☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Oregon
One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices) (Zip Code)
Symbol(s)
on which registeredRegulationsRegulation (Section definitiondefinitions of “large accelerated filer”,filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule (Check one): Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
All references to years refer to the fiscal years ended August 31From time to time, The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) or their representatives have made or may makeSection 27A of the Private Securities Litigation Reform Act of 1933, as amended, and Section 21E1995. Forward-looking statements provide current expectations of the Securities Exchange Act of 1934, as amended, including, without limitation, statements as to expectations, beliefs and strategies regarding the future. Such forward-looking statements may be included in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us with the Securities and Exchange Commission, including this 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 the forward-looking statements. Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to:abilityany statement that does not relate to grow our businesses;ability to obtain lease and sales contracts which provide adequate protection against attempted modificationsany historical or cancellations, changes in interest rates and increased costs of materials and components;ability to convert backlog of railcar orders and obtain and execute lease syndication commitments;ability to recruit, train and retain adequate numbers of qualified employees;ability to obtain adequate certification and licensing of products;availability of financing sources and borrowing base and loan covenant flexibility for working capital, other business development activities, capital spending and leased railcars for syndication (sale of railcars with lease attached);ability to utilize beneficial tax strategies;ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms including loan covenants;ability to obtain adequate insurance coverage at acceptable rates; andshort-term and long-term revenue and earnings effects of the above items.The following factors, among others, could cause actual results or outcomes to differ materially from the forward-looking statements:fluctuations in demand for newly manufactured railcars or marine barges, for wheels, repair services and parts and for railcar management and leasing services;delays in receipt of orders, risks that contracts may be canceled or modified during their term, not renewed, unenforceable or breached by the customer and that customers may not purchase the amount of products or services under the contracts as anticipated;availability of a trained work force at a reasonable cost and with reasonable terms of employment;our ability to maintain good relationships with our labor force, third party labor providers and collective bargaining units representing our direct and indirect labor force;domestic and international economic conditions including such matters as embargoes, quotas, tariffs, or modifications to existing trade agreements;domestic and international political and security conditions including such matters as terrorism, war, civil disruption and crime;the policies and priorities of the federal government including those concerning international trade, infrastructure and corporate taxation;sovereign risk related to international governments that includes, but is not limited to, governments stopping payments, repudiating their contracts, nationalizing private businesses and assets or altering foreign exchange regulations;2THE GREENBRIER COMPANIES, INC.growth or reduction in the surface transportation industry, the enactment of policies favoring other types of surface transportation over rail transportation or the impact from technological advances;our ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements;our ability to maintain good relationships with our customers and suppliers;our ability to renew or replace expiring customer contracts on satisfactory terms;our ability to obtain and execute suitable lease contracts for leased railcars for syndication;steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and availability and their impact on product demand and margin;the delay or failure of acquired businesses or joint ventures, assets,start-up operations, or new products or services to compete successfully;our failure to successfully integrate joint ventures or acquired businesses or complete previously announced transactions;discovery of previously unknown liabilities associated with acquired businesses;changes in product mix and the mix of revenue levels among reporting segments;labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo;production difficulties and product delivery delays as a result of, among other matters, costs or inefficiencies associated with expansion,start-up, or changing of production lines or changes in production rates, equipment failures, changing technologies, transfer of production between facilities ornon-performance of alliance partners, subcontractors or suppliers;lower than anticipated lease renewal rates, earnings on utilization-based leases or residual values for owned or managed leased equipment;discovery of defects in railcars or services resulting in increased warranty costs or litigation;physical damage, business interruption or product or service liability claims that exceed our insurance coverage;commencement of and ultimate resolution or outcome of pending or future litigation and investigations;natural disasters or severe or unusual weather patterns that may affect either us, our suppliers or our customers;loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues;competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base, and competitiveness of our manufacturing facilities and products;industry overcapacity and our manufacturing capacity utilization;decreases or write-downs in carrying value of inventory, goodwill, investments, intangibles or other assets due to impairment;severance or other costs or charges associated with layoffs, shutdowns, or reducing the size and scope of operations;changes in future maintenance or warranty requirements;our ability to adjust to the cyclical nature of the industries in which we operate;changes in interest rates and financial impacts from interest rates;our ability and cost to maintain and renew operating permits;actions or failures to act by various regulatory agencies including changing tank car or other rail car regulations;potential environmental remediation obligations;changes in commodity prices, including oil and gas;risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continuedcurrent fact. We use of such rights;expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry;availability and/or price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order;the failure of, or our delay in implementing and using, new software or other technologies;3THE GREENBRIER COMPANIES, INC.the impact of cybersecurity risks and the costs of mitigating and responding to a data security breach;our ability to replace maturing lease and management services revenue and earnings from equipment sold from our lease fleet with revenue and earnings from new commercial transactions, including new railcar leases, additions to the lease fleet and new management services contracts;financial impacts from currency fluctuations and currency hedging activities in our worldwide operations;credit limitations upon our ability to maintain effective hedging programs;increased costs or other impacts on us or our customers due to changes in legislation, taxes, regulations or accounting pronouncements;our ability to effectively execute our business and operating strategies if we become the target of shareholder activism; andfraud, misconduct by employees and potential exposure to liabilities under the Foreign Corrupt Practices Act and other anti-corruption laws and regulations.Any forward-looking statements should be considered in light of these factors. Wordswords such as “affirms,” “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”“preliminary” and similar expressions to identify forward-looking statements. TheseIn addition, any statements that refer to the costs or revenue related to the completion of contracts, timing of recognition of revenue, the estimated and anticipated impact of the ARI acquisition (including working capital true up, and purchase price allocation, among other factors), estimated warranty costs, contingencies, fair value estimates, and any statements that explicitly or implicitly draw trends in our performance or the markets in which we operate, uncertain events or assumptions, and other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements are not guarantees of future performanceperformance.uncertainties that coulduncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to:differ materiallyprocure specialty components or services on commercially reasonable terms or on a timely basis from the results contemplated by the forward-looking statements. Manya limited number of the important factors that will determine these results and values are beyondsuppliers;predict.acquisition of our business by a third party difficult;4
Assets Cash and cash equivalents Restricted cash Accounts receivable, net Inventories Leased railcars for syndication Equipment on operating leases, net Property, plant and equipment, net Investment in unconsolidated affiliates Intangibles and other assets, net Goodwill Liabilities and Equity Revolving notes Accounts payable and accrued liabilities Deferred income taxes Deferred revenue Notes payable, net Commitments and contingencies (Note 16) Contingently redeemable noncontrolling interest Equity: Greenbrier Preferred stock - without par value; 25,000 shares authorized; none outstanding Common stock - without par value; 50,000 shares authorized; 32,350 and 32,191 shares outstanding at November 30, 2018 and August 31, 2018 Additionalpaid-in capital Retained earnings Accumulated other comprehensive loss Total equity – Greenbrier Noncontrolling interest Total equity November 30,
2018 August 31,
2018 $ 462,797 $ 530,655 8,872 8,819 306,917 348,406 492,573 432,314 233,415 130,926 317,282 322,855 461,120 457,196 58,682 61,414 95,958 94,668 77,508 78,211 $ 2,515,124 $ 2,465,464 $ 22,189 $ 27,725 438,304 449,857 30,631 31,740 108,566 105,954 487,764 436,205 28,449 29,768 — — — — 440,958 442,569 846,018 830,898 (29,345 ) (23,366 ) 1,257,631 1,250,101 141,590 134,114 1,399,221 1,384,215 $ 2,515,124 $ 2,465,464 $ $ $ $ $ $ ) ) $ $ 5
Revenue Manufacturing Wheels, Repair & Parts Leasing & Services Cost of revenue Manufacturing Wheels, Repair & Parts Leasing & Services Margin Selling and administrative expense Net gain on disposition of equipment Earnings from operations Other costs Interest and foreign exchange Earnings before income taxes and earnings (loss) from unconsolidated affiliates Income tax expense Earnings before earnings (loss) from unconsolidated affiliates Earnings (loss) from unconsolidated affiliates Net earnings Net earnings attributable to noncontrolling interest Net earnings attributable to Greenbrier Basic earnings per common share: Diluted earnings per common share: Weighted average common shares: Basic Diluted Dividends declared per common share Three Months Ended
November 30, 2018 2017 $ 471,789 $ 451,485 108,543 78,011 24,191 30,039 604,523 559,535 417,805 380,850 100,978 72,506 13,207 16,865 531,990 470,221 72,533 89,314 50,432 47,043 (14,353 ) (19,171 ) 36,454 61,442 4,404 7,020 32,050 54,422 (9,135 ) (18,135 ) 22,915 36,287 467 (2,910 ) 23,382 33,377 (5,426 ) (7,124 ) $ 17,956 $ 26,253 $ 0.55 $ 0.90 $ 0.54 $ 0.83 32,640 29,332 33,093 32,696 $ 0.25 $ 0.23 $ $ ) ) ) ) ) ) $ $ $ $ $ $ $ $ 6
Net earnings Other comprehensive income Translation adjustment Reclassification of derivative financial instruments recognized in net earnings1 Unrealized gain (loss) on derivative financial instruments2 Other (net of tax effect) Comprehensive income Comprehensive income attributable to noncontrolling interest Comprehensive income attributable to Greenbrier Net of tax effect of Net of tax effect of Three Months Ended
November 30, 2018 2017 $ 23,382 $ 33,377 (3,931 ) (3,187 ) 469 (328 ) (2,302 ) 822 (230 ) (19 ) (5,994 ) (2,712 ) 17,388 30,665 (5,411 ) (7,120 ) $ 11,977 $ 23,545 $ $ ) ) ) ) ) ) ) ) $ $ 1 $0.2$0.1 million and $0.02$0.2 million for the three months ended November 30, 20182019 and 2017.2 $0.9$0.5 million and $0.320182019 and 2017.2018.7
Balance September 1, 2018 Net earnings Other comprehensive income, net Noncontrolling interest adjustments Joint venture partner distribution declared Cumulative effect adjustment due to adoption of ASU2014-09 (See Note 1) Restricted stock awards (net of cancellations) Unamortized restricted stock Restricted stock amortization Cash dividends ($0.25 per share) Balance November 30, 2018 Balance September 1, 2017 Net earnings Other comprehensive income, net Noncontrolling interest adjustments Joint venture partner distribution declared Investment by joint venture partner Restricted stock awards (net of cancellations) Restricted stock amortization Cash dividends ($0.23 per share) Balance November 30, 2017 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 32,191 $ 442,569 $ 830,898 $ (23,366 ) $ 1,250,101 $ 134,114 $ 1,384,215 $ 29,768 — — 17,956 — 17,956 6,745 24,701 (1,319 ) — — — (5,979 ) (5,979 ) (15 ) (5,994 ) — — — — — — 3,919 3,919 — — — — — — (3,173 ) (3,173 ) — — — 5,461 — 5,461 — 5,461 — 159 11,416 — — 11,416 — 11,416 — — (16,163 ) — — (16,163 ) — (16,163 ) — — 3,136 — — 3,136 — 3,136 — — — (8,297 ) — (8,297 ) — (8,297 ) — 32,350 $ 440,958 $ 846,018 $ (29,345 ) $ 1,257,631 $ 141,590 $ 1,399,221 $ 28,449 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 28,503 $ 315,306 $ 709,103 $ (6,279 ) $ 1,018,130 $ 160,763 $ 1,178,893 $ 36,148 — — 26,253 — 26,253 8,063 34,316 (939 ) — — — (2,708 ) (2,708 ) (4 ) (2,712 ) — — — — — — (882 ) (882 ) — — — — — — (26,789 ) (26,789 ) — — — — — — 6,500 6,500 — 198 (5,061 ) — — (5,061 ) — (5,061 ) — — 2,544 — — 2,544 — 2,544 — — — (6,601 ) — (6,601 ) — (6,601 ) — 28,701 $ 312,789 $ 728,755 $ (8,987 ) $ 1,032,557 $ 147,651 $ 1,180,208 $ 35,209
Stock
Shares
Capital
Earnings
Other
Comprehensive
Loss
Greenbrier
Interest
Equity
Redeemable
Noncontrolling
Interest $ $ $ ) $ $ $ $
ASU 2016-02 (See Note 1) ) ) ) ) ) ) ) ) ) $ $ $ ) $ $ $ $
Stock
Shares
Capital
Earnings
Other
Comprehensive
Loss
Greenbrier
Interest
Redeemable
Noncontrolling
Interest $ $ $ ) $ $ $ $ 5,461 — 5,461 — 5,461 — ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ ) $ $ $ $ 8
Cash flows from operating activities Net earnings Adjustments to reconcile net earnings to net cash used in operating activities: Deferred income taxes Depreciation and amortization Net gain on disposition of equipment Accretion of debt discount Stock based compensation expense Noncontrolling interest adjustments Other Decrease (increase) in assets: Accounts receivable, net Inventories Leased railcars for syndication Other Increase (decrease) in liabilities: Accounts payable and accrued liabilities Deferred revenue Net cash used in operating activities Cash flows from investing activities Proceeds from sales of assets Capital expenditures Investment in and advances to unconsolidated affiliates Cash distribution from joint ventures Net cash provided by (used in) investing activities Cash flows from financing activities Net change in revolving notes with maturities of 90 days or less Proceeds from issuance of notes payable Debt issuance costs Repayments of notes payable Investment by joint venture partner Cash distribution to joint venture partner Dividends Tax payments for net share settlement of restricted stock Net cash provided by (used in) financing activities Effect of exchange rate changes Decrease in cash and cash equivalents and restricted cash Cash and cash equivalents and restricted cash Beginning of period End of period Balance Sheet Reconciliation: Cash and cash equivalents Restricted cash Total cash, cash equivalents and restricted cash as presented above Cash paid during the period for Interest Income taxes, net Non-cash activity Transfer from Leased railcars for syndication and Inventories to Equipment on operating leases, net Capital expenditures accrued in Accounts payable and accrued liabilities Dividends declared and accrued in Accounts payable and accrued liabilities Three Months Ended
November 30, 2018 2017 $ 23,382 $ 33,377 (2,360 ) (5,865 ) 20,700 18,370 (14,353 ) (19,171 ) 1,076 1,024 3,194 5,939 3,920 (875 ) 286 477 54,834 (35,510 ) (63,045 ) (16,311 ) (116,726 ) (35,541 ) (392 ) 6,304 (10,949 ) 16,676 3,314 (8,548 ) (97,119 ) (39,654 ) 34,497 75,060 (28,677 ) (29,893 ) (11,393 ) — 1,784 — (3,789 ) 45,167 (4,840 ) 2,561 225,000 2,138 (2,766 ) — (173,453 ) (2,809 ) — 6,500 (3,185 ) (26,900 ) (467 ) (319 ) (4,747 ) (5,061 ) 35,542 (23,890 ) (2,439 ) (1,736 ) (67,805 ) (20,113 ) 539,474 620,358 $ 471,669 $ 600,245 $ 462,797 $ 591,406 8,872 8,839 $ 471,669 $ 600,245 $ 1,740 $ 3,662 $ 7,487 $ 385 $ 14,304 $ — $ 6,972 $ 14,840 $ 7,830 $ 6,282 $ $ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Net cash provided by (used in) investing activities ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 9
2020. Hedging Contract assets Contract liabilities1 Contract liabilities balance includes deferred revenue within the scope of20182019 and for the three months ended November 30, 2018 2012017 20120182019 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2019.20182019 Annual Report on FormPolicies – In the first quarter ofStandardsStandard Update2014-09,Revenue from Contracts with Customers (ASU2014-09). This standard was issued to provide a common revenue recognition model for entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. The new standard also requires additional disclosures to sufficiently describe the nature, amount, timing, and uncertainty of revenue and cash flow arising from contracts with customers. As a result of adopting the new standard, the majority of the Company’s revenue recognition timing have remained unchanged, while certain minor changes have occurred related to maintenance and repair services. Costs incurred while fulfilling maintenance contracts will now be recognized as incurred while the related revenue will continue to be recognized over time. Additionally, repair service revenue, while previously recognized upon completion of the services, will now be recognized over time. This standard was adopted using a modified retrospective approach through a cumulative effect adjustment, which increased retained earnings by $5.5 million at September 1, 2018. The adoption of the new revenue standard did not have a material effect on the Company’s Unaudited Condensed Consolidated Balance Sheets and Statements of Income.In the first quarter of 2019, the Company adopted Accounting Standard Update2016-18,Restricted Cash (ASU2016-18). This update requires additional disclosure and that the Statement of Cash Flow explain the change during the period in the total cash, cash equivalents and amounts generally described as restricted cash. Therefore, amounts generally described as restricted cash are included with cash & cash equivalents when reconciling thebeginning-of-period andend-of-period total amounts shown on the Statement of Cash Flows. The guidance requires retrospective adjustment to each period presented. The adoption of ASU2016-18 did not have an impact on the Condensed Consolidated Balance Sheet and Statement of Income, but did result in revisions to the Condensed Consolidated Statement of Cash Flows as well as other revised disclosures.Prospective Accounting Changes – In February 2016, the FASB issued Accounting Standards Update (ASU2016-02)ASU2016-02Topic 842 requires most leases to be recognized on the balance sheet by recording acurrentprior model, but updated to align with certain changes to the lessee model and Topic 606:revenuestandard using the modified retrospective adoption method, utilizing the simplified transition option available which allows entities to continue to apply the legacy guidance in Topic 840 in the comparative periods presented in the year of adoption. The Company elected the “package of practical expedients,” which allows it to not reassess under the new guidance prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect thestandard. The ASUexemption for all leases that qualifyrequire both quantitative and qualitative disclosures regarding key information about leasing arrangements. The standard is effectivenot recognize ROU assets or lease liabilities for fiscal10THE GREENBRIER COMPANIES, INC.years, and interim periods within those fiscal years, beginning after December 15, 2018 andthese leases with lease terms of less than twelve months. Following the adoption of Topic 842, the Company plans to adopt this standard onwill utilize both Topic 842 and Topic 606:must be adopted usingalso required the Company to eliminate deferred gains associated with certain sale-leaseback transactions. Additionally, the Company derecognized $9.3 million of existing property, plant and equipment and $12.7 million of deferred revenue for railcar transactions previously not qualifying as sales due to continuing involvement, that now qualify for sale accounting under the new guidance. The gain associated with this change in accounting, wasmodified retrospective transition and will include a cumulative effectnew guarantee liability. A cumulative-effect adjustment of $4.4 million was recorded the opening balance of retained earnings in the periodas of adoption. The Company continues to evaluate the impact of this standard on its consolidated financial statementsSeptember 1, 2019.disclosures. (ASU2018,2019, with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2019.2020. 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 shares of the Company’s common stock. In January 2019, the expiration date of this share repurchase program was extended from March 31, 2019 to March 31, 2021 and the amount remaining for repurchase was increased from $88 million to $100 million. 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 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, 2018. As of November 30, 2018, 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.The Company measures revenue at the amounts that reflect the consideration to which it is expected to be entitled in exchange for transferring control of goods and services to customers. The Company recognizes revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. Payment terms vary by segment and product type and are generally due within normal commercial terms. The Company’s contracts with customers may include multiple performance obligations (e.g. railcars, maintenance, management services, etc.). For such arrangements, the Company allocates revenues to each performance obligation based on their relative standalone selling price. The Company has disaggregated revenue from contracts with customers into categories which describe the principal activities from which the Company generates its revenues. See Note 14 - Segments for further disaggregated revenue information.ManufacturingRailcars are manufactured in accordance with contracts with customers. The Company recognizes revenue upon its customers’ acceptance of the completed railcars at a specified delivery point. From time to time, the Company enters into multi-year supply agreements. Each railcar delivery is considered a distinct performance obligation, such that the amounts that are recognized as revenue following railcar delivery are generally not subject to change.The Company typically recognizes marine vessel manufacturing revenue over time using the cost input method, based on progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. This method best depicts the Company’s performance in completing the construction of the marine vessel for the customer and is consistent with the percentage of completion method used prior to the adoption of the new revenue standard.11THE GREENBRIER COMPANIES, INC.Wheels, Repair & PartsThe Company operates a network of wheel, repair and parts shops in North America that provide complete wheelset reconditioning and railcar repair services.Wheels revenue is recognized when wheelsets are shipped to the customer or when consumed by customers in the case of consignment arrangements. Parts revenue is recognized upon shipment of the parts to the customers.Repair revenue is typically recognized over time using the cost input method, based on progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. This method best depicts the Company’s performance in repairing the railcars for the customer. Repair services are typically completed in less than 90 days.Leasing & ServicesThe Company owns a fleet of new and used cars which are leased to third-party customers. Lease revenue is recognized over the lease-term in the period in which it is earned in accordance with ASC 840:Leases.Syndication transactions represent new and used railcars which have been placed on lease to a customer and which the Company intends to sell to an investor with the lease attached. At the time of such sale, revenue and cost of revenue associated with railcars that the Company has manufactured are recognized in the Manufacturing segment; while revenue and cost of revenue associated with railcars which were obtained from a third-party with the intent to resell them and subsequently sold, are recognized in the Leasing & Services segment in accordance with ASC 840:Leases.The Company enters into multi-year contracts to provide management and maintenance services to customers for which revenue is generally recognized ratably over the contract term as a stand-ready obligation. Costs to fulfill these contracts are recognized as incurred.(in thousands) Balance sheet classification September 1,
2018 November 30,
2018 $
change Inventories $ 7,228 $ 9,741 $ 2,513 Deferred revenue $ 41,250 $ 36,763 $ (4,487 )
2019
2019 $ $ $ ) $ $ $ ) 1 the new revenue standard.monthsmonth period ended November 30, 2018,2019, the Company recognized $5.3$20.1 million of revenue that was included in Contract liabilities as of September 2018.12
Revenue type1: Manufacturing – Railcar Sales Manufacturing – Railcars intended for syndication2 Manufacturing – Marine Services working capital Cash and cash equivalents Accounts receivable, net Inventories Property, plant and equipment, net Intangibles and other assets, net Goodwill Total assets acquired Accounts payable and accrued liabilities Total liabilities assumed Net assets acquired of the acquisition date and revised amounts will be recorded as of that date. The effect of measurement period adjustments to the estimated amounts will be reflected on a prospective basis and were not material during the three months ended November 30, 2019 Manufacturing supplies and raw materials Work-in-process Finished goods Excess and obsolete adjustment impairment Intangible assets subject to amortization: Customer relationships Accumulated amortization Other intangibles Accumulated amortization Intangible assets not subject to amortization Prepaid and other assets Nonqualified savings plan investments Revolving notes issuance costs, net Assets held for sale Total Intangible and other assets, net 2019. June 2021. Trade payables Other accrued liabilities Accrued payroll and related liabilities Accrued warranty Income taxes payable Other Balance at beginning of period Charged to cost of revenue, net Payments Currency translation effect Balance at end of period 2018,2019, the Company has entered into contracts with customers for which revenue has not yet been recognized. The following table outlines estimated revenue related to performance obligations wholly or partially unsatisfied, that the Company anticipates will be recognized in future periods.(in millions) November 30,
2018 $ 2,011.8 $ 647.3 $ 55.9 $ 138.7
2019 $ Manufacturing – Marine $ $ $ 1 UnsatisfiedNot a performance obligation related to Wheels, Repair & Parts revenue is not material2Not within the scope of the new revenue standard$1.1$1.4 billion of the Railcar Salesremainderremaining nine m fiscal 2019 in future periods. from 2019-202060% 52%from 2019-2024through 2024 and the remaining amount ratably through 2037.13THE GREENBRIER COMPANIES, INC.August 20, 2018,July 26, 2019, the Company entered intocompleted its acquisition of the manufacturing business of ARI for a dissolution agreement with Watco Companies, LLC, its previous joint venture partner, to discontinue their GBW Railcar Services railcar repair joint venture. Pursuant to the dissolution agreement, previously operated Greenbrier repair shops and associated employees were returned to the Company. Additionally, the dissolution agreement provides that certain agreements entered into inpurchase price of approximately $417.1 million. In connection with the original creationacquisition, the Company acquired two railcar manufacturing facilities in Arkansas, as well as other facilities which produce a range of GBWrailcar components and parts and create enhanced vertical integration for our manufacturing operations. The purchase price2014the acquisition were terminatedequity interests in two railcar component manufacturing businesses which Greenbrier will account for under the equity method of accounting and recognize at their respective fair value as of the transaction date, including the leases of realinvestments in unconsolidated affiliates.personal property, service agreements, and certain employment-related agreements. GBW will complete its cessation of activities in an orderly manner in fiscal 2019.As the assets received and liabilities assumed from GBW meet the definitionconsisted of, a business,combination of cash on hand, the Company has accountedproceeds of a $300 million secured term loan, the issuance to the seller of a $50 million senior convertible note and a payable to the seller for this transaction as a business combination. The total net assets acquired were approximately $56.8 million. Additionally, the Company removed the book value of its remaining equity method investment in, and note receivable due from, the joint venture. The accumulated deficit reflected in GBW’s balance sheet as of August 31, 2018 continues to be funded by the joint venture partners. The Company has included this assumed liability within the purchase price allocation in the table below.2018,2019, the Repair this acquisitionARI’s manufacturing business generated revenues of $23.9from operations of $1.4$ condensed consolidated financial statements as part of the Wheels, Repair & PartsManufacturing segment.impactpreliminary purchase price of the n $ wasdate to August 31, 2019 and asmaterial toacquire 100% of ARICompany’s resultsamounts of operations, therefore pro forma financial information has not been included.The preliminary allocation of the purchase price based on the fair value of the netall assets acquired was:(in thousands) $ 5,000 12,230 18,106 16,748 9,200 7,863 69,147 12,394 12,394 $ 56,753 Certainand liabilities inassumed are preliminary. During the table above are estimates andmeasurement period, which may extend up to 12 months after the date of acquisition, the Company will adjust these assets and liabilities if new information is obtained about the purchase price allocationfacts and circumstances that existed as they are settled.14THE GREENBRIER COMPANIES, INC.
estimated
(in years) $ $ (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 thousands) November 30,
2018 August 31,
2018 $ 286,779 $ 278,726 107,377 105,021 104,933 54,181 (6,516 ) (5,614 ) $ 492,573 $ 432,314
2019
2019 $ $ ) ) $ $ impairment.(In thousands) November 30,
2018 August 31,
2018 $ 72,625 $ 72,521 (44,687 ) (43,576 ) 15,925 16,300 (7,167 ) (6,400 ) 36,696 38,845 4,970 5,115 20,018 18,935 26,992 26,299 3,632 1,824 3,650 3,650 $ 95,958 $ 94,668
2019
2019 $ $ ) ) ) ) 37,229 $ $ $1.9$2.7$1.4$1.9 million for the three months ended November 30, 20182019 and 2017,2018 respectively. Amortization expense for the years ending August 31, 2019, 2020, 2021, 2022, 2023 and 20232024 is expected to be $5.8$10.9 million, $5.1$10.9 million, $5.1$7.6 million, $3.7$6.3 million and $3.5$6.3 million, respectively.15THE GREENBRIER COMPANIES, INC.three3 components, aggregated to $689.0$705.9 million as of November 30, 2018.2018,2019, a $600.0 million revolving line of credit, maturing September 2023,June 2024, secured by substantially all the Company’s assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.50% or Prime plus 0.50% depending on the type ofborrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.2018,2019, lines of credit totaling $39.0$55.9 million secured by certain of the Company’s European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.1% to WIBOR plus 1.3%1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%, were available for working capital needs of the European manufacturing operation.operations. The European lines of credit include $13.8 millionFebruary 2019June 2020 through September 2020.AsJuly 2021. 2018,had twohas 2 lines of credit totaling $50.0 million. The first line of credit provides up to $30.0 million and is fully guaranteed by the Company and its joint venture partner.million. 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 and the line of credit is currently in the process of being renewed.March 2024. The second line of credit provides up to $20.0 million, of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.2018,2019, outstanding commitments under the senior secured credit facilities consisted of $72.4$24.9 million in letters of credit under the North American credit facility and $22.2$29.5 million outstanding under the European credit facilities.2018,2019, outstanding commitments under the senior secured credit facilities consisted of $72.2$24.4 million in letters of credit under the North American credit facility and $27.7$27.1 million outstanding under the European credit facilities.16THE GREENBRIER COMPANIES, INC.(In thousands) November 30,
2018 August 31,
2018 $ 224,059 $ 226,405 78,726 73,273 87,182 105,111 26,264 27,395 11,438 4,771 10,635 12,902 $ 438,304 $ 449,857
2019
2019 $ $ $ $ Three Months Ended
November 30, (In thousands) 2018 2017 $ 27,395 $ 20,737 1,441 1,953 (2,184 ) (751 ) (388 ) 13 $ 26,264 $ 21,952 Note 9 – Notes PayableIn September 2018, the Company refinanced approximately $170 million of existing senior term debt, due in March 2020, secured by a pool of leased railcars with new5-year $225 million senior term debt also secured by a pool of leased railcars. The new debt bears a floating interest rate of LIBOR plus 1.50% or Prime plus 0.50%. The term loan is to be repaid in equal quarterly installments of $1.97 million with the remaining outstanding amounts, plus accrued interest, to be paid on the maturity date in September 2023. An interest rate swap agreement was entered into on 50% of the initial balance to swap the floating interest rate to a fixed rate of 2.99%. The Company intends to use hedge accounting to account for the interest rate swap agreement.17
November 30, $ $ ) ) ) $ $
Balance, August 31, 2018 Other comprehensive loss before reclassifications Amounts reclassified from Accumulated other comprehensive loss Balance, November 30, 2018 Financial Statement Location (Gain) loss on derivative financial instruments: Foreign exchange contracts Interest rate swap contracts 109 – Accumulated Other Comprehensive Loss(In thousands) Unrealized
Gain (loss) on
Derivative
Financial
Instruments Foreign
Currency
Translation
Adjustment Other Accumulated
Other
Comprehensive
Loss $ (431 ) $ (21,506 ) $ (1,429 ) $ (23,366 ) (2,302 ) (3,916 ) (230 ) (6,448 ) 469 — — 469 $ (2,264 ) $ (25,422 ) $ (1,659 ) $ (29,345 )
Gain (
Derivative
Financial
Instruments
Currency
Translation
Adjustment
Other
Comprehensive
Loss $ ) $ ) $ ) $ ) ) ) $ ) $ ) $ ) $ ) presentation location,financial statement caption, were as follows:(In thousands) Three Months Ended
November 30, 2018 2017 $ 488 $ (511 ) Revenue and Cost of revenue 144 167 Interest and foreign exchange 632 (344 ) Total before tax (163 ) 16 Tax expense $ 469 $ (328 ) Net of tax 18
November 30, $ $ ) ) $ $
Weighted average basic common shares outstanding(1) Dilutive effect of 2018 Convertible notes(2) Dilutive effect of 2024 Convertible notes(3) Dilutive effect of restricted stock units(4) Weighted average diluted common shares outstanding 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. The dilutive effect of the The Net earnings attributable to Greenbrier Add back: Interest and debt issuance costs on the 2018 Convertible notes, net of tax Earnings before interest and debt issuance costs on 2018 Convertible Notes Weighted average diluted common shares outstanding Diluted earnings per share(1) Asset Derivatives Liability Derivatives Balance sheet location Balance sheet location Derivatives designated as hedging instruments Foreign forward exchange contracts Accounts receivable, net Accounts payable and accrued liabilities Interest rate swap contracts Accounts receivable, net Accounts payable and accrued liabilities Derivatives not designated as hedging instruments Foreign forward exchange contracts Accounts receivable, net Accounts payable and accrued liabilities Interest rate swap contracts Accounts receivable, net Accounts payable and accrued liabilities Derivatives in cash flow hedging relationships Location of gain (loss) recognized in income on derivatives Foreign forward exchange contract Interest and foreign exchange Interest rate swap contracts Interest and foreign exchange Derivatives in cash flow hedging relationships Location of gain (loss) into income Location of gain (loss) on Foreign forward exchange contracts Foreign forward exchange contracts Interest rate swap contracts 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 three months ended November 30, 2019: Manufacturing Wheels, Repair & Parts Leasing & Services Eliminations Corporate Manufacturing Wheels, Repair & Parts Leasing & Services Eliminations Corporate Manufacturing Wheels, Repair & Parts Leasing & Services Unallocated Earnings from operations Interest and foreign exchange Earnings before income tax and earnings (loss) from unconsolidated affiliates terminated continue sampling, which is now complete. The EPA has also requested that potentially responsible parties enter AOCs during 2019 agreeing to conduct remedial design studies. Some parties have signed AOCs and several other parties including the Company have engaged in discussions with EPA regarding the terms of such AOCs. The allocation process is continuing in parallel with the process to define the remediation steps. The case has been stayed until the allocation process is concluded.1110 – Earnings Per Share(In thousands) Three Months Ended
November 30, 2018 2017 32,640 29,332 — 3,331 — — 453 33 33,093 32,696 n/a 2018 Convertible notes was included for the three months ended November 30, 2017 as they were considered dilutive under the “if converted” method as further discussed below. The 2018 Convertible notes matured on April 1, 2018.(3)The dilutive effect of the 20242.875% Convertible notes was excluded for the three months ended November 30, 20182019 and 20172018 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive.(4)Restricted stock units that are not considered participating securities and restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position. using the more dilutive of two approaches. The first approach includes the dilutive effect, using the treasury stock method associated with shares underlying the 20242.875% Convertible notes, 2.25% Convertible notes, restricted stock units that are not considered participating securities and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second approach supplements the first by including the “if converted” effect of the 2018 Convertible notes during the periods in which they were outstanding. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2024 Convertible notes are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable conversion price. Three Months Ended
November 30, 2018 2017 $ 17,956 $ 26,253 n/a 733 n/a $ 26,986 33,093 32,696 $ 0.54 $ 0.83 (1)Diluted earnings per share was calculated as follows:Earnings before interest and debt issuance costs (net of tax) on convertible notesWeighted average diluted common shares outstanding19THE GREENBRIER COMPANIES, INC. $ $ $ 0.23 $ 0.54 1211 – Stock Based Compensation20182019 and $5.9$3.2 million for the three months ended November 30, 2017.2018. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income.1312 – Derivative Instruments20182019 exchange rates,Euros;Euros and Pound Sterling; and 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 $139.8$71.4 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there is a loss, or as Accounts receivable, net when there is a gain. As the contracts mature at various dates through March 2021,20182019 exchange rates, approximately $2.4$1.0 million would be reclassified to revenue or cost of revenue in the next year.2018,2019, an interest rate swap agreement maturing in September 2023$112.5 million.$108.6 million and an interest rate swap agreement maturing June 2024 had a notional amount of $150.0 million is 20182019 interest rates, approximately $0.8$1.2 million would be reclassified to interest expense in the next year.20THE GREENBRIER COMPANIES, INC. November 30,
2018 August 31,
2018 November 30,
2018 August 31,
2018 (In thousands) Fair
Value Fair
Value Fair
Value Fair
Value $ 755 $ 700 $ 1,857 $ 1,211 — 781 790 1 $ 755 $ 1,481 $ 2,647 $ 1,212 $ 144 $ 76 $ 46 $ 354 — — 105 — $ 144 $ 76 $ 151 $ 354
2019
2019
2019
2019 $ $ $ $ $ $ $ $ $ $ $ $ Gain (loss)
recognized in
income on
derivatives three
months ended
November 30, 2018 2017 $ 380 $ 380 — (17 ) $ 380 $ 363 Gain (loss)
recognized in OCI on
derivatives
(effective portion)
three months ended
November 30,
reclassified from
accumulated OCI Gain (loss)
reclassified from
accumulated OCI into
income
(effective portion)
three months ended
November 30,
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, 2018 2017 2018 2017 2018 2017 $ 72 $ 730 Revenue $ (256 ) $ 710 Revenue $ 262 $ 56 (1,495 ) (354 ) Cost of revenue (232 ) (199 ) Cost of revenue 389 82 (1,773 ) 771 Interest and foreign exchange (144 ) (167 ) Interest and foreign exchange (47 ) — $ (3,196 ) $ 1,147 $ (632 ) $ 344 $ 604 $ 138 21THE GREENBRIER COMPANIES, INC. $ $
hedging
months ended
November 30, $ $ $ ) $ $ $ ) ) ) ) ) ) ) ) ) $ $ ) $ ) $ ) $ $
flow hedge
activity
(loss) on cash
flow hedge
activity $ $ ) $ $ ) ) ) ) ) 1413 – Segment Informationthree 3Prior to August 20, 2018, the Company operated in four reportable segments: Manufacturing; Wheels, Repair & Parts; Leasing & Services; and GBW Joint Venture. On August 20, 2018 the Company entered into an agreement with its joint venture partner to discontinue the GBW railcar repair joint venture, which resulted in 12 repair shops returned to the Company. Beginning on August 20, 2018, the GBW Joint Venture is no longer considered a reportable segment.20182019 Annual Report on Form10-K except for the revenue recognition accounting policy which has subsequently been updated (see Note 2 – Revenue Recognition). tabletapurposes. The results of operations forpurposesGBW Joint Venture are not reflected in the tables below as the investment was accounted for under the equity method of accounting. $ $ $ $ $ ) $ ) ) ) ) ) ) ) $ $ $ $ $ $ Revenue Earnings (loss) from operations (In thousands) External Intersegment Total External Intersegment Total $ 471,789 $ 6,201 $ 477,990 $ 36,855 $ 433 $ 37,288 108,543 15,981 124,524 3,247 312 3,559 24,191 5,999 30,190 17,513 5,452 22,965 — (28,181 ) (28,181 ) — (6,197 ) (6,197 ) — — — (21,161 ) — (21,161 ) $ 604,523 $ — $ 604,523 $ 36,454 $ — $ 36,454 For the three months ended November 30, 2017: Revenue Earnings (loss) from operations (In thousands) External Intersegment Total External Intersegment Total $ 451,485 $ 16,804 $ 468,289 $ 52,969 $ 4,186 $ 57,155 78,011 7,732 85,743 2,418 748 3,166 30,039 1,605 31,644 28,190 1,372 29,562 — (26,141 ) (26,141 ) — (6,306 ) (6,306 ) — — — (22,135 ) — (22,135 ) $ 559,535 $ — $ 559,535 $ 61,442 $ — $ 61,442 Total assets November 30, August 31, (In thousands) 2018 2018 $ 998,820 $ 1,020,757 322,525 306,756 691,389 578,818 502,390 559,133 $ 2,515,124 $ 2,465,464 22THE GREENBRIER COMPANIES, INC. $ $ $ $ $ $ ) ) ) ) ) ) $ $ $ $ $ $ $ $ $ $ (loss) from unconsolidated affiliates: Three Months Ended
November 30, (In thousands) 2018 2017 $ 36,454 $ 61,442 4,404 7,020 $ 32,050 $ 54,422 $ $ $ $ 1514 – Income Taxes The Company recognized the income tax effectsLeasesthe Tax Cutsaccumulated depreciation of $35.1 million and Jobs Act (Tax Act) in accordance with Staff Accounting Bulletin No. 118 (SAB 118), which required the financial results to reflect effects for which the accounting is complete and those which are provisional. Provisional effects were adjusted during the measurement period determined under SAB 118 based on ongoing analysis of data, tax positions and regulatory guidance. The accounting was considered complete$44.2 million as of November 30, 2018. There were no material adjustments made to the provisional effects during2019 and August 31, 2019, respectively. Depreciation expense was $3.5 million for the three months ended November 30, 2018.The Tax Act also made other significant changes to U.S. federal income tax laws, including a global intangiblelow-taxed income tax (GILTI) and a base erosion anti-abuse tax (BEAT) which became effective for2019. In addition, certain railcar equipmentbeginning on September 1, 2018. Thoughoperating leases is subleased to customers underimpactCompany’s Statement of GILTI and BEAT duringIncome for the three months ended November 30, 20182019 was not material, those taxes were$11.4 million, which included in the projected effective tax rate$3.7 million of revenue as a result of daily, monthly or car hire utilization arrangements. $ current year.three months ended November 30, 2019, finance leases were not a material component of the Company’s lease portfolio. The Company’s real estate and equipment leases have remaining lease terms ranging from less than one year to 79 years, with some including options to extend up to 15 years. The Company recognizes a lease liability and corresponding
November 30, 2019 $ $ $ $ ) $ %
November 30, 2019 $ 1615 – Commitments and Contingenciesterminated. Theis continuing in parallel with the process to define the remediation steps.23THE GREENBRIER COMPANIES, INC.sampling. The Company, along with many of the other defendants, has moved to dismiss the case. That motion is pending. 24
Assets: Derivative financial instruments Nonqualified savings plan investments Cash equivalents Liabilities: Derivative financial instruments Level 2 assets and liabilities include derivative financial instruments that are valued based on observable inputs. See Note Assets: Derivative financial instruments Nonqualified savings plan investments Cash equivalents Liabilities: Derivative financial instruments2018,2019, the Company had outstanding letters of credit aggregating $72.4to $24.9 million associated with performance guarantees, facility leases and workers compensation insurance.2018,2019, the Company had a $10.0$4.5 million note receivable from Amsted-Maxion Cruzeiro, its unconsolidated Brazilian castings and components manufacturer and a $19.51716 – Fair Value MeasuresLevel 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; andLevel 3 -unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.20182019 were:(In thousands) Total Level 1 Level 2 (1) Level 3 $ 899 $ — $ 899 $ — 26,992 26,992 — — 126,886 126,886 — — $ 154,777 $ 153,878 $ 899 $ — $ 2,798 $ — $ 2,798 $ — $ $ $ $ $ $ $ $ $ $ $ $ 13 -12 – Derivative Instruments for further discussion.20182019 were:(In thousands) Total Level 1 Level 2 Level 3 $ 1,557 $ — $ 1,557 $ — 26,299 26,299 — — 126,430 126,430 — — $ 154,286 $ 152,729 $ 1,557 $ — $ 1,566 $ — $ 1,566 $ — 25 $ $ $ $ $ $ $ $ $ $ $ $
2019. For the three months ended November 30, 2019, the Company purchased $4.0 million of railcar components from Axis.1817 – Related Party Transactions2018,2019, the carrying amount of the investment was $5.5$5.2 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. During2018, the2019$4$4.0 million in revenue associated with railcars sold out of the leasing warehouse.warehouse2018,2019, the Company had a $10.0 $19.5
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operationsrailroadrail industry in North America. The Leasing & Services segment owns approximately 9,6009,300 railcars (5,900 railcars held as equipment on operating leases, 3,200 held as leased railcars for syndication and 500 held as finished goods inventory) and provides management services for approximately 358,000385,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America as of November 30, 2018.2019. Through unconsolidated affiliates we produce railcars in Brazil, rail and industrial castings, tank heads and other components and we have an ownership stake in a railcar manufacturer in Brazil and a lease financing warehouse.20182019 was approximately 27,50028,500 units with an estimated value of $2.69$3.09 billion. Approximately 1%4% of backlog units and 2% of estimated backlog value as of November 30, 20182019 was associated with our Brazilian manufacturing operations which is accounted for under the equity method. Backlog units for lease may be syndicated to third parties or held in our own 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 the dollar amount of backlog. Marine backlog as of November 30, 20182019 was $56$80 million.In October 2018, we announced that our company and the Saudi Railway Company (SAR) signed an agreement to form a joint venture that will generate a total investment of 1 billion Saudi Riyals (USD $270 million) in Saudi Arabia’s railway system and a supply of freight railcars for the Saudi rail industry. The joint venture is subject to the completion of final due diligence and definitive documentation by the parties and required government and corporate approvals.27
2018 Revenue: Manufacturing Wheels, Repair & Parts Leasing & Services Cost of revenue: Manufacturing Wheels, Repair & Parts Leasing & Services Margin: Manufacturing Wheels, Repair & Parts Leasing & Services Selling and administrative Net gain on disposition of equipment Earnings from operations Interest and foreign exchange Earnings before income taxes and earnings (loss) from unconsolidated affiliates Income tax expense Earnings before earnings (loss) from unconsolidated affiliates Earnings (loss) from unconsolidated affiliates Net earnings Net earnings attributable to noncontrolling interest Net earnings attributable to Greenbrier Diluted earnings per common share Operating profit (loss): Manufacturing Wheels, Repair & Parts Leasing & Services Corporate 20182019 Compared to Three Months Ended November 30, 2017(In thousands) Three Months Ended
November 30, 2018 2017 $ 471,789 $ 451,485 108,543 78,011 24,191 30,039 604,523 559,535 417,805 380,850 100,978 72,506 13,207 16,865 531,990 470,221 53,984 70,635 7,565 5,505 10,984 13,174 72,533 89,314 50,432 47,043 (14,353 ) (19,171 ) 36,454 61,442 4,404 7,020 32,050 54,422 (9,135 ) (18,135 ) 22,915 36,287 467 (2,910 ) 23,382 33,377 (5,426 ) (7,124 ) $ 17,956 $ 26,253 $ 0.54 $ 0.83 $ $ ) ) ) ) ) ) $ $ $ $ operating profit.Earnings from operations (operating profit). Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.(In thousands) Three Months Ended
November 30, 2018 2017 $ 36,855 $ 52,969 3,247 2,418 17,513 28,190 (21,161 ) (22,135 ) $ 36,454 $ 61,442 28 $ $ ) )
Revenue Cost of revenue Margin (%) Net earnings attributable to Greenbrier Not meaningful scrap metal pricing. current period. equipment and an increase in Interest and foreign exchange primarily due a change in the Mexican Peso relative to the U.S. Dollar and interest expense associated with our $300 million of senior term debt issued in July 2019. These were partially offset by an increase in margin primarily attributed to a 40.5% increase in the volume of railcar deliveries.(In thousands) Three Months Ended
November 30, Increase
(Decrease) %
Change 2018 2017 $ 604,523 $ 559,535 $ 44,988 8.0% $ 531,990 $ 470,221 $ 61,769 13.1% 12.0 % 16.0 % (4.0 %) * $ 17,956 $ 26,253 $ (8,297 ) (31.6%) $ $ $ % $ $ $ % % % $ $ $ ) %) * 8.0%27.3% increase in revenue for the three months ended November 30, 20182019 as compared to the three months ended November 30, 20172018 was primarily due to a 39.1% increase in Wheels, Repair & Parts revenue. The increase in Wheels, Repair & Parts revenue was primarily due to the current period including $23.7 million in revenue associated with the repair shops returned to us after discontinuing the GBW joint venture. The increase was also due to a 4.5%39.3% increase in Manufacturing revenue primarily attributed to a 5.0%40.5% increase in the volume of railcar deliveriesdeliveries. This was partially offset by a 20.2% decrease in Wheels, Repair & Parts revenue primarily due to lower wheelset and component volumes due to lower demand, lower repair revenue primarily from four fewer shops in the current period and a changedecrease in product mix.13.1%27.3% increase in cost of revenue for the three months ended November 30, 20182019 as compared to the three months ended November 30, 20172018 was primarily due to a 9.7% increase in Manufacturing cost of revenue. The39.3% increase in Manufacturing cost of revenue was primarily dueattributed to a 5.0%40.5% increase in the volume of railcar deliveries and a change in product mix. The increasedeliveries. This was also due to a 39.3% increasepartially offset by an 18.9% decrease in Wheels, Repair & Parts cost of revenue primarily due to the current period includinglower costs associated with thea reduction in wheelset and component volumes and lower costs from four fewer repair shops returned to us after discontinuingin the GBW joint venture.and 16.0% for both the three months ended November 30, 20182019 and 2017, respectively.2018. The overall margin as a percentage of revenue was positively impacted by an increase in Manufacturing margin to 11.5% from 11.4% primarily attributed to a change in product mix partially offset by operating inefficiencies at some of our manufacturing facilities. The overall margin as a percentage of revenue was negatively impacted by a decrease in ManufacturingWheels, Repair & Parts margin to 11.4%5.4% from 15.6%7.0% primarily attributed to operating at lower volumes and a changedecrease in product mix.scrap metal pricing.was partially offset by an increase in Leasing & Services marginNet earnings attributable to 45.4% from 43.9%. Leasing & Services marginGreenbrier for the three months ended November 30, 2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages.The $8.3 million decrease in net earnings for the three months ended November 30, 20182019 as compared to the three months ended November 30, 20172018 was primarily attributable to aan increase in Net earnings attributable to noncontrolling interest, which is deducted from Net earnings. The decrease in margin fromNet earnings attributable to Greenbrier was also due to a changereduction in Manufacturing product mix and a lower Net gain on disposition of equipment.29
Revenue Cost of revenue Margin (%) Operating profit ($) Operating profit (%) Deliveries Not meaningful deliveries. Manufacturing costs associated with the acquired manufacturing business of ARI. mix partially offset by operating inefficiencies at our recently acquired manufacturing facilities. ARI.(In thousands) Three Months Ended
November 30, Increase
(Decrease) %
Change 2018 2017 $ 471,789 $ 451,485 $ 20,304 4.5 % $ 417,805 $ 380,850 $ 36,955 9.7 % 11.4 % 15.6 % (4.2 %) * $ 36,855 $ 52,969 $ (16,114 ) (30.4 %) 7.8 % 11.7 % (3.9 %) * 4,200 4,000 200 5.0 % $ $ $ % $ $ $ % % % % $ $ $ % % % % % * increased $20.3 million or 4.5%and cost of revenue for the three months ended November 30, 20182019 compared to the prior year.2017.2018. The increase in revenue was primarily attributed to a 5.0%40.5% increase in the volume of railcar deliveries and a change in product mix.cost of revenue increased $37.0 million or 9.7% for the three months ended November 30, 20182019 included $103.5 million in revenue associated with the acquired manufacturing business of ARI.2017.2018. The increase in cost of revenue was primarily attributed to a 5.0%40.5% increase in the volume of railcar deliveries and a changedeliveries. Manufacturing cost of revenue for the three months ended November 30, 2019 included $106.1 million in product mix.decreased 4.2%increased 0.1% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decreaseincrease was primarily attributed to a change in product mix.decreased $16.1increased $16.3 million or 30.4%44.2% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decreaseincrease was primarily attributed to a lower margin percentage from a changean increase in product mix and increased costs associated with expanded international operations.the volume of railcar deliveries. This was partially offset by an increase in net gain on dispositionoperating inefficiencies and integration and acquisition-related expenses from the newly acquired manufacturing business of equipment from insurance proceeds received for business interruption and assets destroyed in a fire at a manufacturing facility in 2016.30
Revenue Cost of revenue Margin (%) Operating profit ($) Operating profit (%) Not meaningful pricing. current period. decrease in scrap metal pricing.(In thousands) Three Months Ended
November 30, Increase
(Decrease) %
Change 2018 2017 $ 108,543 $ 78,011 $ 30,532 39.1 % $ 100,978 $ 72,506 $ 28,472 39.3 % 7.0 % 7.1 % (0.1 %) * $ 3,247 $ 2,418 $ 829 34.3 % 3.0 % 3.1 % (0.1 %) * $ $ $ ) %) $ $ $ ) %) % % %) $ $ $ ) %) % % %) * On August 20, 2018, 12 repair shops were returned to us as a result of discontinuing our GBW railcar repair joint venture. Beginning on August 20, 2018, the results of operations from these repair shops were included in the Wheels, Repair & Parts segment as they are now consolidated for financial reporting purposes. The addition of these repair shops contributed to the increase in and cost of revenue during the three months ended November 30, 2018 compared to the prior year.Wheels, Repair & Parts revenue increased $30.5decreased $21.9 million or 39.1%20.2% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The increasedecrease was primarily due to lower wheelset and component volumes due to lower demand, lower repair revenue primarily from four fewer shops in the current period including $23.7 million in revenue associated with the repair shops returned to us after discontinuing the GBW joint venture. The increase was also due to higher parts revenue and an increasea decrease in scrap metal pricing and volume. These were partially offset by lower wheel set and component volumes.increased $28.5decreased $19.1 million or 39.3%18.9% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The increasedecrease was primarily due to the current period includinglower costs associated with thea reduction in wheelset and component volumes and four fewer repair shops returned to us after discontinuingin the GBW joint venture. The increase was also due to higher costs associated with increased parts volumes. These were partially offset by lower costs from a decrease in wheel set and component volumes.0.1%1.6% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decrease was primarily attributed to operating at lower wheel set and component volumes and inefficiencies at our repair operations. This was partially offset by a favorable parts product mix and an increasedecrease in scrap metal pricing.increased $0.8decreased $2.1 million or 34.3%65.7% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The increasedecrease was primarily attributeddue to higher partsa reduction in volumes withand a favorable mix partially offset by increased costs related to our repair operations.31
Revenue Cost of revenue Margin (%) Operating profit ($) Operating profit (%) Not meaningful management services activity.(In thousands) Three Months Ended
November 30, Increase
(Decrease) %
Change 2018 2017 $ 24,191 $ 30,039 $ (5,848 ) (19.5 %) $ 13,207 $ 16,865 $ (3,658 ) (21.7 %) 45.4 % 43.9 % 1.5 % * $ 17,513 $ 28,190 $ (10,677 ) (37.9 %) 72.4 % 93.8 % (21.4 %) * $ $ $ % $ $ $ % % % % $ $ $ ) %) % % %) * primarily generates revenue from leasing railcars from its lease fleet, and providing various management services. We also earn revenue from rent-producingservices, interim rent on leased railcars for syndication, which are held short term and classified as Leasedthe sale of railcars for syndication on our Consolidated Balance Sheet. From time to time, railcars are purchased from third parties with the intent to resell them. 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.decreased $5.8increased $1.2 million or 19.5%4.9% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decreaseincrease was primarily attributed to a decreasehigher leasing revenue from our lease fleet and an increase in the sale of railcars which we had purchased from third parties with the intent to resell them. This was partially offset by higher management services revenue.decreased $3.7increased $0.2 million or 21.7%1.2% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decreaseincrease was primarily due to a declinehigher costs associated with an increase in the volume of railcars sold that we purchased from third parties partially offset by higher transportation costs.1.5%1.9% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017. Margin2018. The increase in margin was primarily attributed to lower transportation costs.2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin percentages. This was partially offset by higher transportation costs.Leasing & Services operating profit decreased $10.7 million or 37.9% for the three months ended November 30, 20182019 compared to the three months ended November 30, 2017.2018. The decrease was primarily attributed to an $8.2a $7.5 million decrease in net gain on disposition of equipment and a $2.2 million decrease in margin. The higher net gain on disposition of equipment in the prior year related to higher volumes of equipment sales during the three months ended November equipment. 2017 as we were rebalancing our lease portfolio.The percentage of owned units on lease was 94.9% at November 30, 2018 compared to 91.8% at November 30, 2017.32
Selling and administrative expense and a $0.9 million increase in employee related costs. equipment. Interest and foreign exchange: Interest and other expense Foreign exchange gain July 2019.(In thousands) Three Months Ended
November 30, Increase
(Decrease) %
Change 2018 2017 $ 50,432 $ 47,043 $ 3,389 7.2 % $ $ $ % $50.4$54.4 million or 8.3%7.1% of revenue for the three months ended November 30, 20182019 compared to $47.0$50.4 million or 8.4%8.3% of revenue for the prior comparable period. The $3.4$3.9 million increase was primarily attributed to $1.4 million in consulting and related costs associated with strategic business development, $1.1 million in employee costs and $1.1$3.0 million from the addition of the manufacturing business of ARI selling and administrative costs from the repair shops returned to us after discontinuing the GBW joint venture.$14.4$4.0 million for the three months ended November 30, 20182019 compared to $19.2$14.4 million for the prior comparable period. Net gain on disposition of equipment primarily includes the sale of assets from our lease fleet (Equipment on operating leases, net) that are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity; and disposition of property, plant and equipment; and insurance proceeds received for business interruption and assets destroyed in a fire.(In thousands) Three Months Ended
November 30, Increase
(Decrease) 2018 2017 $ 7,165 $ 7,964 $ (799 ) (2,761 ) (944 ) (1,817 ) $ 4,404 $ 7,020 $ (2,616 ) $ $ $ ) $ $ $ $2.6$8.4 million decreaseincrease in interest and foreign exchange expense from the prior comparable period was primarily attributed to a $1.8$2.6 million increase inforeign exchange loss for the three months ended November 30, 2019 compared to a $2.8 million foreign exchange gain in the current year.prior comparable period. The change in foreign exchange gain(gain) loss was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar. In addition, the decreaseThe increase in interest and foreign exchange expense was attributedalso due to a $0.8 million decrease in interest expense due to the maturityassociated with our $300 million of the $119 million convertible senior notesterm debt issued in April 2018.33
24.3% in the prior comparable period. our European operations.20182019 was 28.5%20.7% compared to 33.3%a 28.5% rate for the three months ended November 30, 2017.2018. The decrease in the effective rate from the prior year was primarily attributable to favorable foreign tax discrete items in the enactmentcurrent year versus unfavorable discrete items in the first quarter of 2019. Excluding the Tax Act on December 22, 2017, which reducedimpact of discrete items in both periods, the domestic corporateeffective tax rate from 35%was 24.0% for the three months ended November 30, 2019 compared to 21%.also fluctuatesperiod-to-periodcan fluctuateprojected mix of foreign and domestic earnings and due to other discrete tax items booked within the interim period. In particular it fluctuates projectedventure because theventure. The joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnership’s entire (Loss) From Unconsolidated Affiliates (loss) from unconsolidated affiliates primarily included our share ofafter-tax results from our Brazil operations which include a castings joint venture and a railcar manufacturing joint venture, our lease financing warehouse investment, our North American castings joint venture and our tank head joint venture. In addition,was $1.1 million for the three months ended November 30, 2017, earnings (loss) from unconsolidated affiliates also included our share ofafter-tax results from the GBW joint venture.Earnings from unconsolidated affiliates was2019 compared to $0.5 million for the three months ended November 30, 2018 compared2018. The increase was primarily related to earnings from our investment in Axis, a lossjoint venture that manufactures and sells axles to its joint venture partners. We obtained our ownership interest in Axis as part of $2.9the acquisition of the manufacturing business of ARI on July 26, 2019.2017. The $3.4 million increase in earnings from unconsolidated affiliates was primarily attributed to improved results at our Brazil operations.Noncontrolling InterestNet earnings attributable to noncontrolling interest was $5.4 million for the three months ended November 30, 20182019 compared to $7.1$5.4 million in the prior comparable period, which primarily represents our joint venture partner’s share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales, and our European partner’s share of the results of Greenbrier-Astra Rail.34
Net cash used in operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Effect of exchange rate changes Net decrease in cash and cash equivalents and restricted cash 2019. syndication and a net change in working capital. investments in and advances to unconsolidated affiliates. 7, 2020, which was an increase from $0.25 per share. Three Months Ended
November 30, (In thousands) 2018 2017 $ (97,119 ) $ (39,654 ) (3,789 ) 45,167 35,542 (23,890 ) (2,439 ) (1,736 ) $ (67,805 ) $ (20,113 ) $ ) $ ) ) ) ) $ ) $ ) 2018,2019, cash and cash equivalents and restricted cash were $471.7$262.3 million, a decrease of $67.8$76.2 million from $539.5$338.5 million at August 31, 2018.20182019 compared to the three months ended November 30, 20172018 was primarily due to a net change in working capital and a change in cash flows associated with leased railcars for syndication.20182019 compared to the three months ended November 30, 20172018 was primarily attributable to lower proceeds from the salea decrease of assets.$28.7$23.2 million and $29.9$28.7 million for the three months ended November 30, 20182019 and 2017,2018, respectively. Manufacturing capital expenditures were approximately $17.5$18.8 million and $10.4$17.5 million for the three months ended November 30, 20182019 and 2017,2018, respectively. Capital expenditures for Manufacturing are expected to be approximately $90$95 million in 20192020 and primarily relate to enhancements of our existing manufacturing facilities. Wheels, Repair & Parts capital expenditures were approximately $2.1$1.5 million and $0.4$2.1 million for the three months ended November 30, 20182019 and 2017,2018, respectively. Capital expenditures for Wheels, Repair & Parts are expected to be approximately $15 million in 20192020 for enhancements of our existing facilities. Leasing & Services and corporate capital expenditures were approximately $9.1$2.9 million and $19.1$9.1 million for the three months ended November 30, 20182019 and 2017,2018, respectively. Leasing & Services and corporate capital expenditures for 20192020 are expected to be approximately $90$30 million. Proceeds from sales of leased railcar equipment are expected to be $120$95 million for 2019. The asset additions and dispositions for Leasing & Services in 2018 primarily relate to higher volumes of equipment purchases and sales as we rebalance our lease portfolio.2020. Assets from our lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity.$34.5$27.5 million and $75.1$34.5 million for the three months ended November 30, 2019 and 2018, and 2017, respectively.20182019 compared to the three months ended November 30, 20172018 was primarily attributed to a decrease in the proceeds from the issuance of notes payabledebt, net of repayments and a change in the net activities with joint venture partners.$0.25$0.27 per share was declared on January 8, 2019.35
July 2021. June 2021.$689.0$705.9 million as of November 30, 2018.2019. We had an aggregate of $485.9$342.4 million available to draw down under committed credit facilities as of November 30, 2018.2019. This amount consists of $419.1$266.0 million available on the North American credit facility, $16.8$26.4 million on the European credit facilities and $50.0 million on the Mexican railcar manufacturing joint venture credit facilities.2018,2019, a $600.0 million revolving line of credit, maturing September 2023,June 2024, secured by substantially all of our assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.50% or Prime plus 0.50% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.2018,2019, lines of credit totaling $39.0$55.9 million secured by certain of our European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.1% to WIBOR plus 1.3%1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%, were available for working capital needs of our European manufacturing operation.operations. The European lines of credit include a $13.8 million facility which is guaranteed by us. European credit facilities are continually being renewed. Currently, these European credit facilities have maturities that range from February 2019June 2020 through September 2020.2018,2019, our Mexican railcar manufacturing joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $30.0 million and is fully guaranteed by us and our joint venture partner.million. 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 and the line of credit is currently in the process of being renewed.March 2024. 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%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through July 2019.2018,2019, outstanding commitments under the senior secured credit facilities consisted of $72.4$24.9 million in letters of credit under the North American credit facility and $22.2$29.5 million outstanding under the European credit facilities.2018,2019, we were in compliance with all such restrictive covenants.36THE GREENBRIER COMPANIES, INC.2018,2019, we had a $10.0$4.5 million note receivable from Amsted-Maxion Cruzeiro, our unconsolidated Brazilian castings and components manufacturer and a $19.5an $18.0 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.37
a tax benefit or an additional charge to the tax provision. - Forreporting 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 such amounts, as this requires us to estimate the financial statements are prepared. This informationprobability of various possible outcomes. We reevaluate these uncertain tax positions on a quarterly basis. Changes in tax law or court interpretations may include estimatesresult in the recognition of future income and other assumptions that are inherently uncertain. - - -it is expectedwe expect to be entitled in exchange for transferring control of goods and services to customers. We recognize revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. Payment terms vary by segment and product type and are generally due within normal commercial terms. Our contracts with customers may include multiple performance obligations (e.g. railcars, maintenance, management services, etc.). For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We have disaggregated revenue from contracts with customers into categories which describe the principal activities from which we generate our revenues. See Note 14 - Segments for further disaggregated revenue information.38
Topic 606. earned. segment.the new revenue standard.carsrailcars which are leased to third-party customers. Lease revenue is recognized over the lease-term in the period in which it is earned in accordance with ASC 840:Leases.segment in accordance with ASC 840:Leases. - -39THE GREENBRIER COMPANIES, INC.350:350$77.5$129.5 million as of November 30, 20182019 of which $51.1$86.2 million related to our Manufacturing segment and $43.3 million related to our Wheels, Repair & Parts segment and $26.4 million related to our Manufacturing segment.40
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK20182019 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros;Euros and Pound Sterling; and 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 $139.8$71.4 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 a movement in a single foreign currency exchange rate would have on future operating results.2018,2019, net assets of foreign subsidiaries aggregated $178.9$157.2 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $17.9$15.7 million, or 1.3%1.2% of Total equity.equity – Greenbrier. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. Dollar.$111.3$258.6 million of variable rate debt to fixed rate debt. As a result, we are exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At November 30, 2018, 72%2019, 66% of our outstanding debt had fixed rates and 28%34% had variable rates. At November 30, 2018,2019, a uniform 10% increase in variable interest rates would result in approximately $0.5$0.6 million of additional annual interest expense.41
Item 4.CONTROLS AND PROCEDURESOfficer and Principal Accounting Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to RuleOfficer and Principal 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 Principal Executive Officer and Principal Financial Officer and Principal Accounting Officer, as appropriate to allow timely decisions regarding required disclosure.2018,2019, the Company implemented controls relating to the adoption of the new revenue recognitionlease accounting standard (ASC 606:Revenue from Contracts with Customers842:20182019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.42
Period September 1, 2018 – September 30, 2018 October 1, 2018 – October 31, 2018 November 1, 2018 – November 30, 2018 2019.Item 1.Legal Proceedings1615 to Consolidated Financial Statements, Part I of this quarterly report.Item 1A.Risk Factors2018.2019. There have been no material changes in the risk factors described in our Annual Report on Form2018.2019.Item 2.Unregistered Sales of Equity Securities and Use of ProceedsIn January 2019, theThe share repurchase program has an expiration date of this share repurchase program was extended from March 31, 2019 to March 31, 2021 and the amount remaining for repurchase was increased from $88 million tois $100 million. 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 obligate the Company to acquire any specific number of shares in any period.2018. 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 — — — $ 87,989,491 — — — $ 87,989,491 — — — $ 87,989,491 — ��� 43 $ $ $
Item 6.(a)Exhibits(a) List of Exhibits: 10.1 Form of Restricted Stock Unit Award Agreement. 10.2 Restricted Stock Unit Award Agreement between the Company and Alejandro Centurion. 31.1 31.2 32.1 32.2 101 The following financial information from the Company’s Quarterly Report on Form10-Q for the period ended November 30, 2018 formattedXBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Equity; (v) the Consolidated Statements of Cash Flows; and (vi) the Notes to Condensed Consolidated Financial Statements.Exhibit 101).44
Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GREENBRIER COMPANIES, INC.Date:January 9, 2019 By:/s/ Lorie L. Tekorius Lorie L. Tekorius Executive Vice President and Chief Operating Officer (Principal Financial Officer)Date:January 9, 2019 By:/s/ Adrian J. Downes Adrian J. Downes Senior Vice President,Acting ChiefChief Accounting Officer(Principal Accounting Officer)45