20.0 | ) |
| — |
|
| — |
|
| (20.0 | ) |
| — |
|
| (20.0 | ) |
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| 56.3 |
|
| — |
|
| — |
|
| 56.3 |
|
| — |
|
| 56.3 |
|
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| (1.8 | ) |
| — |
|
| — |
|
| (1.8 | ) | �� | — |
|
| (1.8 | ) |
| — |
|
2.875% Convertible senior notes, due |
| — |
|
| (28.5 | ) |
| — |
|
| — |
|
| (28.5 | ) |
| — |
|
| (28.5 | ) |
| — |
|
2.25% Convertible senior notes, due |
| — |
|
| (8.2 | ) |
| — |
|
| — |
|
| (8.2 | ) |
| — |
|
| (8.2 | ) |
| — |
|
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (8.9 | ) |
| — |
|
| (8.9 | ) |
| — |
|
| (8.9 | ) |
| — |
|
Balance May 31, 2021 |
| 32.4 |
| $ | 467.8 |
| $ | 859.0 |
| $ | (40.0 | ) | $ | 1,286.8 |
| $ | 163.9 |
| $ | 1,450.7 |
| $ | 30.3 |
|
The accompanying notes are an integral part of these financial statements
8
8
THE GREENBRIER COMPANIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands,millions, unaudited)
|
| Nine Months Ended |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net earnings (loss) |
| $ | 24.4 |
|
| $ | (0.5 | ) |
Adjustments to reconcile net earnings (loss) to net cash used in operating activities: |
|
|
|
|
|
| ||
Deferred income taxes |
|
| 16.9 |
|
|
| 20.2 |
|
Depreciation and amortization |
|
| 75.9 |
|
|
| 75.6 |
|
Net gain on disposition of equipment |
|
| (34.3 | ) |
|
| (0.8 | ) |
Accretion of debt discount |
|
| — |
|
|
| 4.6 |
|
Stock based compensation expense |
|
| 10.9 |
|
|
| 12.5 |
|
Net loss on extinguishment of debt |
|
| — |
|
|
| 4.8 |
|
Noncontrolling interest adjustments |
|
| 0.7 |
|
|
| 0.3 |
|
Other |
|
| 3.4 |
|
|
| 1.8 |
|
Decrease (increase) in assets: |
|
|
|
|
|
| ||
Accounts receivable, net |
|
| (160.3 | ) |
|
| (49.2 | ) |
Income tax receivable |
|
| (17.3 | ) |
|
| (66.0 | ) |
Inventories |
|
| (224.2 | ) |
|
| (92.3 | ) |
Leased railcars for syndication |
|
| (77.6 | ) |
|
| (55.5 | ) |
Other assets |
|
| (16.1 | ) |
|
| 0.9 |
|
Increase (decrease) in liabilities: |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| 77.2 |
|
|
| 18.6 |
|
Deferred revenue |
|
| (8.0 | ) |
|
| 1.2 |
|
Net cash used in operating activities |
|
| (328.4 | ) |
|
| (123.8 | ) |
Cash flows from investing activities |
|
|
|
|
|
| ||
Proceeds from sales of assets |
|
| 155.1 |
|
|
| 12.2 |
|
Capital expenditures |
|
| (248.8 | ) |
|
| (62.9 | ) |
Investments in and advances to / repayments from unconsolidated affiliates |
|
| (4.2 | ) |
|
| 0.7 |
|
Cash distribution from unconsolidated affiliates and other |
|
| 1.8 |
|
|
| 0.7 |
|
Net cash used in investing activities |
|
| (96.1 | ) |
|
| (49.3 | ) |
Cash flows from financing activities |
|
|
|
|
|
| ||
Net change in revolving notes with maturities of 90 days or less |
|
| (97.3 | ) |
|
| 147.6 |
|
Proceeds from revolving notes with maturities longer than 90 days |
|
| 35.0 |
|
|
| 112.0 |
|
Repayments of revolving notes with maturities longer than 90 days |
|
| — |
|
|
| (286.0 | ) |
Proceeds from issuance of notes payable |
|
| 323.3 |
|
|
| 373.8 |
|
Repayments of notes payable |
|
| (15.0 | ) |
|
| (308.5 | ) |
Debt issuance costs |
|
| (7.2 | ) |
|
| (14.1 | ) |
Repurchase of stock |
|
| — |
|
|
| (20.0 | ) |
Dividends |
|
| (26.9 | ) |
|
| (26.9 | ) |
Investment by joint venture partner |
|
| — |
|
|
| 7.0 |
|
Cash distribution to joint venture partner |
|
| (9.4 | ) |
|
| (24.1 | ) |
Tax payments for net share settlement of restricted stock |
|
| (3.5 | ) |
|
| (2.8 | ) |
Net cash provided by (used in) financing activities |
|
| 199.0 |
|
|
| (42.0 | ) |
Effect of exchange rate changes |
|
| 19.9 |
|
|
| 9.9 |
|
Decrease in cash and cash equivalents and restricted cash |
|
| (205.6 | ) |
|
| (205.2 | ) |
Cash and cash equivalents and restricted cash |
|
|
|
|
|
| ||
Beginning of period |
|
| 671.4 |
|
|
| 842.1 |
|
End of period |
| $ | 465.8 |
|
| $ | 636.9 |
|
Balance sheet reconciliation |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 449.7 |
|
| $ | 628.2 |
|
Restricted cash |
|
| 16.1 |
|
|
| 8.7 |
|
Total cash and cash equivalents and restricted cash as presented above |
| $ | 465.8 |
|
| $ | 636.9 |
|
Cash paid during the period for |
|
|
|
|
|
| ||
Interest |
| $ | 33.3 |
|
| $ | 20.7 |
|
Income taxes, net |
| $ | 11.1 |
|
| $ | 9.9 |
|
Non-cash activity |
|
|
|
|
|
| ||
Transfers between Leased railcars for syndication and Inventories and |
| $ | 13.0 |
|
| $ | 78.1 |
|
Capital expenditures accrued in Accounts payable and accrued liabilities |
| $ | 5.7 |
|
| $ | 1.9 |
|
Change in Accounts payable and accrued liabilities associated with dividends declared |
| $ | (0.1 | ) |
| $ | 0.2 |
|
Change in Accounts payable and accrued liabilities associated with cash |
| $ | 0.6 |
|
| $ | 1.1 |
|
Three Months Ended November 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net earnings | $ | 33,377 | $ | 47,966 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: | ||||||||
Deferred income taxes | (5,865 | ) | 2,756 | |||||
Depreciation and amortization | 18,370 | 15,595 | ||||||
Net gain on disposition of equipment | (19,171 | ) | (1,122 | ) | ||||
Accretion of debt discount | 1,024 | — | ||||||
Stock based compensation expense | 5,939 | 5,343 | ||||||
Noncontrolling interest adjustments | (875 | ) | (3,781 | ) | ||||
Other | 477 | 229 | ||||||
Decrease (increase) in assets: | ||||||||
Accounts receivable, net | (35,510 | ) | (5,256 | ) | ||||
Inventories | (16,311 | ) | (39,108 | ) | ||||
Leased railcars for syndication | (35,541 | ) | 34,295 | |||||
Other | 6,304 | 8,893 | ||||||
Increase (decrease) in liabilities: | ||||||||
Accounts payable and accrued liabilities | 16,676 | (22,873 | ) | |||||
Deferred revenue | (8,548 | ) | (11,111 | ) | ||||
|
|
|
| |||||
Net cash provided by (used in) operating activities | (39,654 | ) | 31,826 | |||||
|
|
|
| |||||
Cash flows from investing activities | ||||||||
Proceeds from sales of assets | 75,060 | 9,189 | ||||||
Capital expenditures | (29,893 | ) | (12,584 | ) | ||||
Decrease in restricted cash | 53 | 15,637 | ||||||
Cash distribution from unconsolidated affiliates | — | 550 | ||||||
Investment in and advances to unconsolidated affiliates | — | (550 | ) | |||||
|
|
|
| |||||
Net cash provided by investing activities | 45,220 | 12,242 | ||||||
|
|
|
| |||||
Cash flows from financing activities | ||||||||
Net change in revolving notes with maturities of 90 days or less | 2,561 | — | ||||||
Proceeds from issuance of notes payable | 2,138 | — | ||||||
Repayments of notes payable | (2,809 | ) | (1,750 | ) | ||||
Investment by joint venture partner | 6,500 | — | ||||||
Cash distribution to joint venture partner | (26,900 | ) | (11,185 | ) | ||||
Dividends | (319 | ) | (6,147 | ) | ||||
Tax payments for net share settlement of restricted stock | (5,061 | ) | (2,820 | ) | ||||
Excess tax deficiency from restricted stock awards | — | (2,464 | ) | |||||
|
|
|
| |||||
Net cash used in financing activities | (23,890 | ) | (24,366 | ) | ||||
|
|
|
| |||||
Effect of exchange rate changes | (1,736 | ) | (8,591 | ) | ||||
Increase (decrease) in cash and cash equivalents | (20,060 | ) | 11,111 | |||||
Cash and cash equivalents | ||||||||
Beginning of period | 611,466 | 222,679 | ||||||
|
|
|
| |||||
End of period | $ | 591,406 | $ | 233,790 | ||||
|
|
|
| |||||
Cash paid during the period for | ||||||||
Interest | $ | 3,662 | $ | 3,511 | ||||
Income taxes, net | $ | 385 | $ | 10,433 | ||||
Non-cash activity | ||||||||
Transfer from Leased railcars for syndication to Equipment on operating leases, net | $ | — | $ | 6,082 | ||||
Capital expenditures accrued in Accounts payable and accrued liabilities | $ | 14,840 | $ | 5,447 | ||||
Dividends declared and accrued in Accounts payable and accrued liabilities | $ | 6,282 | $ | — |
The accompanying notes are an integral part of these financial statements
9
9
THE GREENBRIER COMPANIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Interim Financial Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of November 30, 2017May 31, 2022 and for the three and nine months ended November 30, 2017May 31, 2022 and 20162021 have been prepared without audit andto 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. The results of operations for the three and nine months ended November 30, 2017May 31, 2022 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2018.2022.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form10-Q. Therefore, these unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s 2017 Annual Report on Form10-K. 10-K for the year ended August 31, 2021.
In the first quarter of 2022 the Company renamed two of its reportable segments to more prominently display the nature of the customer solutions it provides and markets in which it operates. The new names of its reportable segments are Manufacturing (unchanged), Maintenance Services (previously Wheels, Repair & Parts), and Leasing & Management Services (previously Leasing & Services). The name changes have no impact on the organization’s reporting structure nor on financial information previously reported. Separately, effective September 1, 2021, the Company changed its measurement basis for allocating syndication revenue between the Manufacturing and Leasing & Management Services reportable segments. This change in measurement reflects the information currently used by management to assess the Company's operating performance in accordance with its refined leasing strategy and has no impact to the Company’s total consolidated revenue. Segment results for the prior periods have been recast to conform to the current period presentation.
Greenbrier-Astra Rail was formed in 2017 between the Company’s existing European operations headquartered in Poland and Astra Rail, based in Romania. Greenbrier-Astra Rail is controlled by the Company with an approximate 75% interest. In 2017, Astra Rail received a put option to sell its entire noncontrolling interest to Greenbrier. The option was exercisable 30 business days prior to and up until June 1, 2022. During the second quarter of 2022, the option was extended to be exercisable 30 business days prior to and up until June 1, 2026.
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.
Initial Adoption of Accounting Policies – Standards
Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the first quarterFASB issued Accounting Standard Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity’s own equity and modifies the guidance on diluted EPS calculations as a result of 2017,these changes. The Company adopted this guidance effective September 1, 2021 on a modified retrospective basis and recorded a cumulative effect adjustment to increase Retained earnings by $5 million. The impact of adoption also resulted in a reduction to Additional paid in capital of approximately $59 million related to amounts attributable to conversion options that had previously been recorded in equity and the associated derecognition of related deferred tax liabilities of $17 million. Additionally, the Company adoptedrecorded an increase to its convertible notes balance by an aggregate amount of approximately $71 million as a result of derecognizing the debt discount. The adoption of this guidance also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the discount associated with the equity component. The Company did not incur any impact to liquidity or cash flows. As of September 1, 2021, when calculating net
10
earnings attributable to Greenbrier per share of common stock, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of its convertible notes.
Simplification of Accounting Standardsfor Income Taxes
In December 2019, the FASB issued Accounting Standard Update2016-09,Improvements 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to Employee Share-Based Paymentthe general principles in Topic 740 for: recognizing deferred taxes for investments, performing intra-period allocations and calculating taxes in interim periods. The ASU also improves consistent application of GAAP for other areas of Topic 740 by clarifying and amending existing guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The Company adopted this guidance September 1, 2021 with no impact to the Company's consolidated financial statements. The ongoing application of ASU 2019-12 is not expected to materially impact the Company's consolidated financial statements.
Prospective Accounting Changes
Reference Rate Reform
In March 2020, the FASB issued Accounting Standard Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting (ASU2016-09). 2020-04), which provides practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The elective amendments provide expedients 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. This changes how companies accountguidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. The guidance can be applied immediately through December 31, 2022. The Company expects to adopt this standard when LIBOR is discontinued if there is a mismatch in its interest rate swap and derivatives for a period of time. The Company does not expect a material impact to its financial condition, results of operations or disclosures based on the current debt portfolio and capital structure.
Note 2 – Asset Backed Securities
GBX Leasing 2022-1 LLC (GBXL I) was formed as a wholly owned special purpose entity (SPE) of GBX Leasing to securitize the leasing assets of GBX Leasing. On February 9, 2022, GBXL I (Issuer) issued $323.3 million of term notes secured by a portfolio of railcars and associated operating leases and other assets, acquired and owned by GBXL I. Greenbrier Management Services, LLC (GMS) entered into certain aspectsagreements relating to the management and servicing of share-basedthe Issuer’s assets. The Company used the net proceeds received from the issuance of the term notes to pay down the GBX Leasing warehouse credit facility.
The Company evaluated the accounting for the transaction and concluded that, based on its equity investment in the Issuer combined with GMS’s capacity as servicer, the Company is the primary beneficiary of the SPE and will consolidate the SPE for financial reporting purposes.
Issued debt includes principal of $302.6 million of GBXL I Series 2022-1 Class A Secured Railcar Equipment Notes (Class A Notes) and $20.7 million of GBXL I Series 2022-1 Class B Secured Railcar Equipment Notes (Class B Notes), collectively the GBXL Series 2022-1 Notes (the GBXL Notes). The GBXL Notes bear interest at fixed rates of 2.87% and 3.45% for the Class A Notes and Class B Notes, respectively. The GBXL Notes are payable monthly and have a legal maturity date of February 20, 2052. The Company incurred $5.0 million in debt issuance costs, which will be amortized to interest expense through the expected repayment period. Both Class A and Class B Notes have an anticipated repayment date of January 20, 2029 and a legal maturity date. While the legal maturity date is in 2052, the cash flows generated from the railcar assets will pay down the 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 GBXL Notes has not been repaid in full by the anticipated repayment date, then the Issuer will also be required to employees. Excess tax benefits or deficienciespay additional interest to the holders at a rate equal to 4.00% per annum.
11
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 a Series 2022-1 Supplement dated February 9, 2022. 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 assets transferred and the related debt.
(in millions) |
| May 31, 2022 |
| |
Assets |
|
|
| |
Restricted cash |
| $ | 7.0 |
|
Equipment on operating leases, net |
|
| 406.4 |
|
Liabilities |
|
|
| |
Notes payable, net |
| $ | 315.7 |
|
Note 3 – Revenue Recognition
Contract balances
Contract assets primarily consist of unbilled receivables related to vested awardsmarine vessel construction for which were previously recognized in stockholders’ equitythe respective contracts do not yet permit billing at the reporting date, and railcar maintenance and conversion inventories. Contract liabilities primarily consist of customer prepayments for manufacturing, maintenance, and other management-type services, for which the Company has not yet satisfied the related performance obligations.
The contract balances are now recognized inas follows:
(in millions) |
| Balance sheet classification |
| May 31, |
|
| August 31, |
|
| $ |
| |||
Contract assets |
| Accounts receivable, net |
| $ | 16.7 |
|
| $ | 5.9 |
|
| $ | 10.8 |
|
Contract assets |
| Inventories |
| $ | 13.4 |
|
| $ | 6.7 |
|
| $ | 6.7 |
|
Contract liabilities 1 |
| Deferred revenue |
| $ | 27.8 |
|
| $ | 36.4 |
|
| $ | (8.6 | ) |
1 Contract liabilities balance includes deferred revenue within the income statement when awards vest. For the three months ended November 30, 2017, the impactscope of adopting this new guidance was immaterial. Additionally, alltax-related cash flows resulting from stock-based awards are reported as operating activities in the statement of cash flow. Prior to adopting the updated standard, excess tax benefits or deficiencies were reported as financing activities in the statement of cash flows.
Prospective Accounting Changes – In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update2014-09,Revenue from Contracts with Customers (ASU2014-09), providing a common revenue recognition model under U.S. GAAP. Under ASU2014-09, an entity recognizes revenue in a way that depicts (Topic 606).
For the transfer of promised goods or services to customers in an amount that reflectsthree and nine months ended May 31, 2022, the consideration to which the entity expects to be entitled in exchange for the goods or services. It also requires additional disclosures to sufficiently describe the nature, amount, timing,Company recognized $1.5 million and uncertainty$14.8 million, respectively, of revenue and cash flows arising fromthat was included in Contract liabilities as of August 31, 2021.
Performance obligations
As of May 31, 2022, the Company has entered into contracts with customers. customers for which revenue has not yet been recognized. The new standard may be adopted using either a full retrospectivefollowing table outlines estimated revenue related to performance obligations wholly or a modified retrospective approach. The FASB issued a one year deferral andpartially unsatisfied, that the new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt ASU2014-09 effective September 1, 2018 using the modified retrospective method. Under this method, the new standardanticipates will be applied only to the most current period presentedrecognized in the financial statements and the cumulative effect of initially applying the standard will result in an adjustment to the opening balance of retained earningsfuture periods.
(in millions) |
| May 31, |
| |
Revenue type: |
|
|
| |
Manufacturing – Railcar sales |
| $ | 2,835.7 |
|
Manufacturing – Marine |
| $ | 40.6 |
|
Manufacturing – Conversions |
| $ | 227.1 |
|
Management services |
| $ | 124.4 |
|
Other |
| $ | 7.6 |
|
|
|
|
| |
Manufacturing – Railcars intended for syndication 1 |
| $ | 639.8 |
|
1 Not a performance obligation as of the adoption date. The Company continues to evaluate the requirements of the standard and its impact on the Company’s consolidated financial statements and disclosures. The Company currently expects revenue recognition policies to remain substantially unchanged as a result of adopting ASU2014-09, although this could change based on the Company’s continued evaluation.
In February 2016, the FASB issued Accounting Standards Update2016-02,Leases (ASU2016-02). The new guidance supersedes existing guidance on accounting for leasesdefined in Topic 840606.
Based on current production and is intended to increase the transparencydelivery schedules and comparabilityexisting contracts, approximately $2.5 billion of accounting for lease transactions. ASU2016-02 requires most leasesRailcar sales are expected to be recognized onin fiscal 2022 and 2023 while the balance sheet. Lessees will need to recognize aright-of-use asset and a lease liability for virtually all leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leasesremaining amount is expected to be classified as either operating or finance. Lessor accounting remains similarrecognized into 2024. The table above excludes estimated revenue to the current model, but updated to align
10
THE GREENBRIER COMPANIES, INC.
with certain changes to the lessee model and the new revenue recognition standard. The ASU will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidancerecognized at the beginning ofCompany’s Brazilian manufacturing operations, as they are accounted for under the earliest comparative period presented. The Company plans to adopt this guidance beginning September 1, 2019. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.equity method.
In December 2016, the FASB issued Accounting Standards Update2016-18,Restricted Cash (ASU2016-18). This update requires additional disclosure and that the Statement of Cash Flow explain the change during the period12
Revenue amounts reflected in the total cash, cash equivalents and amounts generally described as restricted cash. Therefore, amounts generally described as restricted cash should be included with cash & cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the Statement of Cash Flows. The new guidance is effectiveRailcars intended for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2018.
In August 2017, the FASB issued Accounting Standards Update2017-12,Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (ASU2017-12). This update improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance. The guidance expands the ability to hedgenon-financial and financial risk components, reduces complexity in fair value hedges of interest rate risk, eliminates the requirement to separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment requirements. The new guidance is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2019. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
Share Repurchase Program –The Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the Company’s common stock. The programsyndication may be modified, suspendedsyndicated to third parties or discontinued at any time without prior notice and currently has an expiration date of March 31, 2019. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions fromtime-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.
The Company did not repurchase any shares during the three months ended November 30, 2017. As of November 30, 2017, the Company had cumulatively repurchased 3,206,226 shares for approximately $137.0 million since October 2013 and had $88.0 million available under the share repurchase program.
Note 2 – Acquisitions
On June 1, 2017, Greenbrier and Astra Holding GmbH (Astra) contributed their European operations to a newly formed company, Greenbrier-Astra Rail, a Europe-based freight railcar manufacturing, engineering and repair business. As consideration for an approximate 75% controlling interest, Greenbrier agreed to pay Astra €30 million at closing and €30 million 12 months after closing and issue an approximate 25% noncontrolling interest in the new company. The total net assets acquired of $114.6 million includes $38.3 million representing the fair value of the noncontrolling interest at the acquisition date.
Astra also received a put option to sell its entire noncontrolling interest to Greenbrier at an exercise price equal to the higher of fair value or a defined EBITDA multiple as measured on the exercise date. The option is exercisable 30 days prior to and up until June 1, 2022. Due to Astra’s redemption right under the put option, the noncontrolling interest has been classified as a Contingently redeemable noncontrolling interest in the mezzanine section of the Consolidated Balance Sheets. The carrying value of the noncontrolling interest cannot be less than the maximum redemption amount, which is the amount Greenbrier will settle the put option for if exercised. Adjustments to reconcile the carrying value to the maximum redemption amount are recorded to retained earnings. There were no such adjustments during the period ended November 30, 2017.
11
THE GREENBRIER COMPANIES, INC.
For the three months ended November 30, 2017, the European operations contributed by Astra generated revenues of $43.2 million and earnings from operations of $0.4 million, which are reportedheld in the Company’s consolidated financial statementsfleet depending on a variety of factors.
Marine revenue is expected to be recognized through 2023 as partvessel construction is completed.
Conversions represent orders to modernize existing railcars and are expected to be recognized through 2023.
Management services includes management and maintenance services of which approximately 49% are expected to be performed through 2026 and the Manufacturing segment. The impact of the acquisition was not material to the Company’s consolidated results of operations, therefore pro forma financial information has not been included.remaining amount through 2037.
Minor adjustments were made to the purchase price allocation during the three months ended November 30, 2017. The preliminary allocation of the purchase price based on the fair value of the net assets acquired from Astra was as follows as of June 1, 2017, the acquisition date:
(in thousands) | ||||
Cash and cash equivalents | $ | 6,562 | ||
Accounts receivable | 10,984 | |||
Inventories | 30,454 | |||
Property, plant and equipment | 75,296 | |||
Intangibles and other assets | 17,300 | |||
Goodwill | 24,518 | |||
|
| |||
Total assets acquired | 165,114 | |||
Accounts payable and accrued liabilities | 17,879 | |||
Deferred income taxes | 7,292 | |||
Deferred revenue | 964 | |||
Notes payable | 24,382 | |||
|
| |||
Total liabilities assumed | 50,517 | |||
|
| |||
Net assets acquired | $ | 114,597 | ||
|
|
Note 34 – Inventories
Inventories are valued at the lower of cost(first-in,first-out) or market.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 inventory balance:
(in millions) |
| May 31, |
|
| August 31, |
| ||
Manufacturing supplies and raw materials |
| $ | 561.3 |
|
| $ | 352.8 |
|
Work-in-process |
|
| 149.9 |
|
|
| 167.3 |
|
Finished goods |
|
| 84.2 |
|
|
| 73.4 |
|
Excess and obsolete adjustment |
|
| (13.7 | ) |
|
| (19.9 | ) |
|
| $ | 781.7 |
|
| $ | 573.6 |
|
(In thousands) | November 30, 2017 | August 31, 2017 | ||||||
Manufacturing supplies and raw materials | $ | 241,018 | $ | 222,080 | ||||
Work-in-process | 90,457 | 86,794 | ||||||
Finished goods | 84,438 | 95,389 | ||||||
Excess and obsolete adjustment | (4,542 | ) | (4,136 | ) | ||||
|
|
|
| |||||
$ | 411,371 | $ | 400,127 | |||||
|
|
|
|
12
THE GREENBRIER COMPANIES, INC.
Note 45 – Intangibles and Other Assets, net
Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment.
The following table summarizes the Company’s identifiable intangible and other assets balance:
(in millions) |
| May 31, |
|
| August 31, |
| ||
Intangible assets subject to amortization: |
|
|
|
|
|
| ||
Customer relationships |
| $ | 87.5 |
|
| $ | 89.8 |
|
Accumulated amortization |
|
| (65.3 | ) |
|
| (64.1 | ) |
Other intangibles |
|
| 42.4 |
|
|
| 40.3 |
|
Accumulated amortization |
|
| (15.8 | ) |
|
| (13.0 | ) |
|
|
| 48.8 |
|
|
| 53.0 |
|
Intangible assets not subject to amortization |
|
| 2.4 |
|
|
| 2.4 |
|
Prepaid and other assets |
|
| 33.4 |
|
|
| 26.7 |
|
Operating lease ROU assets |
|
| 39.4 |
|
|
| 39.8 |
|
Nonqualified savings plan investments |
|
| 44.2 |
|
|
| 47.7 |
|
Debt issuance costs, net |
|
| 7.8 |
|
|
| 8.6 |
|
Assets held for sale |
|
| 1.8 |
|
|
| 5.4 |
|
Total Intangible and other assets, net |
| $ | 177.8 |
|
| $ | 183.6 |
|
(In thousands) | November 30, 2017 | August 31, 2017 | ||||||
Intangible assets subject to amortization: | ||||||||
Customer relationships | $ | 64,521 | $ | 64,521 | ||||
Accumulated amortization | (41,000 | ) | (40,153 | ) | ||||
Other intangibles | 16,773 | 20,207 | ||||||
Accumulated amortization | (5,402 | ) | (4,866 | ) | ||||
|
|
|
| |||||
34,892 | 39,709 | |||||||
Intangible assets not subject to amortization | 4,164 | 912 | ||||||
Prepaid and other assets | 15,003 | 16,914 | ||||||
Nonqualified savings plan investments | 23,694 | 20,974 | ||||||
Revolving notes issuance costs, net | 2,416 | 2,623 | ||||||
Assets held for sale | 3,650 | 4,045 | ||||||
|
|
|
| |||||
Total Intangible and other assets, net | $ | 83,819 | $ | 85,177 | ||||
|
|
|
|
Amortization expense was $1.9 million and $7.3 million for the three and nine months ended November 30, 2017 was $1.4May 31, 2022, respectively and $2.9 million and $8.5 million for the three and nine months ended November 30, 2016 was $1.7 million.May 31, 2021, respectively. Amortization expense for the years ending August 31, 2018, 2019, 2020, 20212022, 2023, 2024, 2025 and 20222026 is expected to be $5.8$9.2 million, $5.4$8.1 million, $5.7$7.5 million, $5.4$6.4 million and $4.0 million.$6.1 million, respectively.
13
13
THE GREENBRIER COMPANIES, INC.
Note 56 – Revolving Notes
Senior secured credit facilities, consisting of three4 components, aggregated to $626.7 million$1.1 billion as of November 30, 2017.May 31, 2022.
As of November 30, 2017,May 31, 2022, a $550.0$600.0 million revolving line of credit, maturing October 2020,August 2026, secured by substantially all the Company’s U.S. assets in the U.S. not otherwise pledged as security for term loans was availableor 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 LIBOR plus 1.75%1.50% or Prime plus 0.75%0.50% 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.
As of November 30, 2017,May 31, 2022, a $350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing, a joint venture in which the Company owns approximately 95%. Advances under this facility bear interest at LIBOR plus 2.0%. The warehouse credit facility converts to a term loan in April 2023 and matures in April 2025.
As of May 31, 2022, lines of credit totaling $26.7$73.7 million secured by certain of the Company’s European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2%1.2% to WIBOR plus 1.3%1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.9%1.1%, were available for working capital needs of the Company’s European manufacturing operation.operations. The European lines of credit include $35.4 million which are guaranteed by the Company. European credit facilities are continually beingregularly renewed. Currently, these European credit facilities have maturities that range from February 2018July 2022 through June 2019.October 2023.
As of November 30, 2017,May 31, 2022, the Company’s Mexican railcar manufacturing joint ventureoperations had two4 lines of credit totaling $50.0 million.$120.0 million for working capital needs. The first line of credit provides up to $30.0 million and is fully guaranteed by the Company and its joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to $20.0$30.0 million, of which the Company and its joint venture partner have each guaranteed 50%50%. Advances under this facility bear interest at LIBOR plus 2.0%3.75% to 4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.
As of November 30, 2017, outstanding commitments under the senior secured credit facilities consisted of $75.4 million in lettersJune 2024. The second line of credit provides up to $35.0 million, of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 3.70%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2023. The third 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 fourth line of credit provides up to $5.0 million and matures in September 2022. Advances under this facility bear interest at LIBOR plus 2.95%.
Credit facility balances:
(in millions) |
| May 31, |
|
| August 31, |
| ||
|
|
|
|
|
|
| ||
North America |
| $ | 160.0 |
|
| $ | 160.0 |
|
Mexico |
|
| 85.0 |
|
|
| 15.0 |
|
Europe |
|
| 58.3 |
|
|
| 50.2 |
|
GBX Leasing |
|
| - |
|
|
| 147.0 |
|
Total Revolving notes |
| $ | 303.3 |
|
| $ | 372.2 |
|
Outstanding commitments under the North American credit facility and $6.9 million outstanding under the European credit facilities.
As of August 31, 2017, outstanding commitments under the senior secured credit facilities consisted of $77.6 million inincluded letters of credit which totaled $6.9 million and $8.4 million as of May 31, 2022 and August 31, 2021, respectively.
As of May 31, 2022, the Company had an aggregate of $85.0 million available to draw down under the North American credit facility and $4.3 million outstanding under the Europeancommitted credit facilities.
14
THE GREENBRIER COMPANIES, INC.
Note 67 – Accounts Payable and Accrued Liabilities
(In thousands) | November 30, 2017 | August 31, 2017 | ||||||
Trade payables | $ | 193,919 | $ | 180,592 | ||||
Other accrued liabilities | 122,919 | 111,316 | ||||||
Accrued payroll and related liabilities | 76,273 | 84,749 | ||||||
Accrued warranty | 21,952 | 20,737 | ||||||
Accrued maintenance | 17,462 | 17,667 | ||||||
Income taxes payable | 8,848 | — | ||||||
|
|
|
| |||||
$ | 441,373 | $ | 415,061 | |||||
|
|
|
|
(in millions) |
| May 31, |
|
| August 31, |
| ||
Trade payables |
| $ | 327.6 |
|
| $ | 265.1 |
|
Other accrued liabilities |
|
| 116.0 |
|
|
| 109.1 |
|
Operating lease liabilities |
|
| 41.7 |
|
|
| 42.6 |
|
Accrued payroll and related liabilities |
|
| 125.2 |
|
|
| 125.1 |
|
Accrued warranty |
|
| 28.5 |
|
|
| 27.9 |
|
|
| $ | 639.0 |
|
| $ | 569.8 |
|
Note 78 – Warranty Accruals
Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on the history of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirations of warranty periods.
Warranty accrual activity:
(In thousands) | Three Months Ended November 30, | |||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||
Balance at beginning of period | $ | 20,737 | $ | 12,159 |
| $ | 30.1 |
|
| $ | 42.7 |
|
| $ | 27.9 |
|
| $ | 45.2 |
| ||||
Charged to cost of revenue, net | 1,953 | 357 |
|
| 1.7 |
|
|
| (9.2 | ) |
|
| 7.6 |
|
|
| (7.9 | ) | ||||||
Payments | (751 | ) | (637 | ) |
|
| (3.1 | ) |
|
| (2.0 | ) |
|
| (6.4 | ) |
|
| (5.8 | ) | ||||
Currency translation effect | 13 | (142 | ) |
|
| (0.2 | ) |
|
| 0.1 |
|
|
| (0.6 | ) |
|
| 0.1 |
| |||||
|
| |||||||||||||||||||||||
Balance at end of period | $ | 21,952 | $ | 11,737 |
| $ | 28.5 |
|
| $ | 31.6 |
|
| $ | 28.5 |
|
| $ | 31.6 |
| ||||
|
|
15
THE GREENBRIER COMPANIES, INC.
Note 89 – Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
(In thousands) | Unrealized Gain (loss) on Derivative Financial Instruments | Foreign Currency Translation Adjustment | Other | Accumulated Other Comprehensive Loss | ||||||||||||
Balance, August 31, 2017 | $ | 181 | $ | (5,366 | ) | $ | (1,094 | ) | $ | (6,279 | ) | |||||
Other comprehensive loss before reclassifications | 822 | (3,183 | ) | (19 | ) | (2,380 | ) | |||||||||
Amounts reclassified from Accumulated other comprehensive loss | (328 | ) | — | — | (328 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance, November 30, 2017 | $ | 675 | $ | (8,549 | ) | $ | (1,113 | ) | $ | (8,987 | ) | |||||
|
|
|
|
|
|
|
|
(in millions) |
| Unrealized |
|
| Foreign |
|
| Other |
|
| Accumulated |
| ||||
Balance, August 31, 2021 |
| $ | (7.4 | ) |
| $ | (35.8 | ) |
| $ | (0.5 | ) |
| $ | (43.7 | ) |
Other comprehensive gain (loss) before reclassifications |
|
| 10.7 |
|
|
| (7.5 | ) |
|
| 0.1 |
|
|
| 3.3 |
|
Amounts reclassified from Accumulated other |
|
| 3.8 |
|
|
| — |
|
|
| — |
|
|
| 3.8 |
|
Balance, May 31, 2022 |
| $ | 7.1 |
|
| $ | (43.3 | ) |
| $ | (0.4 | ) |
| $ | (36.6 | ) |
The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income, with presentation location,financial statement caption, were as follows:
Three Months Ended November 30, | Financial Statement |
| Three Months Ended |
|
|
| ||||||||||||||
(In thousands) | 2017 | 2016 | ||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| Financial Statement Caption | ||||||||||||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
| ||||||||||||
Foreign exchange contracts | $ | (511 | ) | $ | 143 | Revenue and Cost of revenue |
| $ | 0.5 |
|
| $ | 0.5 |
|
| Revenue and Cost of revenue | ||||
Interest rate swap contracts | 167 | 338 | Interest and foreign exchange |
|
| 1.7 |
|
|
| 1.3 |
|
| Interest and foreign exchange | |||||||
|
|
|
| 2.2 |
|
|
| 1.8 |
|
| Total before tax | |||||||||
(344 | ) | 481 | Total before tax |
|
| (0.7 | ) |
|
| (0.4 | ) |
| Income tax expense | |||||||
16 | (158 | ) | Tax expense |
| $ | 1.5 |
|
| $ | 1.4 |
|
| Net of tax | |||||||
|
| |||||||||||||||||||
$ | (328 | ) | $ | 323 | Net of tax | |||||||||||||||
|
|
1615
THE GREENBRIER COMPANIES, INC.
|
| Nine Months Ended |
|
|
| |||||
(in millions) |
| 2022 |
|
| 2021 |
|
| Financial Statement Caption | ||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
| ||
Foreign exchange contracts |
| $ | 0.9 |
|
| $ | 1.2 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| 4.3 |
|
|
| 3.9 |
|
| Interest and foreign exchange |
|
|
| 5.2 |
|
|
| 5.1 |
|
| Total before tax |
|
|
| (1.4 | ) |
|
| (1.2 | ) |
| Income tax expense |
|
| $ | 3.8 |
|
| $ | 3.9 |
|
| Net of tax |
Note 910 – Earnings Per Share
The shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows:
(In thousands) | Three Months Ended November 30, | |||||||
2017 | 2016 | |||||||
Weighted average basic common shares outstanding(1) | 29,332 | 29,097 | ||||||
Dilutive effect of 2018 Convertible notes(2) | 3,331 | 3,258 | ||||||
Dilutive effect of 2024 Convertible notes(3) | — | n/a | ||||||
Dilutive effect of performance based restricted stock units(4) | 33 | 57 | ||||||
|
|
|
| |||||
Weighted average diluted common shares outstanding | 32,696 | 32,412 | ||||||
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(In thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Weighted average basic common shares outstanding (1) |
| 32,588 |
|
|
| 32,573 |
|
|
| 32,560 |
|
|
| 32,726 |
|
Dilutive effect of 2.875% convertible notes due 2024 (2) (3) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Dilutive effect of 2.875% convertible notes due 2028 (4) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Dilutive effect of 2.25% convertible notes due 2024 (2) (5) | N/A |
|
|
| — |
|
| N/A |
|
|
| — |
| ||
Dilutive effect of restricted stock units (2) (6) |
| 1,073 |
|
|
| 1,032 |
|
|
| 1,066 |
|
|
| 1,021 |
|
Weighted average diluted common shares outstanding |
| 33,661 |
|
|
| 33,605 |
|
|
| 33,626 |
|
|
| 33,747 |
|
(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 common stock equivalents was excluded from the share calculation for the three and nine months ended May 31, 2021 as the average stock price was less than the applicable conversion price and therefore was anti-dilutive under previous applicable guidance. See further discussion below. (3) The dilutive effect of the 2.875% Convertible notes due 2024 was excluded for the three and nine months ended May 31, 2022 as they were considered anti-dilutive under the “if converted” method as further discussed below. (4) The dilutive effect of the 2.875% Convertible notes due 2028 was excluded for the three and nine months ended May 31, 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. These convertible notes were issued in April 2021. (5) The 2.25% Convertible notes due 2024 were retired in April 2021. (6) Restricted stock units that are not considered participating securities and restricted |
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. The Company's approach for calculating diluted |
Diluted EPS iswas modified beginning September 1, 2021 upon the adoption of Accounting Standard Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. See Note 1 - Interim Financial Statements for additional information.
For the three and nine months ended May 31, 2022, diluted EPS was calculated using the more dilutive of two approaches.methods. The first approachmethod includes the dilutive effect, using the treasury stock method, associated with shares underlying the 2024 Convertible notesrestricted 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 approachmethod supplements the first by also including the “if converted” effect of the 20182.875% Convertible notes.notes due 2024 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. The 2024 Convertible notes are included in
16
For the calculation of both approachesthree and nine months ended May 31, 2021, diluted EPS was calculated using the treasury stock method whenassociated with shares underlying the average2.875% Convertible notes due 2024, 2.25% convertible notes due 2024, restricted stock price is greater than the applicable conversion price.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.
Three Months Ended November 30, | Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
(in millions, except shares which are reflected in thousands, and per share amounts) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||
Net earnings attributable to Greenbrier | $ | 3.1 |
|
| $ | 19.7 |
|
| $ | 26.7 |
|
| $ | 0.7 |
| ||||||||
Weighted average basic common shares outstanding |
| 32,588 |
|
|
| 32,573 |
|
|
| 32,560 |
|
|
| 32,726 |
| ||||||||
Basic earnings per share | $ | 0.10 |
|
| $ | 0.61 |
|
| $ | 0.82 |
|
| $ | 0.02 |
| ||||||||
2017 | 2016 |
|
|
|
|
|
|
|
|
|
|
| |||||||||||
Net earnings attributable to Greenbrier | $ | 26,253 | $ | 24,962 | $ | 3.1 |
|
| $ | 19.7 |
|
| $ | 26.7 |
|
| $ | 0.7 |
| ||||
Add back: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest and debt issuance costs on the 2018 Convertible notes, net of tax | 733 | 733 | |||||||||||||||||||||
|
| ||||||||||||||||||||||
Earnings before interest and debt issuance costs on convertible notes | $ | 26,986 | $ | 25,695 | |||||||||||||||||||
|
| ||||||||||||||||||||||
Interest and debt issuance costs on the 2.875% | n/a |
|
| n/a |
|
| n/a |
|
| n/a |
| ||||||||||||
Earnings before interest and debt issuance costs | n/a |
|
| n/a |
|
| n/a |
|
| n/a |
| ||||||||||||
Weighted average diluted common shares outstanding | 32,696 | 32,412 |
| 33,661 |
|
|
| 33,605 |
|
|
| 33,626 |
|
|
| 33,747 |
| ||||||
Diluted earnings per share(1) | $ | 0.83 | $ | 0.79 | |||||||||||||||||||
Diluted earnings per share | $ | 0.09 |
|
| $ | 0.59 |
|
| $ | 0.79 |
|
| $ | 0.02 |
|
Earnings before interest and debt issuance costs (net of tax) on convertible notes
Weighted average diluted common shares outstanding
17
THE GREENBRIER COMPANIES, INC.
Note 1011 – 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. Awards are expensed upon grant when the recipient’s eligible retirement date precedes the grant date.Stock based compensation expense consists of restricted stock unit awards.
Stock based compensation expense was $5.9$5.0 million and $10.9 million for the three and nine months ended November 30, 2017May 31, 2022, respectively and $5.3$3.5 million and $12.5 million for the three and nine months ended November 30, 2016.May 31, 2021, respectively. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income.
Note 1112 – 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 or loss.
At November 30, 2017May 31, 2022 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of EurosEuros; and U.S. Dollars; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $243.5$100.3 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there isin a loss position, or as Accounts receivable, net when there isin a gain.gain position. As the contracts mature at various dates through July 2019,October 2023, 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 November 30, 2017May 31, 2022 exchange rates, approximately $0.6$2.6 million would be reclassified to revenue or cost of revenue in the next 12 months.year.
At November 30, 2017, anMay 31, 2022, interest rate swap agreementagreements maturing in March 2020from September 2023 through January 2032 had a notional amount of $87.8amounts that aggregated to $408.2 million. The fair value of the contractcontracts is included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities on the Consolidated Balance Sheets.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
17
swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At November 30, 2017May 31, 2022 interest rates, approximately $0.6$0.8 million would be reclassified to interest expense in the next 12 months.year.
Fair Values of Derivative Instruments
(in millions)
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
November 30, 2017 | August 31, 2017 | November 30, 2017 | August 31, 2017 | |||||||||||||||||
(In thousands) | Balance sheet location | Fair Value | Fair Value | Balance sheet location | Fair Value | Fair Value | ||||||||||||||
Derivatives designated as hedging instruments | ||||||||||||||||||||
Foreign forward exchange contracts | Accounts receivable, net | $ | 1,735 | $ | 2,341 | Accounts payable and accrued liabilities | $ | 1,194 | $ | 1,761 | ||||||||||
Interest rate swap contracts | Intangibles and other assets, net | — | — | Accounts payable and accrued liabilities | 227 | 1,125 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
$ | 1,735 | $ | 2,341 | $ | 1,421 | $ | 2,886 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Derivatives not designated as hedging instruments | ||||||||||||||||||||
Foreign forward exchange contracts | Accounts receivable, net | $ | 2,018 | $ | 1,473 | Accounts payable and accrued liabilities | $ | 5 | $ | — |
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||||||||||
|
|
|
| May 31, |
|
| August 31, |
|
|
|
| May 31, |
|
| August 31, |
| ||||
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
| ||||
Derivatives designated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign forward |
| Accounts receivable, |
| $ | 1.2 |
|
| $ | 0.1 |
|
| Accounts payable and |
| $ | 2.3 |
|
| $ | 0.3 |
|
Interest rate swap |
| Accounts receivable, |
|
| 12.4 |
|
|
| — |
|
| Accounts payable and |
|
| 0.6 |
|
|
| 10.0 |
|
|
|
|
| $ | 13.6 |
|
| $ | 0.1 |
|
|
|
| $ | 2.9 |
|
| $ | 10.3 |
|
Derivatives not |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign forward |
| Accounts receivable, |
| $ | — |
|
| $ | — |
|
| Accounts payable and |
| $ | — |
|
| $ | 0.1 |
|
18
THE GREENBRIER COMPANIES, INC.
The Effect of Derivative Instruments on the Statements of Income
(in millions)
Three Months Ended May 31, 2022 and 2021
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2022 |
|
| 2021 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | 0.2 |
|
| $ | 0.1 |
|
Derivatives in | Gain (loss) recognized |
| Location of gain | Gain (loss) reclassified |
| Location of gain | Gain (loss) recognized |
| |||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
Foreign | $ | 1.5 |
|
| $ | 0.5 |
| Revenue | $ | (0.6 | ) |
| $ | (0.5 | ) | Revenue | $ | 0.3 |
|
| $ | 0.2 |
|
Foreign |
| 0.8 |
|
|
| 0.3 |
| Cost of |
| 0.1 |
|
|
| — |
| Cost of |
| 0.2 |
|
|
| — |
|
Interest rate |
| 15.2 |
|
|
| (0.5 | ) | Interest and |
| (1.7 | ) |
|
| (1.3 | ) | Interest and |
| — |
|
|
| — |
|
| $ | 17.5 |
|
| $ | 0.3 |
|
| $ | (2.2 | ) |
| $ | (1.8 | ) |
| $ | 0.5 |
|
| $ | 0.2 |
|
18
The following table presents the amounts in the 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 May 31, 2022 and 2021:
|
| For The Three Months Ended May 31, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||
Revenue |
| $ | 793.5 |
|
| $ | (0.6 | ) |
| $ | 450.2 |
|
| $ | (0.5 | ) |
Cost of revenue |
| $ | 717.2 |
|
| $ | 0.1 |
|
| $ | 375.0 |
|
| $ | — |
|
Interest and foreign exchange |
| $ | 14.9 |
|
| $ | (1.7 | ) |
| $ | 10.2 |
|
| $ | (1.3 | ) |
Nine Months Ended May 31, 2022 and 2021
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2022 |
|
| 2021 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (0.2 | ) |
| $ | — |
|
Derivatives in |
| Gain (loss) recognized |
|
| Location of gain |
| Gain (loss) reclassified |
|
| Location of gain |
| Gain (loss) recognized |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||||
Foreign |
| $ | (3.5 | ) |
| $ | (1.1 | ) |
| Revenue |
| $ | (1.0 | ) |
| $ | (1.1 | ) |
| Revenue |
| $ | 0.8 |
|
| $ | 0.5 |
|
Foreign |
|
| 0.9 |
|
|
| — |
|
| Cost of |
|
| 0.1 |
|
|
| (0.1 | ) |
| Cost of |
|
| 0.6 |
|
|
| 0.1 |
|
Interest rate |
|
| 17.5 |
|
|
| 0.6 |
|
| Interest and |
|
| (4.3 | ) |
|
| (3.9 | ) |
| Interest and |
|
| — |
|
|
| — |
|
|
| $ | 14.9 |
|
| $ | (0.5 | ) |
|
|
| $ | (5.2 | ) |
| $ | (5.1 | ) |
|
|
| $ | 1.4 |
|
| $ | 0.6 |
|
Derivatives in cash flow hedging relationships | Location of gain (loss) recognized in income on derivatives | Gain (loss) recognized in income on derivatives three months ended November 30, | ||||||||
2017 | 2016 | |||||||||
Foreign forward exchange contract | Interest and foreign exchange | $ | 380 | $ | 47 | |||||
Interest rate swap contracts | Interest and foreign exchange | (17 | ) | 38 | ||||||
|
|
|
| |||||||
$ | 363 | $ | 85 | |||||||
|
|
|
|
|
| For The Nine Months Ended May 31, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||
Revenue |
| $ | 2,027.0 |
|
| $ | (1.0 | ) |
| $ | 1,148.8 |
|
| $ | (1.1 | ) |
Cost of revenue |
| $ | 1,848.3 |
|
| $ | 0.1 |
|
| $ | 1,015.3 |
|
| $ | (0.1 | ) |
Interest and foreign exchange |
| $ | 39.3 |
|
| $ | (4.3 | ) |
| $ | 30.9 |
|
| $ | (3.9 | ) |
Derivatives in cash flow hedging relationships | Gain (loss) recognized in OCI on derivatives (effective portion) three months ended November 30, | Location of gain (loss) reclassified from accumulated OCI into income | Gain (loss) reclassified from accumulated OCI into income (effective portion) three months ended November 30, | Location of gain (loss) on derivative (ineffective portion and amount excluded from effectiveness testing) | Gain (loss) recognized on derivative (ineffective portion and amount excluded from effectiveness testing) three months ended November 30, | |||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||||
Foreign forward exchange contracts | $ | 730 | $ | (6,456 | ) | Revenue | $ | 710 | $ | (87 | ) | Revenue | $ | 56 | $ | (1,258 | ) | |||||||||||||||
Foreign forward exchange contracts | (354 | ) | (834 | ) | Cost of revenue | (199 | ) | (56 | ) | Cost of revenue | 82 | (32 | ) | |||||||||||||||||||
Interest rate swap contracts | 771 | 1,146 | | Interest and foreign exchange | | (167 | ) | (338 | ) | | Interest and foreign exchange | | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
$ | 1,147 | $ | (6,144 | ) | $ | 344 | $ | (481 | ) | $ | 138 | $ | (1,290 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
19
Note 1213 – Segment Information
GreenbrierThe Company operates in four3 reportable segments: Manufacturing; Wheels & Parts;Maintenance Services; and Leasing & Services; and GBW Joint Venture. The results of GBW Joint Venture are included as part of Earnings (loss) from unconsolidated affiliates as the Company accounts for its interest in GBW Railcar Services LLC (GBW) under the equity method of accounting.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 2017 Annual Report on Form10-K. 10-K for the year ended August 31, 2021. Performance is evaluated based on Earnings (loss) from operations. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or Income tax expense(expense) benefit 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.
In the first quarter of 2022 the Company renamed two of its reportable segments to more prominently display the nature of the customer solutions it provides and markets in which it operates. The new names of its reportable segments are Manufacturing (unchanged), Maintenance Services (previously Wheels, Repair & Parts), and Leasing & Management Services (previously Leasing & Services). The name changes have no impact on the organization’s reporting structure nor on financial information previously reported. Separately, effective September 1, 2021, the Company changed its measurement basis for allocating syndication revenue between the Manufacturing and Leasing & Management Services reportable segments. This change in measurement reflects the information currently used by management to assess the Company's operating performance in accordance with its refined leasing strategy and has no impact to the Company’s total consolidated revenue. Segment results for the prior periods have been recast to conform to the current period presentation.
The information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes. The results of operations for the GBW Joint Venture are not reflected in the tables below as the investment is accounted for under the equity method of accounting.
19
THE GREENBRIER COMPANIES, INC.
For the three months ended November 30, 2017:May 31, 2022:
Revenue | Earnings (loss) from operations | |||||||||||||||||||||||
(In thousands) | External | Intersegment | Total | External | Intersegment | Total | ||||||||||||||||||
Manufacturing | $ | 451,485 | $ | 16,804 | $ | 468,289 | $ | 52,969 | $ | 4,186 | $ | 57,155 | ||||||||||||
Wheels & Parts | 78,011 | 7,732 | 85,743 | 2,418 | 748 | 3,166 | ||||||||||||||||||
Leasing & Services | 30,039 | 1,605 | 31,644 | 28,190 | 1,372 | 29,562 | ||||||||||||||||||
Eliminations | — | (26,141 | ) | (26,141 | ) | — | (6,306 | ) | (6,306 | ) | ||||||||||||||
Corporate | — | — | — | (22,135 | ) | — | (22,135 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 559,535 | $ | — | $ | 559,535 | $ | 61,442 | $ | — | $ | 61,442 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
For the three months ended November 30, 2016: | ||||||||||||||||||||||||
Revenue | Earnings (loss) from operations | |||||||||||||||||||||||
(In thousands) | External | Intersegment | Total | External | Intersegment | Total | ||||||||||||||||||
Manufacturing | $ | 454,033 | $ | — | $ | 454,033 | $ | 83,341 | $ | — | $ | 83,341 | ||||||||||||
Wheels & Parts | 69,635 | 7,201 | 76,836 | 2,894 | 612 | 3,506 | ||||||||||||||||||
Leasing & Services | 28,646 | 5,334 | 33,980 | 7,390 | 5,250 | 12,640 | ||||||||||||||||||
Eliminations | — | (12,535 | ) | (12,535 | ) | — | (5,862 | ) | (5,862 | ) | ||||||||||||||
Corporate | — | — | — | (20,965 | ) | — | (20,965 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 552,314 | $ | — | $ | 552,314 | $ | 72,660 | $ | — | $ | 72,660 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 650.9 |
|
| $ | 38.3 |
|
| $ | 689.2 |
|
| $ | 20.5 |
|
| $ | 1.8 |
|
| $ | 22.3 |
|
Maintenance Services |
|
| 101.5 |
|
|
| 8.6 |
|
|
| 110.1 |
|
|
| 8.6 |
|
|
| — |
|
|
| 8.6 |
|
Leasing & Management Services |
|
| 41.1 |
|
|
| 0.6 |
|
|
| 41.7 |
|
|
| 19.2 |
|
|
| 0.1 |
|
|
| 19.3 |
|
Eliminations |
|
| — |
|
|
| (47.5 | ) |
|
| (47.5 | ) |
|
| — |
|
|
| (1.9 | ) |
|
| (1.9 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28.7 | ) |
|
| — |
|
|
| (28.7 | ) |
|
| $ | 793.5 |
|
| $ | — |
|
| $ | 793.5 |
|
| $ | 19.6 |
|
| $ | — |
|
| $ | 19.6 |
|
Total assets | ||||||||
(In thousands) | November 30, 2017 | August 31, 2017 | ||||||
Manufacturing | $ | 915,918 | $ | 914,450 | ||||
Wheels & Parts | 262,349 | 236,315 | ||||||
Leasing & Services | 535,847 | 535,323 | ||||||
Unallocated | 698,576 | 711,617 | ||||||
|
|
|
| |||||
$ | 2,412,690 | $ | 2,397,705 | |||||
|
|
|
|
For the nine months ended May 31, 2022:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,659.1 |
|
| $ | 79.5 |
|
| $ | 1,738.6 |
|
| $ | 34.6 |
|
| $ | 2.1 |
|
| $ | 36.7 |
|
Maintenance Services |
|
| 260.5 |
|
|
| 17.4 |
|
|
| 277.9 |
|
|
| 10.4 |
|
|
| — |
|
|
| 10.4 |
|
Leasing & Management Services |
|
| 107.4 |
|
|
| 1.3 |
|
|
| 108.7 |
|
|
| 84.0 |
|
|
| 0.1 |
|
|
| 84.1 |
|
Eliminations |
|
| — |
|
|
| (98.2 | ) |
|
| (98.2 | ) |
|
| — |
|
|
| (2.2 | ) |
|
| (2.2 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (72.4 | ) |
|
| — |
|
|
| (72.4 | ) |
|
| $ | 2,027.0 |
|
| $ | — |
|
| $ | 2,027.0 |
|
| $ | 56.6 |
|
| $ | — |
|
| $ | 56.6 |
|
20
For the three months ended May 31, 2021:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 339.7 |
|
| $ | 7.5 |
|
| $ | 347.2 |
|
| $ | 29.1 |
|
| $ | 0.5 |
|
| $ | 29.6 |
|
Maintenance Services |
|
| 80.9 |
|
|
| 2.3 |
|
|
| 83.2 |
|
|
| 4.2 |
|
|
| 0.1 |
|
|
| 4.3 |
|
Leasing & Management Services |
|
| 29.6 |
|
|
| — |
|
|
| 29.6 |
|
|
| 14.5 |
|
|
| — |
|
|
| 14.5 |
|
Eliminations |
|
| — |
|
|
| (9.8 | ) |
|
| (9.8 | ) |
|
| — |
|
|
| (0.6 | ) |
|
| (0.6 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.1 | ) |
|
| — |
|
|
| (22.1 | ) |
|
| $ | 450.2 |
|
| $ | — |
|
| $ | 450.2 |
|
| $ | 25.7 |
|
| $ | — |
|
| $ | 25.7 |
|
For the nine months ended May 31, 2021:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 845.7 |
|
| $ | 30.5 |
|
| $ | 876.2 |
|
| $ | 16.7 |
|
| $ | 3.1 |
|
| $ | 19.8 |
|
Maintenance Services |
|
| 218.1 |
|
|
| 4.2 |
|
|
| 222.3 |
|
|
| 6.4 |
|
|
| 0.1 |
|
|
| 6.5 |
|
Leasing & Management Services |
|
| 85.0 |
|
|
| 1.0 |
|
|
| 86.0 |
|
|
| 31.7 |
|
|
| 0.1 |
|
|
| 31.8 |
|
Eliminations |
|
| — |
|
|
| (35.7 | ) |
|
| (35.7 | ) |
|
| — |
|
|
| (3.3 | ) |
|
| (3.3 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56.9 | ) |
|
| — |
|
|
| (56.9 | ) |
|
| $ | 1,148.8 |
|
| $ | — |
|
| $ | 1,148.8 |
|
| $ | (2.1 | ) |
| $ | — |
|
| $ | (2.1 | ) |
|
| Total assets |
| |||||
(in millions) |
| May 31, |
|
| August 31, |
| ||
Manufacturing |
| $ | 1,814.1 |
|
| $ | 1,493.5 |
|
Maintenance Services |
|
| 266.8 |
|
|
| 260.9 |
|
Leasing & Management Services |
|
| 1,158.3 |
|
|
| 949.4 |
|
Unallocated, including cash |
|
| 466.9 |
|
|
| 686.9 |
|
|
| $ | 3,706.1 |
|
| $ | 3,390.7 |
|
Reconciliation of Earnings (loss) from operations to Earnings (loss) before income tax and earnings (loss) from unconsolidated affiliates:
Three Months Ended November 30, | ||||||||||||
(In thousands) | 2017 | 2016 | ||||||||||
Earnings from operations | $ | 61,442 | $ | 72,660 | ||||||||
Interest and foreign exchange | 7,020 | 1,724 | ||||||||||
|
|
|
| |||||||||
Earnings before income tax and earnings (loss) from unconsolidated affiliates | $ | 54,422 | $ | 70,936 | ||||||||
|
|
|
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Earnings (loss) from operations |
| $ | 19.6 |
|
| $ | 25.7 |
|
| $ | 56.6 |
|
| $ | (2.1 | ) |
Interest and foreign exchange |
| $ | 14.9 |
|
| $ | 10.2 |
|
| $ | 39.3 |
|
| $ | 30.9 |
|
Net loss on extinguishment of debt |
|
| — |
|
|
| 4.8 |
|
|
| — |
|
|
| 4.8 |
|
Earnings (loss) before income tax and |
| $ | 4.7 |
|
| $ | 10.7 |
|
| $ | 17.3 |
|
| $ | (37.8 | ) |
20
21
THE GREENBRIER COMPANIES, INC.
Note 14 – Leases
Lessor
The resultsEquipment on operating leases is reported net of operations for the GBW Joint Venture are accounted for under the equity methodaccumulated depreciation of accounting. The GBW Joint Venture is the Company’s fourth reportable segment$42.5 million and information$34.4 million as of November 30, 2017May 31, 2022 and August 31, 20172021, respectively. Depreciation expense was $5.5 million and $15.9 million for the three and nine months ended May 31, 2022 and $3.3 million and $10.1 million for the three and nine months ended May 31, 2021, 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 fourteen years. Operating lease rental revenues included in the Company’s Statements of Income for the three and nine months ended May 31, 2022 was $16.0 million and $47.3 million, respectively, which included $3.8 million and $12.3 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements. Operating lease rental revenues included in the Company’s Statements of Income for the three and nine months ended May 31, 2021 was $8.0 million and $32.1 million, respectively, which included $2.8 million and $10.2 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 May 31, 2022, will mature as follows:
(in millions) |
|
|
| |
Remaining three months of 2022 |
| $ | 12.9 |
|
2023 |
|
| 36.0 |
|
2024 |
|
| 29.3 |
|
2025 |
|
| 22.4 |
|
2026 |
|
| 19.6 |
|
Thereafter |
|
| 56.5 |
|
|
| $ | 176.7 |
|
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 nine months ended November 30, 2017May 31, 2022 and 2016 are included in2021, finance leases were not a material component of the tables below.Company's lease portfolio.The Company’s real estate and equipment leases have remaining lease terms ranging from less than one year to 76 years, with some including options to extend up to 15 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 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 November 30, | ||||||||
(In thousands) | 2017 | 2016 | ||||||
Revenue | $ | 58,000 | $ | 70,253 | ||||
Loss from operations | $ | (5,744 | ) | $ | (4,561 | ) | ||
Total Assets | ||||||||
November 30, 2017 | August 31, 2017 | |||||||
GBW(1) | $ | 204,288 | $ | 206,009 |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Operating lease expense |
| $ | 2.7 |
|
| $ | 2.9 |
|
| $ | 7.9 |
|
| $ | 10.4 |
|
Short-term lease expense |
|
| 1.1 |
|
|
| 1.0 |
|
|
| 3.8 |
|
|
| 3.6 |
|
Total |
| $ | 3.8 |
|
| $ | 3.9 |
|
| $ | 11.7 |
|
| $ | 14.0 |
|
22
Aggregate minimum future amounts payable under operating leases having initial or remaining non-cancelable terms at May 31, 2022 will mature as follows:
(in millions) |
|
|
| |
Remaining three months of 2022 |
| $ | 2.6 |
|
2023 |
|
| 10.4 |
|
2024 |
|
| 9.1 |
|
2025 |
|
| 6.4 |
|
2026 |
|
| 5.1 |
|
Thereafter |
|
| 12.7 |
|
Total lease payments |
| $ | 46.3 |
|
Less: Imputed interest |
|
| (4.6 | ) |
Total lease obligations |
| $ | 41.7 |
|
The table below presents additional information related to the Company’s leases:
Weighted average remaining lease term: | ||||
Operating leases | 12.2 Years | |||
Weighted average discount rate: | ||||
Operating leases | 2.7 | % |
Supplemental cash flow information related to leases were as follows:
(in millions) |
| Nine months ended |
| |
Cash paid for amounts included in the measurement |
|
|
| |
Operating cash flows from operating leases |
| $ | 8.6 |
|
ROU assets obtained in exchange for new operating |
| $ | 6.9 |
|
Note 1315 – Commitments and Contingencies
Portland Harbor Superfund Site
The Company’s 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"National Priority List”List" or “Superfund”"Superfund" site due to sediment contamination (the Portland Harbor Site). The Company and more than 140 other parties have received a “General Notice”"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 havedid not signedsign such consent, but nevertheless contributed moneyfinancially to the effort. TheEPA-mandated RI/FS was produced by the LWG and cost over $110$110 million during a17-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 the17-year period was not material. Some or all of any such outlay may be recoverable from other responsible parties. The LWG requested on October 18, 2017 that the AOC be terminated since the EPA issued its Record of Decision (ROD) for the Portland Harbor Site on January 6, 2017. On2017 and accordingly on October 26, 2017, the EPA project manager approved that request.AOC was terminated.
23
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, 83 parties, including the State of Oregon and the federal government, entered into anon-judicial mediation process to try to allocate costs associated with remediation of the Portland Harbor site.Site. 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. court until January 14, 2025.
The allocation process is continuing in parallel with the process to define the remediation steps.
The EPA’sEPA's January 6, 2017 ROD identifies aclean-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$1.7 billion. The EPA typically expects its cost estimates to be accurate within a range of-30% -30% to +50%+50%, but this ROD states that changes in costs are likely to occur as a result of new data it wants to collectcollected over a2-year period prior to final remedy design. The ROD identifies 13EPA has identified 15 Sediment Decision Units.Units within the ROD cleanup area. One of the units, RM9W, includes the nearshore area of the river sediments offshore of the Company’s Portland Oregon manufacturing facilityProperty as well as upstream and downstream of the facility. It also includes a portion of the Company’s riverbank. The ROD does not break down total remediation
21
THE GREENBRIER COMPANIES, INC.
costs by Sediment Decision Unit. The EPA’sEPA's ROD concluded that more data was needed to better defineclean-up scope and cost. On December 8, 2017, the EPA announced that Portland Harbor is one of 21 Superfund sites targeted for greater attention. On December 19, 2017, the EPA announced that it had entered a new AOC with a group of four potentially responsible parties to conduct additional sampling during 2018 and 2019 to provide more certainty aboutclean-up costs and aid the mediation process to allocate those costs. The parties to the mediation, including the Company, have agreed to help fund the additional sampling.
On January 30, 2017sampling, which is now complete. 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 Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the United States 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 Bandsarea offshore of the Yakama Nation v. Air Liquide America Corp., et al.,United States Court for the District of Oregon Case No.3i17-CV-00164-SB.Company’s manufacturing facility. The Company alonghas not signed an AOCin connection with manyremedial design, but will assist in conducting or funding a portion of the other defendants, has movedRM9W remedial design. The allocation process is continuing in parallel with the process to dismissdefine the case. That motion is pending. The complaint does not specify the amount of damages the Plaintiff will seek.remedial design.
The ROD does not address responsibility for the costs ofclean-up, nor does it allocate such costs among the potentially responsible parties. Responsibility for funding and implementing the EPA’sEPA'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 contaminationcontaminants 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 property precedes itsthe Company’s ownership of the Portland Oregon manufacturing facility.Property. Because these environmental investigations are still underway, including the collection of newpre-remedial design sampling data by EPA, 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’sriver'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 itsthe Portland property.Property.
On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the U.S. 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.
24
Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing Operations
The Company has entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (DEQ) in which the Company agreed to conduct an investigation of whether, and to what extent, past or present operations at the Portland propertyProperty 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 the Companyit could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.
Other Litigation, Commitments and Contingencies
In connection with the acquisition of the manufacturing business of American Railcar Industries, Inc. (ARI), the Company agreed to assume potential legacy liabilities (known and unknown) related to railcars manufactured by ARI. Among these potential liabilities are certain retrofit and repair obligations arising from regulatory actions by the Federal Railroad Administration and the Association of American Railroads. In some cases, the seller shares with the Company the costs of these retrofit and repair obligations. The Company currently is not able to determine if any of these liabilities will have a material adverse impact on the Company’s Consolidated Financial Statements.
From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcomes of which cannot be predicted with certainty. In the quarter ended November 30, 2016, the Company received an adverse judgment of approximately $15 million on one matter related to commercial litigation in a foreign jurisdiction. The judgment was reversed on appeal and the case was remanded to the trial court. In June 2017 the court issued a new judgment against the Company of approximately $10 million. The judgment was affirmed on appeal. The Company has reached an agreement in principle, subject to final documentation and court approval, to settle such litigation and certain related matters. 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’sCompany's Consolidated Financial Statements.
As of November 30, 2017,May 31, 2022, the Company had outstanding letters of credit aggregating $75.4to $6.9 million associated with performance guarantees, facility leases and workers compensation insurance.
As of November 30, 2017, the Company had a $36.5 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net. The Company is likely to make additional capital contributions or loans to GBW, an unconsolidated 50/50 joint venture, in the future.
22
THE GREENBRIER COMPANIES, INC.
As of November 30, 2017, the Company had a $10.0 million note receivable from Amsted-Maxion Cruzeiro, its unconsolidated Brazilian castings and components manufacturer and a $9.2 million note receivable balance from Greenbrier-Maxion, its unconsolidated Brazilian railcar manufacturer. These note receivables are included on the Consolidated Balance Sheet in Accounts receivable, net. In the future, the Company may make loans to or provide guarantees for Amsted-Maxion Cruzeiro or Greenbrier-Maxion.
Note 1416 – 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 November 30, 2017May 31, 2022 were:
(In thousands) | Total | Level 1 | Level 2 (1) | Level 3 | ||||||||||||||||||||||||||||
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Derivative financial instruments | $ | 3,753 | $ | — | $ | 3,753 | $ | — |
| $ | 13.6 |
|
| $ | — |
|
| $ | 13.6 |
|
| $ | — |
| ||||||||
Nonqualified savings plan investments | 23,694 | 23,694 | — | — |
|
| 44.2 |
|
|
| 44.2 |
|
|
| — |
|
|
| — |
| ||||||||||||
Cash equivalents | 105,563 | 105,563 | — | — |
|
| 109.1 |
|
|
| 109.1 |
|
|
| — |
|
|
| — |
| ||||||||||||
|
|
|
|
| $ | 166.9 |
|
| $ | 153.3 |
|
| $ | 13.6 |
|
| $ | — |
| |||||||||||||
$ | 133,010 | $ | 129,257 | $ | 3,753 | $ | — | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Derivative financial instruments | $ | 1,426 | $ | — | $ | 1,426 | $ | — |
| $ | 2.9 |
|
| $ | — |
|
| $ | 2.9 |
|
| $ | — |
|
25
Assets and liabilities measured at fair value on a recurring basis as of August 31, 20172021 were:
(In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||||||||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Derivative financial instruments | $ | 3,814 | $ | — | $ | 3,814 | $ | — |
| $ | 0.1 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
| ||||||||
Nonqualified savings plan investments | 20,974 | 20,974 | — | — |
|
| 47.7 |
|
|
| 47.7 |
|
|
| — |
|
|
| — |
| ||||||||||||
Cash equivalents | 105,337 | 105,337 | — | — |
|
| 228.9 |
|
|
| 228.9 |
|
|
| — |
|
|
| — |
| ||||||||||||
|
|
|
|
| $ | 276.7 |
|
| $ | 276.6 |
|
| $ | 0.1 |
|
| $ | — |
| |||||||||||||
$ | 130,125 | $ | 126,311 | $ | 3,814 | $ | — | |||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Derivative financial instruments | $ | 2,886 | $ | — | $ | 2,886 | $ | — |
| $ | 10.5 |
|
| $ | — |
|
| $ | 10.5 |
|
| $ | — |
|
23
THE GREENBRIER COMPANIES, INC.
Note 1517 – Related Party Transactions
In June 2017, theThe Company has a 41.9% interest in Axis, LLC (Axis), a joint venture. The Company purchased a 40% interest in the common stock of an entity that buys$3.5 million and sells railcar assets that are leased to third parties. The railcars sold to this leasing warehouse are principally built by Greenbrier. The Company accounts for this leasing warehouse investment under the equity method of accounting. As of November 30, 2017, the carrying amount of the investment was $7.2$9.7 million which is classified in Investment in unconsolidated affiliates in the Consolidated Balance Sheet. Upon sale of railcars to this entity from Greenbrier, 60% of the related revenue and margin is recognized and 40% is deferred until the railcars are ultimately sold by the entity. During the three months ended November 30, 2017, the Company recognized $16 million in revenue associated with railcars sold into the leasing warehouse and an additional $8 million associated with railcars sold out of the leasing warehouse. The Company also provides administrative and remarketing services to this entity and earns management fees for these services which were minor for the three and nine months ended November 30, 2017.May 31, 2022, respectively and $3.3 million and $10.0 million for the three and nine months ended May 31, 2021, respectively of railcar components from Axis.
Note 16 – Subsequent Event
On December 22, 2017 the Tax Cuts and Jobs Act of 2017 was signed into law. The provisions of the law include a reduction of the corporate tax rate and the taxation of a multi-national corporation’s permanently reinvested foreign earnings. The Company is currently evaluating the impact to its financial statements.26
24
THE GREENBRIER COMPANIES, INC.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We operate in fourthree reportable segments: Manufacturing; Wheels & Parts;Maintenance Services; and Leasing & Services; and GBW Joint Venture.Management Services. Our segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland, Romania and Romania,Turkey, produces double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar products and marine vessels. The Wheels & PartsMaintenance Services segment performs wheel and axle servicing, as well as production ofrailcar maintenance and produces a variety of parts for the railroadrail industry in North America. The Leasing & Management Services segment, which includes GBX Leasing, owns approximately 8,00011,800 railcars (6,200 railcars held as equipment on operating leases, 1,700 held as leased railcars for syndication and 100 held as finished goods inventory) and providesof May 31, 2022. We also provide management services for approximately 353,000421,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America as of November 30, 2017. The GBW Joint Venture segment provides repair services across North America, including facilities certified by the AAR. The results of GBW’s operations are included as part of Earnings (loss) from unconsolidated affiliates as we account for our interest under the equity method of accounting.May 31, 2022. Through other unconsolidated affiliates we produce rail and industrial castings, tank heads and other components and have an ownership stake in a railcar manufacturer in Brazil.
Our total manufacturing
We identify three general trends impacting our business at present, all of which we believe are reflected in our results for the nine months ended May 31, 2022. First, we believe the North American freight rail equipment market continues to emerge from the cyclical decrease in economic activity which began prior to the emergence of COVID-19. Second, we believe global economic activity continues to recover from the historic sharp dramatic decrease resulting from the COVID-19 pandemic. Third, inflation, rising interest rates, price volatility, supply chain disruptions and geopolitical disquiet, demand concerted management focus for successful execution across the business. While we believe the current market and broader economic environment most likely will present many positive opportunities for our business, as we navigate the recovery, we face a number of challenges which include:
In February 2022, the Russian Federation commenced a military invasion of Ukraine. As a result of this action, various nations have instituted economic sanctions against the Russian Federation. The full extent of short and long-term implications of Russia’s invasion of Ukraine and related sanctions are difficult to predict at this time but may have an adverse effect on the global economic markets generally and could exacerbate the existing challenges noted above. Since the commencement of the military invasion of Ukraine, there has been an increase in the price of steel and a shortage of certain materials and components. We do not have operations in Ukraine or Russia.
As described in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2021 and our subsequent Quarterly Reports on Form 10-Q, 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.
27
We believe we have the management expertise and are well-positioned to navigate the immediate challenges of increasing production rates safely amidst emerging COVID variants and geopolitical disquiet, while managing labor and supply chain continuity. Despite the challenging operating environment, we achieved the following accomplishments during the first nine months of 2022 as we navigate the recovery phase:
Our backlog remains strong with railcar deliveries into 2024 and marine deliveries into 2023. Our railcar backlog was approximately 26,50030,900 units with an estimated value of $2.56$3.6 billion of which 22,300 units are for direct sales and 4,200 units are for lease to third parties. Approximately 3% of backlog units and the estimated value as of November 30, 2017 was associated with our Brazilian manufacturing operations which is accounted for under the equity method.May 31, 2022. Backlog units for lease may be syndicated to third parties or held in our ownlease 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% of backlog units and estimated backlog value as of May 31, 2022 was associated with our Brazilian manufacturing operations which is accounted for under the dollar amount of backlog.equity method. Marine backlog as of November 30, 2017May 31, 2022 was $25$41 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. We cannot guarantee that our reported backlog will convert to revenue in any particular period, if at all.
25
28
THE GREENBRIER COMPANIES, INC.
Three Months Ended November 30, 2017May 31, 2022 Compared to the Three Months Ended November 30, 2016May 31, 2021
Overview
Revenue, costCost of revenue, marginMargin and operating profitEarnings from operations (operating profit) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
Three Months Ended November 30, |
| Three Months Ended |
| |||||||||||||
(In thousands) | 2017 | 2016 | ||||||||||||||
(in millions, except per share amounts) |
| 2022 |
|
| 2021 |
| ||||||||||
Revenue: |
|
|
|
|
|
| ||||||||||
Manufacturing | $ | 451,485 | $ | 454,033 |
| $ | 650.9 |
|
| $ | 339.7 |
| ||||
Wheels & Parts | 78,011 | 69,635 | ||||||||||||||
Leasing & Services | 30,039 | 28,646 | ||||||||||||||
|
| |||||||||||||||
Maintenance Services |
|
| 101.5 |
|
|
| 80.9 |
| ||||||||
Leasing & Management Services |
|
| 41.1 |
|
|
| 29.6 |
| ||||||||
559,535 | 552,314 |
|
| 793.5 |
|
|
| 450.2 |
| |||||||
Cost of revenue: |
|
|
|
|
| |||||||||||
Manufacturing | 380,850 | 356,555 |
|
| 611.3 |
|
|
| 292.4 |
| ||||||
Wheels & Parts | 72,506 | 64,978 | ||||||||||||||
Leasing & Services | 16,865 | 18,030 | ||||||||||||||
|
| |||||||||||||||
Maintenance Services |
|
| 91.1 |
|
|
| 73.7 |
| ||||||||
Leasing & Management Services |
|
| 14.8 |
|
|
| 8.9 |
| ||||||||
470,221 | 439,563 |
|
| 717.2 |
|
|
| 375.0 |
| |||||||
Margin: |
|
|
|
|
| |||||||||||
Manufacturing | 70,635 | 97,478 |
|
| 39.6 |
|
|
| 47.3 |
| ||||||
Wheels & Parts | 5,505 | 4,657 | ||||||||||||||
Leasing & Services | 13,174 | 10,616 | ||||||||||||||
|
| |||||||||||||||
Maintenance Services |
|
| 10.4 |
|
|
| 7.2 |
| ||||||||
Leasing & Management Services |
|
| 26.3 |
|
|
| 20.7 |
| ||||||||
89,314 | 112,751 |
|
| 76.3 |
|
|
| 75.2 |
| |||||||
Selling and administrative | 47,043 | 41,213 |
|
| 57.4 |
|
|
| 49.3 |
| ||||||
Net gain on disposition of equipment | (19,171 | ) | (1,122 | ) | ||||||||||||
|
| |||||||||||||||
Net (gain) loss on disposition of equipment |
|
| (0.7 | ) |
|
| 0.2 |
| ||||||||
Earnings from operations | 61,442 | 72,660 |
|
| 19.6 |
|
|
| 25.7 |
| ||||||
Interest and foreign exchange | 7,020 | 1,724 |
|
| 14.9 |
|
|
| 10.2 |
| ||||||
|
| |||||||||||||||
Earnings before income taxes and loss from unconsolidated affiliates | 54,422 | 70,936 | ||||||||||||||
Income tax expense | (18,135 | ) | (20,386 | ) | ||||||||||||
|
| |||||||||||||||
Earnings before loss from unconsolidated affiliates | 36,287 | 50,550 | ||||||||||||||
Loss from unconsolidated affiliates | (2,910 | ) | (2,584 | ) | ||||||||||||
|
| |||||||||||||||
Net loss on extinguishment of debt |
|
| — |
|
|
| 4.8 |
| ||||||||
Earnings before income taxes and earnings from unconsolidated affiliates |
|
| 4.7 |
|
|
| 10.7 |
| ||||||||
Income tax (expense) benefit |
|
| (1.1 | ) |
|
| 6.9 |
| ||||||||
Earnings before earnings from unconsolidated affiliates |
|
| 3.6 |
|
|
| 17.6 |
| ||||||||
Earnings from unconsolidated affiliates |
|
| 4.0 |
|
|
| 2.4 |
| ||||||||
Net earnings | 33,377 | 47,966 |
|
| 7.6 |
|
|
| 20.0 |
| ||||||
Net earnings attributable to noncontrolling interest | (7,124 | ) | (23,004 | ) |
|
| (4.5 | ) |
|
| (0.3 | ) | ||||
|
| |||||||||||||||
Net earnings attributable to Greenbrier | $ | 26,253 | $ | 24,962 |
| $ | 3.1 |
|
| $ | 19.7 |
| ||||
|
| |||||||||||||||
Diluted earnings per common share | $ | 0.83 | $ | 0.79 |
| $ | 0.09 |
|
| $ | 0.59 |
|
Performance for our segments is evaluated based on operating profit.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(expense) benefit for either external or internal reporting purposes.
Three Months Ended November 30, |
| Three Months Ended |
| |||||||||||||
(In thousands) | 2017 | 2016 | ||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
| ||||||||||
Operating profit (loss): |
|
|
|
|
|
| ||||||||||
Manufacturing | $ | 52,969 | $ | 83,341 |
| $ | 20.5 |
|
| $ | 29.1 |
| ||||
Wheels & Parts | 2,418 | 2,894 | ||||||||||||||
Leasing & Services | 28,190 | 7,390 | ||||||||||||||
Maintenance Services |
|
| 8.6 |
|
|
| 4.2 |
| ||||||||
Leasing & Management Services |
|
| 19.2 |
|
|
| 14.5 |
| ||||||||
Corporate | (22,135 | ) | (20,965 | ) |
|
| (28.7 | ) |
|
| (22.1 | ) | ||||
|
|
| $ | 19.6 |
|
| $ | 25.7 |
| |||||||
$ | 61,442 | $ | 72,660 | |||||||||||||
|
|
26
29
THE GREENBRIER COMPANIES, INC.
Consolidated Results
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | % Change | |||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue | $ | 559,535 | $ | 552,314 | $ | 7,221 | 1.3% |
| $ | 793.5 |
|
| $ | 450.2 |
|
| $ | 343.3 |
|
|
| 76.3 | % | |||||||||
Cost of revenue | $ | 470,221 | $ | 439,563 | $ | 30,658 | 7.0% |
| $ | 717.2 |
|
| $ | 375.0 |
|
| $ | 342.2 |
|
|
| 91.3 | % | |||||||||
Margin (%) | 16.0 | % | 20.4 | % | (4.4 | %) | * |
|
| 9.6 | % |
|
| 16.7 | % |
|
| (7.1 | %) |
| * |
| ||||||||||
Net earnings attributable to Greenbrier | $ | 26,253 | $ | 24,962 | $ | 1,291 | 5.2% |
| $ | 3.1 |
|
| $ | 19.7 |
|
| $ | (16.6 | ) |
|
| (84.3 | %) |
* 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 average 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 1.3%76.3% increase in revenue for the three months ended November 30, 2017May 31, 2022 as compared to the three months ended November 30, 2016May 31, 2021 was primarily due to a 12.0%91.6% increase in Wheels & PartsManufacturing revenue. The increase in Wheels & PartsManufacturing revenue was primarily as a result of higher wheel set and component volumes due to an increase in demand and an increase in scrap metal pricing. The increase was also attributed to a 4.9%75.0% increase in Leasing & Services revenue, which is the result of higher management services revenue from new service agreements and an increase in the sale of railcars which we had purchased from third parties with the intent to resell them.railcar deliveries.
The 7.0%91.3% increase in cost of revenue for the three months ended November 30, 2017May 31, 2022 as compared to the three months ended November 30, 2016May 31, 2021 was primarily due to a 6.8%109.1% increase in Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was primarily dueattributed to a change in product mix which had higher average labor and material content. The increase was also attributed to an 11.6%75.0% increase in Wheels & Parts cost of revenue, primarily due torailcar deliveries and higher wheel setsteel and componentother input costs associated with increased volumes.during the three months ended May 31, 2022.
Margin as a percentage of revenue was 16.0%9.6% and 20.4%16.7% for the three months ended November 30, 2017May 31, 2022 and 2016,2021, respectively. The overall margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin from 13.9% to 15.6% from 21.5%6.1% primarily attributed to more competitive pricing, a changehigher costs and inefficiencies in product mix and lower volumesour Manufacturing operations in part due to ramping up production. Many of new railcarour customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales with leases attached which typically result in higher sales prices and margins. This was partially offset by anprice to our customers. While this has no impact to our margin dollars, the increase in Leasing & Servicesrevenue and cost of sales has a negative impact to our margin to 43.9% from 37.1% as a resultpercentage of lower maintenance and transportation costs.revenue.
NetThe $16.6 million decrease in net earnings attributable to Greenbrier is impacted by our operating activities and noncontrolling interest associated with our 50/50 joint venture at one of our Mexican railcar manufacturing facilities and our 75% interest in Greenbrier-Astra Rail, both of which we consolidate for financial reporting purposes. The $1.3 million increase in net earnings for the three months ended November 30, 2017May 31, 2022 as compared to the three months ended November 30, 2016May 31, 2021 was primarily attributabledue to anthe following:
27
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | % Change | |||||||||||||
2017 | 2016 | |||||||||||||||
Revenue | $ | 451,485 | $ | 454,033 | $ | (2,548 | ) | (0.6 | %) | |||||||
Cost of revenue | $ | 380,850 | $ | 356,555 | $ | 24,295 | 6.8 | % | ||||||||
Margin (%) | 15.6 | % | 21.5 | % | (5.9 | %) | * | |||||||||
Operating profit ($) | $ | 52,969 | $ | 83,341 | $ | (30,372 | ) | (36.4 | %) | |||||||
Operating profit (%) | 11.7 | % | 18.4 | % | (6.7 | %) | * | |||||||||
Deliveries | 4,000 | 4,000 | — | 0.0 | % |
As of June 1, 2017, the Manufacturing segment included the results of Greenbrier-Astra Rail which is consolidated for financial reporting purposes.
Manufacturing revenue decreased $2.5 million or 0.6%administrative expense for the three months ended November May 31, 2022 primarily attributed to an increase in employee related costs, legal, consulting, and travel associated with increased business activity.
These were partially offset by:
30 2017
Manufacturing Segment
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(In millions, except railcar deliveries) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 650.9 |
|
| $ | 339.7 |
|
| $ | 311.2 |
|
|
| 91.6 | % |
Cost of revenue |
| $ | 611.3 |
|
| $ | 292.4 |
|
| $ | 318.9 |
|
|
| 109.1 | % |
Margin (%) |
|
| 6.1 | % |
|
| 13.9 | % |
|
| (7.8 | %) |
| * |
| |
Operating profit ($) |
| $ | 20.5 |
|
| $ | 29.1 |
|
| $ | (8.6 | ) |
|
| (29.6 | %) |
Operating profit (%) |
|
| 3.1 | % |
|
| 8.6 | % |
|
| (5.5 | %) |
| * |
| |
Deliveries |
|
| 4,900 |
|
|
| 2,800 |
|
|
| 2,100 |
|
|
| 75.0 | % |
* 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 $311.2 million or 91.6% for the three months ended May 31, 2022 compared to the three months ended November 30, 2016.May 31, 2021. The decreaseincrease in revenue was primarily attributed to a 75.0% increase in railcar deliveries. The increase was also due to the prior year including a benefit from aadditional revenue associated with an increase in steel and other input costs during the three months ended May 31, 2022, as many of our customer renegotiation fee. Excluding the impactcontracts include price escalation provisions when certain of the customer renegotiation fee, our manufacturing costs increase.
Manufacturing cost of revenue increased $318.9 million or 109.1% for the three months ended November 30, 2017 increased compared to the prior year due to the addition of our manufacturing operations in Romania as part of the formation of Greenbrier-Astra Rail and a change in product mix, partially offset by more competitive pricing in the current year.
Manufacturing cost of revenue increased $24.3 million or 6.8% for the three months ended November 30, 2017May 31, 2022 compared to the three months ended November 30, 2016.May 31, 2021. The increase in cost of revenue was primarily attributed to a change75.0% increase in product mixthe volume of railcar deliveries and higher steel and other input costs as well as inefficiencies in our Manufacturing operations in part due to ramping up production during the three months ended May 31, 2022.
Manufacturing margin as a percentage of revenue decreased 7.8% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The decrease in margin percentage for the three months ended May 31, 2022 was primarily attributed to higher costs and inefficiencies in our Manufacturing operations in part due to ramping up production. Many of our customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales price to our customers. While this has no impact to our margin dollars, the increase in revenue and cost of sales has a negative impact to our margin as a percentage of revenue. In addition, the margin percentage for three months ended May 31, 2021 benefited from a $15.8 million favorable resolution of warranty and other loss contingencies associated with our international operations.
Manufacturing operating profit decreased $8.6 million for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The decrease in operating profit was primarily attributed to the three months ended May 31, 2021 benefiting from a favorable resolution of warranty and other loss contingencies associated with our international operations. This was partially offset by an increase in railcar deliveries for the three months ended May 31, 2022.
31
Maintenance Services Segment
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 101.5 |
|
| $ | 80.9 |
|
| $ | 20.6 |
|
|
| 25.5 | % |
Cost of revenue |
| $ | 91.1 |
|
| $ | 73.7 |
|
| $ | 17.4 |
|
|
| 23.6 | % |
Margin (%) |
|
| 10.2 | % |
|
| 8.9 | % |
|
| 1.3 | % |
| * |
| |
Operating profit ($) |
| $ | 8.6 |
|
| $ | 4.2 |
|
| $ | 4.4 |
|
|
| 104.8 | % |
Operating profit (%) |
|
| 8.5 | % |
|
| 5.2 | % |
|
| 3.3 | % |
| * |
|
* 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 $20.6 million or 25.5% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase was primarily attributed to higher volumes due to increased demand. The increase was also due to higher scrap metal pricing and volumes.
Maintenance Services cost of revenue increased $17.4 million or 23.6% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase was primarily due to higher costs associated with an increase in volumes and an increase in material and labor costs.
Maintenance Services margin as a percentage of revenue increased 1.3% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase in margin percentage was primarily attributed to an increase in scrap metal pricing. This was partially offset by higher material and labor costs during the three months ended May 31, 2022.
Maintenance Services operating profit increased $4.4 million or 104.8% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase in operating profit was primarily attributed to higher volumes and an increase in scrap metal pricing. This was partially offset by higher material and labor costs during the three months ended May 31, 2022.
32
Leasing & Management Services Segment
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 41.1 |
|
| $ | 29.6 |
|
| $ | 11.5 |
|
|
| 38.9 | % |
Cost of revenue |
| $ | 14.8 |
|
| $ | 8.9 |
|
| $ | 5.9 |
|
|
| 66.3 | % |
Margin (%) |
|
| 64.0 | % |
|
| 69.9 | % |
|
| (5.9 | %) |
| * |
| |
Operating profit ($) |
| $ | 19.2 |
|
| $ | 14.5 |
|
| $ | 4.7 |
|
|
| 32.4 | % |
Operating profit (%) |
|
| 46.7 | % |
|
| 49.0 | % |
|
| (2.3 | %) |
| * |
|
* Not meaningful
Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet which hadincludes GBX Leasing, 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 $11.5 million or 38.9% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase was primarily attributed to higher average laborsyndication revenue from an increase in the volume of new railcar sales with leases attached and material content.higher interim rent on leased railcars for syndication.
ManufacturingLeasing & Management Services cost of revenue increased $5.9 million or 66.3% for the three months ended May 31, 2022 compared to the three months ended May 31, 2021. The increase was primarily due to higher costs from the additions to our lease fleet.
Leasing & Management Services margin as a percentage of revenue decreased 5.9% for the three months ended November 30, 2017May 31, 2022 compared to the three months ended November 30, 2016. The decrease was primarily attributed to more competitive pricing, change in product mix and lower volumes of new railcar sales with leases attached which typically result in higher sales prices and margins.May 31, 2021. The decrease in margin percentage was alsoprimarily attributed to the prior year including a benefit fromassociated with a customer renegotiationlease transfer fee receivedon previously syndicated railcars during the three months ended November 30, 2016.May 31, 2021. This was partially offset by higher syndication activity during the three months ended May 31, 2022.
ManufacturingLeasing & Management Services operating profit decreased $30.4increased $4.7 million or 36.4% for the three months ended November 30, 2017May 31, 2022 compared to the three months ended November 30, 2016.May 31, 2021. The decreaseincrease was primarily attributed to lower margins from more competitive pricing, a change in product mixhigher syndication activity.
33
Selling and increased costs associated with expanded international operations.Administrative Expense
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Selling and administrative expense |
| $ | 57.4 |
|
| $ | 49.3 |
|
| $ | 8.1 |
|
|
| 16.4 | % |
28
THE GREENBRIER COMPANIES, INC.
Wheels & Parts Segment
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | % Change | |||||||||||||
2017 | 2016 | |||||||||||||||
Revenue | $ | 78,011 | $ | 69,635 | $ | 8,376 | 12.0 | % | ||||||||
Cost of revenue | $ | 72,506 | $ | 64,978 | $ | 7,528 | 11.6 | % | ||||||||
Margin (%) | 7.1 | % | 6.7 | % | 0.4 | % | * | |||||||||
Operating profit ($) | $ | 2,418 | $ | 2,894 | $ | (476 | ) | (16.4 | %) | |||||||
Operating profit (%) | 3.1 | % | 4.2 | % | (1.1 | %) | * |
Wheels & Parts revenue increased $8.4Selling and administrative expense was $57.4 million or 12.0%7.2% of revenue for the three months ended November 30, 2017May 31, 2022 compared to $49.3 million or 11.0% of revenue for the prior comparable period. The $8.1 million increase was primarily attributed to an increase in employee related costs, legal, consulting, and travel associated with increased business activity.
Net Gain (Loss) on Disposition of Equipment
Net gain (loss) on disposition of equipment primarily 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 accommodate customer demand and to manage risk and liquidity.
Net gain on disposition of equipment was $0.7 million for the three months ended May 31, 2022 compared to net loss on disposition of equipment of $0.2 million for the three months ended May 31, 2021.
Interest and Foreign Exchange
Interest and foreign exchange expense was composed of the following:
|
| Three Months Ended |
|
| Increase |
| ||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
| |||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
| |||
Interest and other expense |
| $ | 15.4 |
|
| $ | 10.9 |
|
| $ | 4.5 |
|
Foreign exchange gain |
|
| (0.5 | ) |
|
| (0.7 | ) |
|
| 0.2 |
|
|
| $ | 14.9 |
|
| $ | 10.2 |
|
| $ | 4.7 |
|
The $4.7 million increase in interest and foreign exchange expense for the three months ended May 31, 2022 compared to the three months ended November 30, 2016.May 31, 2021 was primarily attributed to an increase in interest expense from higher levels of borrowings.
Net Loss on Extinguishment of Debt
Net loss on extinguishment of debt was $4.8 million for the three months ended May 31, 2021, which relates to the retirement of $207.1 million of our 2.875% convertible notes due 2024 and $50 million of our 2.25% convertible notes due 2024.
Income Tax
For the three months ended May 31, 2022, we had income tax expense of $1.1 million on pre-tax income of $4.7 million for an effective tax rate of 23%. 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 by adjustments that are required to be reported in the quarter.
34
For the three months ended May 31, 2021, we had an income tax benefit of $6.9 million on pre-tax income of $10.7 million. The tax benefit for the three months ended May 31, 2021 primarily related to accelerated depreciation and the impact of the CARES Act which allows us to carry back tax losses to years when tax rates were higher, resulting in a tax benefit.
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 (loss) before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax (expense) benefit.
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 was $4.0 million and $2.4 million for the three months ended May 31, 2022 and 2021, respectively. The increase was primarily related to higher profitability at our Brazil operations.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $4.5 million and $0.3 million for the three months ended May 31, 2022 and 2021, respectively. Net earnings 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.
35
Nine Months Ended May 31, 2022 Compared to the Nine Months Ended May 31, 2021
Overview
Revenue, Cost of revenue, Margin and Earnings (loss) from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
| Nine Months Ended |
| |||||
(in millions, except per share amounts) |
| 2022 |
|
| 2021 |
| ||
Revenue: |
|
|
|
|
|
| ||
Manufacturing |
| $ | 1,659.1 |
|
| $ | 845.7 |
|
Maintenance Services |
|
| 260.5 |
|
|
| 218.1 |
|
Leasing & Management Services |
|
| 107.4 |
|
|
| 85.0 |
|
|
|
| 2,027.0 |
|
|
| 1,148.8 |
|
Cost of revenue: |
|
|
|
|
|
| ||
Manufacturing |
|
| 1,567.9 |
|
|
| 775.1 |
|
Maintenance Services |
|
| 244.0 |
|
|
| 203.4 |
|
Leasing & Management Services |
|
| 36.4 |
|
|
| 36.8 |
|
|
|
| 1,848.3 |
|
|
| 1,015.3 |
|
Margin: |
|
|
|
|
|
| ||
Manufacturing |
|
| 91.2 |
|
|
| 70.6 |
|
Maintenance Services |
|
| 16.5 |
|
|
| 14.7 |
|
Leasing & Management Services |
|
| 71.0 |
|
|
| 48.2 |
|
|
|
| 178.7 |
|
|
| 133.5 |
|
Selling and administrative |
|
| 156.4 |
|
|
| 136.4 |
|
Net gain on disposition of equipment |
|
| (34.3 | ) |
|
| (0.8 | ) |
Earnings (loss) from operations |
|
| 56.6 |
|
|
| (2.1 | ) |
Interest and foreign exchange |
|
| 39.3 |
|
|
| 30.9 |
|
Net loss on extinguishment of debt |
|
| — |
|
|
| 4.8 |
|
Earnings (loss) before income taxes and earnings from |
|
| 17.3 |
|
|
| (37.8 | ) |
Income tax (expense) benefit |
|
| (2.9 | ) |
|
| 36.0 |
|
Earnings (loss) before earnings from unconsolidated affiliates |
|
| 14.4 |
|
|
| (1.8 | ) |
Earnings from unconsolidated affiliates |
|
| 10.0 |
|
|
| 1.3 |
|
Net earnings (loss) |
|
| 24.4 |
|
|
| (0.5 | ) |
Net loss attributable to noncontrolling interest |
|
| 2.3 |
|
|
| 1.2 |
|
Net earnings attributable to Greenbrier |
| $ | 26.7 |
|
| $ | 0.7 |
|
Diluted earnings per common share |
| $ | 0.79 |
|
| $ | 0.02 |
|
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) benefit for either external or internal reporting purposes.
|
| Nine Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Operating profit (loss): |
|
|
|
|
|
| ||
Manufacturing |
| $ | 34.6 |
|
| $ | 16.7 |
|
Maintenance Services |
|
| 10.4 |
|
|
| 6.4 |
|
Leasing & Management Services |
|
| 84.0 |
|
|
| 31.7 |
|
Corporate |
|
| (72.4 | ) |
|
| (56.9 | ) |
|
| $ | 56.6 |
|
| $ | (2.1 | ) |
36
Consolidated Results
|
| Nine Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 2,027.0 |
|
| $ | 1,148.8 |
|
| $ | 878.2 |
|
|
| 76.4 | % |
Cost of revenue |
| $ | 1,848.3 |
|
| $ | 1,015.3 |
|
| $ | 833.0 |
|
|
| 82.0 | % |
Margin (%) |
|
| 8.8 | % |
|
| 11.6 | % |
|
| (2.8 | %) |
| * |
| |
Net earnings attributable to Greenbrier |
| $ | 26.7 |
|
| $ | 0.7 |
|
| $ | 26.0 |
|
| * |
|
* 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 average 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 76.4% increase in revenue for the nine months ended May 31, 2022 as compared to the nine months ended May 31, 2021 was primarily due to a 96.2% increase in Manufacturing revenue. The increase in Manufacturing revenue was primarily attributed to an 80.6% increase in railcar deliveries.
The 82.0% increase in cost of revenue for the nine months ended May 31, 2022 as compared to the nine months ended May 31, 2021 was primarily due to a 102.3% increase in Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was primarily attributed to an 80.6% increase in railcar deliveries and higher steel and other input costs during the nine months ended May 31, 2022.
Margin as a resultpercentage of revenue was 8.8% and 11.6% for the nine months ended May 31, 2022 and 2021, respectively. The overall margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin from 8.3% to 5.5% primarily attributed to higher wheel setcosts and inefficiencies in our Manufacturing operations in part due to ramping up production. Many of our customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales price to our customers. While this has no impact to our margin dollars, the increase in revenue and cost of sales has a negative impact to our margin as a percentage of revenue.
The $26.0 million increase in net earnings attributable to Greenbrier for the nine months ended May 31, 2022 as compared to the nine months ended May 31, 2021 was primarily due to the following:
These were partially offset by:
37
Manufacturing Segment
|
| Nine Months Ended |
|
| Increase |
|
| % |
| |||||||
(In millions, except railcar deliveries) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 1,659.1 |
|
| $ | 845.7 |
|
| $ | 813.4 |
|
|
| 96.2 | % |
Cost of revenue |
| $ | 1,567.9 |
|
| $ | 775.1 |
|
| $ | 792.8 |
|
|
| 102.3 | % |
Margin (%) |
|
| 5.5 | % |
|
| 8.3 | % |
|
| (2.9 | %) |
| * |
| |
Operating profit ($) |
| $ | 34.6 |
|
| $ | 16.7 |
|
| $ | 17.9 |
|
|
| 107.2 | % |
Operating profit (%) |
|
| 2.1 | % |
|
| 2.0 | % |
|
| 0.1 | % |
| * |
| |
Deliveries |
|
| 13,000 |
|
|
| 7,200 |
|
|
| 5,800 |
|
|
| 80.6 | % |
* 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 $813.4 million or 96.2% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase in revenue was primarily attributed to an 80.6% increase in railcar deliveries. The increase was also due to the additional revenue associated with an increase in steel and other input costs during the nine months ended May 31, 2022, as many of our customer contracts include price escalation provisions when certain of our manufacturing costs increase.
Manufacturing cost of revenue increased $792.8 million or 102.3% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase in cost of revenue was primarily attributed to an 80.6% increase in the volume of railcar deliveries and higher steel and other input costs as well as inefficiencies in our Manufacturing operations in part due to ramping up production during the nine months ended May 31, 2022.
Manufacturing margin as a percentage of revenue decreased 2.9% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The decrease in margin percentage for the nine months ended May 31, 2022 was primarily attributed to higher costs and inefficiencies in our Manufacturing operations in part due to ramping up production. Many of our customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales price to our customers. While this has no impact to our margin dollars, the increase in revenue and cost of sales has a negative impact to our margin as a percentage of revenue. In addition, the margin percentage for nine months ended May 31, 2021 benefited from a $15.8 million favorable resolution of warranty and other loss contingencies associated with our international operations.
Manufacturing operating profit increased $17.9 million for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase in operating profit was primarily attributed to an increase in railcar deliveries.
38
Maintenance Services Segment
|
| Nine Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 260.5 |
|
| $ | 218.1 |
|
| $ | 42.4 |
|
|
| 19.4 | % |
Cost of revenue |
| $ | 244.0 |
|
| $ | 203.4 |
|
| $ | 40.6 |
|
|
| 20.0 | % |
Margin (%) |
|
| 6.3 | % |
|
| 6.7 | % |
|
| (0.4 | %) |
| * |
| |
Operating profit ($) |
| $ | 10.4 |
|
| $ | 6.4 |
|
| $ | 4.0 |
|
|
| 62.5 | % |
Operating profit (%) |
|
| 4.0 | % |
|
| 2.9 | % |
|
| 1.1 | % |
| * |
|
* 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 $42.4 million or 19.4% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase was primarily attributed to higher volumes due to an increase inincreased demand and an increase in scrap metal pricing. These were partially offset by a decrease in parts volume.pricing and volume as we scrap wheels and other components.
Wheels & PartsMaintenance Services cost of revenue increased $7.5$40.6 million or 11.6%20.0% for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016.May 31, 2021. The increase was primarily attributeddue to higher wheel set and component costs associated with increased volumes. This was partially offset by a decreasean increase in parts volume.volumes and an increase in material and labor costs.
Wheels & PartsMaintenance Services margin as a percentage of revenue increaseddecreased 0.4% for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016.May 31, 2021. The increasedecrease in margin percentage was primarily attributed to higher wheel setmaterial and componentlabor costs during the nine months ended May 31, 2022. This was partially offset by an increase in scrap metal pricing.
Maintenance Services operating profit increased $4.0 million or 62.5% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase in operating profit was primarily attributed to higher volumes and an increase in scrap metal pricing. This was partially offset by a less favorable parts product mix.
Wheels & Parts operating profit decreased $0.5 million or 16.4% forhigher material and labor costs during the threenine months ended November 30, 2017 compared to the three months ended November 30, 2016. The decrease was primarily attributed to a $0.5 million net loss on disposition of equipment in the current year compared to a $0.2 million net gain on disposition of equipment in the prior year. This was partially offset by an increase in margin due to higher wheel set and component volumes and an increase in scrap metal pricing.May 31, 2022.
29
39
THE GREENBRIER COMPANIES, INC.
Leasing & Management Services Segment
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | % Change | |||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||||||
|
| Nine Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue | $ | 30,039 | $ | 28,646 | $ | 1,393 | 4.9 | % |
| $ | 107.4 |
|
| $ | 85.0 |
|
| $ | 22.4 |
|
|
| 26.4 | % | ||||||||
Cost of revenue | $ | 16,865 | $ | 18,030 | $ | (1,165 | ) | (6.5 | %) |
| $ | 36.4 |
|
| $ | 36.8 |
|
| $ | (0.4 | ) |
|
| (1.1 | %) | |||||||
Margin (%) | 43.9 | % | 37.1 | % | 6.8 | % | * |
|
| 66.1 | % |
|
| 56.7 | % |
|
| 9.4 | % |
| * |
| ||||||||||
Operating profit ($) | $ | 28,190 | $ | 7,390 | $ | 20,800 | 281.5 | % |
| $ | 84.0 |
|
| $ | 31.7 |
|
| $ | 52.3 |
|
|
| 165.0 | % | ||||||||
Operating profit (%) | 93.8 | % | 25.8 | % | 68.0 | % | * |
|
| 78.2 | % |
|
| 37.3 | % |
|
| 40.9 | % |
| * |
|
The* Not meaningful
Our Leasing & Management Services segment primarily generates revenue from leasing railcars from itsour lease fleet andwhich includes GBX Leasing, providing various management services. From timeservices, syndication revenue associated with leases attached to time,new railcar sales, interim rent on leased railcars arefor syndication and the sale of railcars purchased from third parties with the intent to resell them.resell. The gross proceeds from the sale of these railcars are recorded in revenue and the costcosts of purchasing these railcars are recorded in cost of revenue.
Leasing & Management Services revenue increased $1.4$22.4 million or 4.9%26.4% for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016.May 31, 2021. The increase was primarily attributed to higher management servicessyndication revenue from new service agreements and an increase in the volume of new railcar sales with leases attached and higher leasing revenue primarily from additions to our fleet. These were partially offset by a decrease in the sale of railcars which we had purchased from third parties with the intent to resell them.resell.
Leasing & Management Services cost of revenue decreased $1.2$0.4 million or 6.5%1.1% for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016.May 31, 2021. The decrease was primarily due to lower maintenance and transportation costs.volumes of railcars sold that we purchased from third parties. This was partially offset by an increase in costs from the additions to our lease fleet.
Leasing & Management Services margin as a percentage of revenue increased 6.8%9.4% for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016.May 31, 2021. The increase in margin percentage was primarily attributed to higher syndication activity. In addition, the margin percentage for the nine months ended May 31, 2021 was negatively impacted by higher sales of railcars that we purchased from third parties which have lower margin percentages.
Leasing & Management Services operating profit increased $52.3 million or 165% for the nine months ended May 31, 2022 compared to the nine months ended May 31, 2021. The increase was primarily attributed to lower maintenance and transportation costs. This was partially offset by a lower margin percentage on the sale of railcars purchased from third parties.
Leasing & Services operating profit increased $20.8 million or 281.5% for the three months ended November 30, 2017 compared to the three months ended November 30, 2016. The increase was primarily attributed to an $18.7 million increase inhigher net gain on disposition of equipment and a $2.6 million increase in margin. The net gain on disposition of equipment for the three months ended November 30, 2017 relates to higher volumes of equipment sales as we rebalance our lease portfolio. syndication activity.
The percentage of owned units on lease was 91.8% at November 30, 2017 compared to 94.2% at November 30, 2016.
3040
THE GREENBRIER COMPANIES, INC.
GBW Joint Venture Segment
GBW, an unconsolidated 50/50 joint venture, generated total revenue of $58.0 million and $70.3 million for the three months ended November 30, 2017 and 2016, respectively. The decrease in revenue of $12.3 million and 17.5% was primarily due to a decrease in the volume of repair work.
GBW margin as a percentage of revenue for the three months ended November 30, 2017 was negative 4.6% compared to negative 0.5% for the three months ended November 30, 2016. The decrease in margin percentage was primarily due to inefficiencies of operating at lower volumes of repair work.
To reflect our 50% share of GBW’s net results, we recorded a loss of $1.6 million and $1.4 million in Loss from unconsolidated affiliates for the three months ended November 30, 2017 and 2016, respectively.
Selling and Administrative Expense
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | % Change | |||||||||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||||||||||
|
| Nine Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Selling and administrative expense | $ | 47,043 | $ | 41,213 | $ | 5,830 | 14.1 | % |
| $ | 156.4 |
|
| $ | 136.4 |
|
| $ | 20.0 |
|
|
| 14.7 | % |
Selling and administrative expense was $47.0$156.4 million or 8.4%7.7% of revenue for the threenine months ended November 30, 2017May 31, 2022 compared to $41.2$136.4 million or 7.5%11.9% of revenue for the prior comparable period. The $5.8$20.0 million increase was primarily attributed to $2.6 million from the addition of Astra Rail’s sellinghigher costs for legal, consulting and administrative costs, a $2.1 million increase in consulting, legal and related costs primarilytravel associated with litigation, strategicincreased business development and IT initiatives and a $1.0 millionactivity. The increase inwas also attributed to higher employee related costs.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment was $19.2 million for the three months ended November 30, 2017 compared to $1.1 million for the prior comparable period.
Net gain on disposition of equipmentprimarily includes the sale of assets from our lease fleet (Equipment on operating leases, net) thatand disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to take advantage of market conditionsaccommodate customer demand and to manage risk and liquidity and disposition of property, plant and equipment. The netliquidity.
Net gain on disposition of equipment was $34.3 million and $0.8 million for the threenine months ended November 30, 2017 primarily relates to higher volumesMay 31, 2022 and 2021, respectively. The increase in Net gain on disposition of equipment was primarily attributed to sales as we rebalanceof assets from our lease portfolio.fleet during the nine months ended May 31, 2022.
Other CostsInterest and Foreign Exchange
Interest and foreign exchange expense was composed of the following:
(In thousands) | Three Months Ended November 30, | Increase (Decrease) | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||||
|
| Nine Months Ended |
|
| Increase |
| ||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
| |||||||||||||||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest and other expense | $ | 7,964 | $ | 3,862 | $ | 4,102 |
| $ | 38.7 |
|
| $ | 31.3 |
|
| $ | 7.4 |
| ||||||
Foreign exchange gain | (944 | ) | (2,138 | ) | 1,194 | |||||||||||||||||||
Foreign exchange (gain) loss |
|
| 0.6 |
|
|
| (0.4 | ) |
|
| 1.0 |
| ||||||||||||
|
|
|
| $ | 39.3 |
|
| $ | 30.9 |
|
| $ | 8.4 |
| ||||||||||
$ | 7,020 | $ | 1,724 | $ | 5,296 | |||||||||||||||||||
|
|
|
The $5.3$8.4 million increase in interest and foreign exchange expense fromfor the prior comparable periodnine months ended May 31, 2022 compared to the nine months ended May 31, 2021 was primarily attributed to an increase in interest expense associated withfrom higher levels of borrowings and interest rates.
Net Loss on Extinguishment of Debt
Net loss on extinguishment of debt was $4.8 million for the nine months ended May 31, 2021, which relates to the retirement of $207.1 million of our $275 million2.875% convertible senior notes due 2024 whichand $50 million of our 2.25% convertible notes due 2024.
Income Tax
For the nine months ended May 31, 2022, we issued in February 2017had income tax expense of $2.9 million on pre-tax income of $17.3 million for an effective tax rate of 17%. 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 additional interest expense duemay be positively or negatively by adjustments that are required to the addition of Astra Rail. In addition, the overall increase was attributed to lower foreign exchange gain of $1.0 millionbe reported in the current year compared to a $2.1quarter. Tax expense for the nine months ended May 31, 2022 included net favorable discrete items.
41
For the nine months ended May 31, 2021, we had an income tax benefit of $36.0 million gain in the prior comparable period. The $1.2 million decrease in foreign exchange gain was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.
31
THE GREENBRIER COMPANIES, INC.
Income Tax
on pre-tax loss of $37.8 million. The tax ratebenefit for the threenine months ended November 30, 2017 was 33.3% comparedMay 31, 2021 primarily related to 28.7% for the three months ended November 30, 2016. The increase in the tax rate was primarily attributable toaccelerated depreciation and the impact of discrete items.
the CARES Act which allows us to carry back to years when tax rates were higher, resulting in a tax benefit. The tax benefit is derived from the US Federal tax rate also fluctuatesperiod-to-perioddifferential between the 2016 tax rate of 35% and our current rate of 21%.
The effective tax rate can fluctuate year-to-year due to changes in the projected mix of foreign and domesticpre-tax earnings and due to other discrete tax items booked within the interim period. In particular it fluctuates earnings. It can also fluctuate with changes in the proportion of projectedpre-tax earnings attributable to our Mexican railcar manufacturing joint venture because theventure. The joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnership’s entirepre-tax earnings are included in Earningsearnings (loss) before income taxes and lossearnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.(expense) benefit.
LossEarnings From Unconsolidated Affiliates
Loss fromThrough unconsolidated affiliates primarily included our share ofafter-taxwe produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from our GBW joint venture, our Brazil operations which include a castings joint venture and a railcar manufacturing joint venture, our leasing warehouse investment, our castings joint venture and our tank head joint venture.these unconsolidated affiliates on an after-tax basis.
LossEarnings from unconsolidated affiliates was $2.9$10.0 million and $1.3 million for the threenine months ended November 30, 2017 compared to $2.6 million for the three months ended November 30, 2016.May 31, 2022 and 2021, respectively. The $0.3 million increase in loss from unconsolidated affiliates was primarily attributedrelated to losseshigher profitability at GBW due to lower repair volumes and our increased ownership stake in our Brazil operations which operated at a loss.operations.
Noncontrolling Interest
Net earningsloss attributable to noncontrolling interest was $7.1$2.3 million and $1.2 million for the threenine months ended November 30, 2017 comparedMay 31, 2022 and 2021, respectively. Net loss attributable to $23.0 millionnoncontrolling interest primarily represents our joint venture partner's share in the prior comparable period. These amounts primarily represent our Mexican partner’s share of the results of operations of our Mexican railcar manufacturing joint venture,ventures, adjusted for intercompany sales. The three months ended November 30, 2017 also includedsales, and our European partner’s share of the results of Greenbrier-Astra Rail. The decrease of $15.9 million from the prior year is primarily a result of a decrease in the volume of railcar deliveries and lower margins at our Mexican railcar manufacturing joint venture.European operations.
32
42
THE GREENBRIER COMPANIES, INC.
Liquidity and Capital Resources
Three Months Ended November 30, | ||||||||
(In thousands) | 2017 | 2016 | ||||||
Net cash provided by (used in) operating activities | $ | (39,654 | ) | $ | 31,826 | |||
Net cash provided by investing activities | 45,220 | 12,242 | ||||||
Net cash used in financing activities | (23,890 | ) | (24,366 | ) | ||||
Effect of exchange rate changes | (1,736 | ) | (8,591 | ) | ||||
|
|
|
| |||||
Net increase (decrease) in cash and cash equivalents | $ | (20,060 | ) | $ | 11,111 | |||
|
|
|
|
|
| Nine Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (328.4 | ) |
| $ | (123.8 | ) |
Net cash used in investing activities |
|
| (96.1 | ) |
|
| (49.3 | ) |
Net cash provided by (used in) financing activities |
|
| 199.0 |
|
|
| (42.0 | ) |
Effect of exchange rate changes |
|
| 19.9 |
|
|
| 9.9 |
|
Decrease in cash and cash equivalents and restricted cash |
| $ | (205.6 | ) |
| $ | (205.2 | ) |
We have been financed through cash generated from operations and borrowings. At November 30, 2017,May 31, 2022 cash and cash equivalents and restricted cash were $591.4$465.8 million, a decrease of $20.1$205.6 million from $611.5$671.4 million at August 31, 2017.2021.
Cash Flows From Operating Activities
The change in cash provided byused in operating activities for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016May 31, 2021 was primarily due to a net changeincrease in working capital lower earningsassociated with increased production rates and an increase in net gain on disposition of equipment.from higher steel and other input costs.
Cash Flows From Investing Activities
Cash used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets.assets and investment activity with our unconsolidated affiliates. The change in cash used in investing activities for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016May 31, 2021 was primarily attributable to higheran increase in capital expenditures due to additions to our lease fleet as part of our leasing strategy, partially offset by an increase in proceeds from the sale of assets partially offset by an increase in capital expenditures and a change in restricted cash.compared to the prior year.
|
| Nine Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Capital expenditures: |
|
|
|
|
|
| ||
Leasing & Management Services |
| $ | 219.4 |
|
| $ | 41.6 |
|
Manufacturing |
|
| 25.4 |
|
|
| 14.9 |
|
Maintenance Services |
|
| 4.0 |
|
|
| 6.4 |
|
Total capital expenditures (gross) |
| $ | 248.8 |
|
| $ | 62.9 |
|
Proceeds from sales of assets |
|
| (155.1 | ) |
|
| (12.2 | ) |
Total capital expenditures (net of proceeds) |
| $ | 93.7 |
|
| $ | 50.7 |
|
Capital expenditures totaled $29.9 million and $12.6 million for the three months ended November 30, 2017 and 2016, respectively. Manufacturing capital expenditures were approximately $10.4 million and $9.0 million for the three months ended November 30, 2017 and 2016, respectively. Capital expenditures for Manufacturing are expected to be approximately $70 million in 2018 and primarily relate to enhancementsadditions to our lease fleet and on-going investments into the safety and productivity of our existing manufacturing facilities. Wheels & Parts capital expenditures were approximately $0.4 million and $1.2 million for the three months ended November 30, 2017 and 2016, respectively. Capital expenditures for Wheels & Parts are expected to be approximately $5 million in 2018 for maintenance and enhancements of our existing facilities. Leasing & Services and corporate capital expenditures were approximately $19.1 million and $2.4 million for the three months ended November 30, 2017 and 2016, respectively. Leasing & Services and corporate capital expenditures for 2018 are expected to be approximately $120 million. Proceeds from salesthe sale of leased railcar equipment are expected to be $150 million for 2018. The asset additions and dispositions for Leasing & Services in 2018assets primarily relate to higher volumessales of equipment purchases and sales as we rebalancerailcars from our lease portfolio.fleet within Leasing & Management Services. Assets from our lease fleet are periodically sold in the normal course of business in order to take advantage of market conditionsaccommodate customer demand and to manage risk and liquidity.
Proceeds from the salesales of assets whichare expected to be approximately $155 million for 2022.
Capital expenditures for 2022 are expected to be approximately $310 million for Leasing & Management Services, approximately $50 million for Manufacturing and approximately $10 million for Maintenance Services. Capital expenditures for 2022 primarily relatedrelate to sales of railcars fromadditions to our lease fleet within Leasing & Services, were approximately $75.1 millionreflecting our enhanced leasing strategy and $9.2 million forcontinued investments into the three months ended November 30, 2017safety and 2016, respectively. Proceeds from the saleproductivity of assets for the three months ended November 30, 2016 included approximately $7.7 million of equipment sold pursuant to sale leaseback transactions. The gain resulting from the sale leaseback transactions was deferred and is being recognized over the lease term in Net gain on disposition of equipment.our facilities.
Cash Flows From Financing Activities
The change in cash used inprovided by (used in) financing activities for the threenine months ended November 30, 2017May 31, 2022 compared to the threenine months ended November 30, 2016May 31, 2021 was primarily attributed to proceeds from debt, net activities with joint venture partnersof repayments. During the nine months ended May 31, 2022 we issued asset backed securities of $323.3 million, and timing of when dividends were paid.used proceeds to pay down our credit facility for GBX Leasing.
43
Dividend & Share Repurchase Program
A quarterly dividend of $0.23$0.27 per share was declared on January 4, 2018.July 6, 2022.
The Board of Directors has authorized our company to repurchase in aggregate up to $225 millionshares of our common stock. We didThe share repurchase program has an expiration date of January 31, 2023. The amount remaining for repurchase was $100.0 million as of May 31, 2022. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time to time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The program may be modified, suspended or discontinued at any time without prior notice. The share repurchase program does not repurchaseobligate us to acquire any specific number of shares during the three months ended November 30, 2017. As of November 30, 2017, we had cumulativelyin any period. There were no shares repurchased 3,206,226 shares for approximately $137.0 million since October 2013 and had $88.0 million available under the share repurchase program with an expiration dateduring the nine months ended May 31, 2022 and 2021.
Cash, Borrowing Availability and Credit Facilities
As of MarchMay 31, 2019.2022, we had $449.7 million in Cash and cash equivalents and $85.0 million in available borrowings. Our current cash balance is part of our strategy to maintain strong liquidity to respond to current uncertainties.
33
THE GREENBRIER COMPANIES, INC.
Senior secured credit facilities, consisting of threefour components, aggregated to $626.7 million$1.1 billion as of November 30, 2017.May 31, 2022. We had an aggregate of $358.8$85.0 million available to draw down under committed credit facilities as of November 30, 2017.May 31, 2022. This amount consists of $289.0$34.6 million available on the North American credit facility, $19.8$15.4 million on the European credit facilities and $50.0$35.0 million on the Mexican railcar manufacturing joint venture credit facilities.
As of November 30, 2017,May 31, 2022, a $550.0$600.0 million revolving line of credit, maturing October 2020,August 2026, secured by substantially all of our U.S. assets in the U.S. not otherwise pledged as security for term loans was availableor the warehouse credit facility, existed to provide working capital and interim financing of equipment, principally for theour U.S. and Mexican operations. Advances under this North American credit facility bear interest at LIBOR plus 1.75%1.50% or Prime plus 0.75%0.50% 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.
As of November 30, 2017,May 31, 2022, a $350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing, a joint venture in which we own approximately 95%. Advances under this facility bear interest at LIBOR plus 2.0%. The warehouse credit facility converts to a term loan in April 2023 and matures in April 2025.
As of May 31, 2022, lines of credit totaling $26.7$73.7 million secured by certain of our European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3%1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.9%1.1%, were available for working capital needs of our European manufacturing operation.operations. The European lines of credit include $35.4 million which are guaranteed by us. European credit facilities are continually beingregularly renewed. Currently, these European credit facilities have maturities that range from February 2018July 2022 through June 2019.October 2023.
As of November 30, 2017,May 31, 2022, our Mexican railcar manufacturing joint ventureoperations had twofour lines of credit totaling $50.0 million.$120.0 million for working capital needs. The first line of credit provides up to $30.0 million and is fully guaranteed by us and our joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to $20.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%3.75% to 4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.June 2024. The second line of credit provides up to $35.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 3.70%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2023. The third 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 fourth line of credit provides up to $5.0 million and matures in September 2022. Advances under this facility bear interest at LIBOR plus 2.95%.
As of November 30, 2017, outstanding
44
Credit facility balances:
(in millions) |
| May 31, |
|
| August 31, |
| ||
|
|
|
|
|
|
| ||
North America |
| $ | 160.0 |
|
| $ | 160.0 |
|
Mexico |
|
| 85.0 |
|
|
| 15.0 |
|
Europe |
|
| 58.3 |
|
|
| 50.2 |
|
GBX Leasing |
|
| - |
|
|
| 147.0 |
|
Total Revolving notes |
| $ | 303.3 |
|
| $ | 372.2 |
|
Outstanding commitments under the senior secured credit facilities consisted of $75.4 million in letters of credit under our North American credit facility andincluded letters of credit which totaled $6.9 million outstanding under our European credit facilities.and $8.4 million as of May 31, 2022 and August 31, 2021, respectively.
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 capitalfinancing 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 November 30, 2017,May 31, 2022, 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 counterpartynon-performance.
34To 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 $408.2 million of variable rate debt to fixed rate debt as of May 31, 2022.
As of November 30, 2017, we had a $36.5 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net. We are likely to make additional capital contributions or loans to GBW, an unconsolidated 50/50 joint venture, in the future.
As of November 30, 2017, we had a $10.0 million note receivable from Amsted-Maxion Cruzeiro, our unconsolidated Brazilian castings and components manufacturer and a $9.2 million note receivable balance from Greenbrier-Maxion, our unconsolidated Brazilian railcar manufacturer. These note receivables are included on the Consolidated Balance Sheet in Accounts receivable, net. In the future, we may make loans to or provide guarantees for Amsted-Maxion Cruzeiro or Greenbrier-Maxion.
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, a €30 million payment in June 2018 as consideration for the Greenbrier-Astra Rail transaction, 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.
3545
THE GREENBRIER COMPANIES, INC.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting 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.
Income taxes- ForThe 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 reporting purposes,statement and income tax expense is estimated based on amounts anticipated to be reported on tax return filings. Those anticipated amounts may change from when the financial statements are prepared to when the tax returns are filed. Further, because tax filings are subject to review by taxing authorities, there is risk that a position taken in preparation of a tax return may be challenged by a taxing authority. If a challenge is successful, differences in tax expense or between current and deferred tax items may arise in future periods. Any material effect of such differences would be reflected in the financial statements when management considers the effect more likely than not of occurring and the amount reasonably estimable.reporting purposes. Valuation allowances reduce deferred tax assets to amountsan amount that will more likely than not be realized. We recognize liabilities for uncertain tax positions based on whether evidence indicates that it is more likely than not that the position will be realized basedsustained on information available whenaudit.
It is inherently difficult 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. Should a change in circumstances lead to a change in judgment about the financial statements are prepared. This information may include estimatesrealizability of deferred tax assets in future income and other assumptions that are inherently uncertain.
Maintenance obligations - We are responsible for maintenance on a portion ofyears, the managed and owned lease fleet under the terms of maintenance obligations definedCompany would adjust related valuation allowances in the underlying leaseperiod that the change in circumstances occurs, along with a corresponding increase or management agreement. The estimated maintenance liability is based on maintenance histories for each type and agecharge to income. Changes in tax law or court interpretations may result in the recognition of railcar. These estimates involve judgment asa tax benefit or an additional charge to the future costs of repairs and the types and timing of repairs required over the lease term. As we cannot predict with certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could be materially different from maintenance requirements. The liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. These adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements.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. For 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.
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. If further developments in or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. 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.
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THE GREENBRIER COMPANIES, INC.
Revenue recognitionGoodwill - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Railcars are generally manufactured, repaired or refurbished and wheels and parts produced under firm orders from third parties. Revenue is recognized when these products or services are completed, accepted by an unaffiliated customer and contractual contingencies removed. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears; however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual when reported to us. These estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar. Adjustments to actual have historically not been significant. Revenue from the construction of marine barges is either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition. Under the percentage of completion method, revenue is recognized based on the progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. Under the completed contract method, revenue is not recognized until the project has been fully completed.
We will periodically sell railcarsIn accordance with leases attached to financial investors. Revenue and cost of revenue associated with railcars that the Company has manufactured are recognized in Manufacturing once sold. Revenue and cost of revenue associated with railcars which were obtained from a third party with the intent to resell them which are subsequently sold are recognized in Leasing & Services. In addition we will often perform management or maintenance services at market rates for these railcars. Pursuant to the guidance in Accounting Standards Codification (ASC)840-20-40, we evaluate the terms of any remarketing agreements Topic 350, Intangibles–Goodwill and any contractual provisions that represent retained risk and the level of retained risk based on those provisions. We determine whether the level of retained risk exceeds 10% of the individual fair value of the railcars with leases attached that are delivered. If retained risk exceeded 10%Other (ASC 350), the transaction would not be recognized as a sale until such time as the retained risk declined to 10%Company evaluates goodwill for possible impairment annually or less. For any contracts with multiple elements (i.e. railcars, maintenance, management services, etc.) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we will use the element’s estimated selling price for purposes of allocating the total arrangement consideration among the elements.
Impairment of long-lived assets - Whenmore frequently if events or changes in circumstances indicate that the carrying amount of certain long-livedsuch assets may not be recoverable,recoverable. The Company uses a two-step process to assess the assets are evaluated for impairment.realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. If the forecast of undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying value of the assets toqualitative assessment indicates a stable or improved fair value, would be recognized in the current period. These estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change.no further testing is required. If the forecast of undiscounted future cash flows exceeds the carrying amount of the assetsa qualitative assessment indicates it would indicateis more likely than not that the assets were not impaired.
Goodwill and acquired intangible assets - We periodically acquire businesses in purchase transactions in which the allocation of the purchase price may result in the recognition of goodwill and other intangible assets. The determination of the value of such intangible assets requires management to make estimates and assumptions. These estimates affect the amount of future period amortization and possible impairment charges.
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill and indefinite-lived intangible assets are also tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in the market price of our common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be recoverable, the assets are evaluated for impairment. Among other things, our assumptions used in the valuation of goodwill include growth of revenue and margins, market multiples, discount rates and increased cash flows over time. If actual operating results were to differ from these assumptions, it may result in an impairment of our goodwill.
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THE GREENBRIER COMPANIES, INC.
The provisions of ASC 350, Intangibles - Goodwill and Other, require that we perform an impairment test on goodwill. We compare the fair value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based onis less than its carrying amount, the present value of estimated future cash flows. UnderCompany will proceed to the market approach, we estimatequantitative second step where the fair value of a reporting unit is calculated based on observed market multiples for comparable businesses. Anweighted income and market-based approaches.
If the fair value of a reporting unit is lower than its carrying value, an impairment lossto goodwill is recorded, not to the extent that the reporting unit’s carrying amount exceeds the reporting unit’s fair value. An impairment loss cannot exceed the totalcarrying amount of goodwill allocated toin the reporting unit. OurWe performed our annual goodwill impairment test during the third quarter of 2022 and concluded that goodwill was not impaired.
As of May 31, 2022, our goodwill balance was $67.8$128.7 million as of November 30, 2017 of which $43.3 million related to our Wheels & Parts segment and $24.5$85.7 million related to our Manufacturing segment.
GBW, an unconsolidated 50/50 joint venture, also separately tests its goodwillsegment and indefinite-lived intangible assets for impairment consistent$43.0 million related to our Maintenance Services segment. Our Manufacturing segment includes the North America Manufacturing reporting unit with the methodology described above. As of November 30, 2017, GBW had a goodwill balance of $41.5$56.6 million; and the Europe Manufacturing reporting unit with a goodwill balance of $29.1 million.
38Pursuant to the authoritative guidance, we make certain judgments and assumptions to determine our reporting units, which determines the carrying values for each reporting unit. Judgments related to qualitative factors include changes in economic considerations, market and industry trends, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit.
THE GREENBRIER COMPANIES, INC.
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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 forecastforecasted foreign currency sales and expenses. At November 30, 2017May 31, 2022 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of EurosEuros; and U.S. Dollars; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $243.5$100.3 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 of 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 where the functional currency is not U.S. Dollars.subsidiaries. At November 30, 2017,May 31, 2022, net assets of foreign subsidiaries aggregated to $204.6$203.4 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $20.5$20.4 million, or 2.0%1.4% of Total equity - Greenbrier. This calculation assumes that each exchange rate would change in the same adverse 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 $87.8$408.2 million of variable rate debt to fixed rate debt. As a result,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 November 30, 2017, 81%May 31, 2022, 77% of our outstanding debt had fixed rates and 19%23% had variable rates. At November 30, 2017,May 31, 2022, a uniform 10% increase in variable interest rates would have resultedresult in approximately $0.3$0.8 million of additional annual interest expense.
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THE GREENBRIER COMPANIES, INC.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our President and ChiefPrincipal Executive Officer and our ChiefPrincipal Financial and Accounting Officer, the effectiveness of the Company’sour disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our President and ChiefPrincipal Executive Officer and our ChiefPrincipal Financial and Accounting Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our management, including our President and ChiefPrincipal Executive Officer and our ChiefPrincipal Financial and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended November 30, 2017May 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is hereby incorporated by reference the information disclosed in Note 1315 to Consolidated Financial Statements, Part I of this quarterly report.Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
This Form10-Q should be read in conjunction with the risk factors and information disclosedPart I Item 1A “Risk Factors” in our Annual Report on Form10-K for the year ended August 31, 2017. There2021 and our subsequent Quarterly Reports on Form 10-Q. Except as set forth below, there have been no material changes in the risk factorsRisk Factors described in our most recent Annual Report on Form10-K and subsequent Quarterly Reports on Form 10-Q.
Inflation in the global economy could negatively impact our business and results of operations.
General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. General inflation, including rising prices for energy, metals, components, and other inputs as well as rising wages negatively impact our business by increasing our operating costs. General inflation also negatively impacts our business by decreasing the capital for our customers to deploy to purchase our goods and services. Inflation may cause our customers to reduce or delay orders for our goods and services thereby causing a decrease in sales of our goods and services.
Increases in the price of materials and components used in the production of ourproducts could negatively impact our profit margin on the sale of our products.
A significant portion of our business depends on the adequate supply of numerous specialty and other parts and components at cost effective prices such as brakes, wheels, side frames, bolsters, and bearings for the year ended August 31, 2017.railcar business. Our manufacturing operations depend on our ability to obtain timely deliveries of materials in acceptable quantities and quality from our suppliers. Prices for materials may continue to increase due to the armed conflict in Ukraine, and trends in the global economy, among other reasons. Although a portion of the costs we must incur to meet our contractual obligations are subject to escalation clauses which allow us to pass through costs to our customers, we will absorb some cost increases thereby decreasing margin on some of our customer contracts.
Monetary and other policy interventions by governments and central banks, including the increase of interest rates, as well as uncertainly about governmental macroeconomic policies, could negatively impact our business and results of operations.
The United States Federal Reserve raised its benchmark interest rate by three-quarters of a percentage point in June 2022. Several other central banks, including the European Central Bank, have signaled increases in benchmark interest rates. Rising interest rates increases our borrowing costs potentially decreasing our profitability. Additionally, increased borrowing costs faced by our customers could result in decreased demand for our products. Monetary interventions also risk a sustained decline in aggregate demand, either globally or within one more geographic market. A decline in demand for our products would most likely have a negative impact on our business and results of operations.
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Our business may be negatively impacted as a result of armed conflict in Ukraine.
In February 2022, the Russian Federation commenced a military invasion of Ukraine. We cannot predict the full impact of the armed conflict in Ukraine, the economic sanctions imposed on Russia, and the related economic and geopolitical instability, including instability in the manufacturing and freight rail markets. Some of our operations, particularly in Europe, have experienced higher energy costs, an increase in the price and availability of steel and certain other materials and components, disruptions in transportation and supply chains, higher manufacturing and borrowing costs. There is a risk we will not be successful in renegotiating existing agreements to allow us to pass through these increased prices of manufacturing. As a result of these impacts and due to the lack of new railcar orders in Europe during the third quarter of 2022, we have slowed down production at our European manufacturing facilities. These negative factors may continue to occur along with other risks to our business that may emerge which include, among others, prolonged heightened inflation, macroeconomic interventions in response to inflation, cyber disruptions or attacks, and disruptions in credit markets. All of these factors and others could disrupt our business directly and could disrupt the business of our customers thereby reducing or delaying orders of our goods and services. Prolonged civil unrest, political instability or uncertainty, military activities, or broad-based sanctions could have an adverse effect on our operations and business outlook.
Disruptions in the supply of materials and components used in the production of ourproducts could negatively impact our business and results of operations.
Supply chains were severely disrupted by the COVID-19 global pandemic. Armed conflict in Ukraine has also severely disrupted supply chains for the materials and components that we use in manufacturing our products. Certain materials for our products are currently available from a limited number of suppliers and, as a result, we may have limited control over pricing, availability, and delivery schedules. The inability to purchase a sufficient quantity of materials on a timely basis could create disruptions in our production and result in delays while we attempt to engage alternative suppliers. Any such disruption or conditions could harm our business and adversely impact our results of operations.
A material disruption in the movement of rail traffic could impair our ability to deliver railcars and other products to our customers in a timely manner which could prevent us from meeting customer demand, reduce our sales, and negatively impact our results of operations.
Once a railcar or other product is manufactured in one of our plants, it must be moved by rail to a customer delivery point. In many cases, the manufacturing plant and the delivery point are in different countries. Many different and unrelated factors could cause a delay in our ability to move our goods in a timely manner from the manufacturing plant to the delivery point including physical disruptions such as natural disasters and power outages, labor stoppages or shortages hindering the operation of railroads and related transportation infrastructure, regulatory and bureaucratic inefficiency and unresponsiveness, and other causes. A material disruption in the movement of rail traffic could negatively impact our business and results of operations.
Item 2. Unregistered Sales |
Issuer Purchases of Equity Securities and Use of Proceeds
Since October 2013, theThe Board of Directors has authorized the Company to repurchase in aggregate up to $225 millionshares of the Company’s common stock. The share repurchase program may be modified, suspended or discontinued at any time without prior notice and currently has an expiration date of MarchJanuary 31, 2019. Under the share2023. The amount remaining for repurchase program, shareswas $100.0 million as of common stock may be purchased on the open market or through privately negotiated transactions fromtime-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.
May 31, 2022. There were no shares repurchased under the share repurchase programrepurchases during the three months ended November 30, 2017.May 31, 2022 under this program.
Period | Total Number of Shares Purchased | Average Price Paid Per Share (Including Commissions) | Total Number of Shares Purchased as Part of Publically Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
September 1, 2017 – September 30, 2017 | — | — | — | $ | 87,989,491 | |||||||||||
October 1, 2017 – October 31, 2017 | — | — | — | $ | 87,989,491 | |||||||||||
November 1, 2017 – November 30, 2017 | — | — | — | $ | 87,989,491 | |||||||||||
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Item 6. Exhibits
3.1 | Amended and Restated Bylaws of the Registrant dated March 28, 2022. | |
10.1 | ||
10.2 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | Cover Page Interactive Data File (Formatted as inline XBRL and contained in |
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THE GREENBRIER COMPANIES, INC.
SIGNATURES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE GREENBRIER COMPANIES, INC. | |||||||||
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Date: | July 11, 2022 | By: | /s/ Adrian J. Downes | ||||||
Adrian J. Downes | |||||||||
Senior Vice President, | |||||||||
Chief Financial Officer and Chief Accounting Officer | |||||||||
(Principal Financial Officer and Principal Accounting Officer) |
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