UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended May 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ______ to ______
Commission File No. 1-13146
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THE GREENBRIER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 93-0816972
(State of Incorporation)(I.R.S. Employer Identification No.)
One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices) (Zip Code)
(503)684-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of the registrant's common stock, $0.001
par value per share, outstanding on June 30, 1996 was 14,160,000
shares.
1
THE GREENBRIER COMPANIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts, unaudited)
May 31, August 31,
1996 1995
----------- -----------
ASSETS
MANUFACTURING
Current assets:
Cash and cash equivalents $ 1,584 $ 1,653
Accounts receivable 23,248 28,003
Inventories 65,065 86,280
Prepaid expenses 1,948 1,497
----------- -----------
91,845 117,433
Property, plant and equipment 35,170 33,135
Other 3,478 4,200
----------- -----------
130,493 154,768
LEASING AND SERVICES
Cash and cash equivalents 4,220 8,697
Restricted cash and investments 13,013 3,664
Accounts and notes receivable 26,609 11,610
Railcars held for refurbishment or sale 40,221 13,559
Investment in direct finance leases 184,412 168,402
Equipment on operating leases 165,133 158,661
Prepaid expenses and other 15,352 13,028
----------- -----------
448,960 377,621
----------- -----------
$ 579,453 $ 532,389
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
MANUFACTURING
Current liabilities:
Revolving notes $ 22,220 $ 27,313
Accounts payable and accrued liabilities 45,722 45,647
Current portion of notes payable 936 966
----------- -----------
68,878 73,926
Notes payable 13,366 13,512
----------- -----------
82,244 87,438
LEASING AND SERVICES
Revolving notes 8,601 -
Accounts payable and accrued liabilities 58,480 47,767
Deferred revenue 6,267 4,729
Deferred participation 30,413 27,829
Deferred income taxes 18,396 15,730
Notes payable 185,342 176,276
----------- -----------
307,499 272,331
Subordinated debt 43,489 37,762
Minority interest 38,090 38,040
COMMITMENTS AND CONTINGENCIES (NOTE 3)
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value, 25,000
shares authorized, none issued - -
Common stock - $0.001 par value, 50,000
shares authorized, 14,160 outstanding 14 14
Additional paid-in capital 49,051 48,894
Retained earnings 58,677 47,383
Foreign currency translation adjustments 389 527
----------- -----------
108,131 96,818
----------- -----------
$ 579,453 $ 532,389
=========== ===========
The accompanying notes are an integral part of these statements.
2
THE GREENBRIER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts, unaudited)
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- -------------------
1996 1995 1996 1995
------------------- -------------------
REVENUES
Manufacturing $ 95,842 $ 94,756 $308,345 $215,307
Leasing and services 25,298 22,568 71,651 67,781
--------- --------- --------- ---------
Total revenues 121,140 117,324 379,996 283,088
COSTS AND EXPENSES
Cost of manufacturing sales 85,529 82,060 276,461 191,074
Leasing and services 10,734 9,488 31,656 28,740
Selling and administrative
expense:
Manufacturing 3,828 3,073 10,852 8,381
Leasing and services 4,129 2,945 11,147 8,688
Corporate 1,487 1,711 4,955 4,489
--------- --------- --------- ---------
9,444 7,729 26,954 21,558
Interest expense:
Manufacturing 565 800 2,397 1,632
Leasing and services 5,553 5,661 16,506 17,022
--------- --------- --------- ---------
6,118 6,461 18,903 18,654
Minority interest:
Manufacturing 424 (476) (105) (476)
Leasing and services 761 895 2,182 2,512
--------- --------- --------- ---------
1,185 419 2,077 2,036
--------- --------- --------- ---------
Total costs and expenses 113,010 106,157 356,051 262,062
EARNINGS BEFORE INCOME TAX EXPENSE
Manufacturing 5,496 9,299 18,740 14,696
Leasing and services 4,121 3,579 10,160 10,819
Corporate (1,487) (1,711) (4,955) (4,489)
--------- --------- --------- ---------
8,130 11,167 23,945 21,026
Income tax expense (3,229) (4,880) (10,102) (9,021)
--------- --------- --------- ---------
NET EARNINGS $ 4,901 $ 6,287 $ 13,843 $ 12,005
========= ========= ========= =========
Net earnings per share $ 0.35 $ 0.44 $ 0.98 $ 0.85
========= ========= ========= =========
Weighted average shares
outstanding 14,160 14,160 14,160 14,160
========= ========= ========= =========
Dividends declared
per share $ 0.06 $ 0.06 $ 0.18 $ 0.18
========= ========= ========= =========
The accompanying notes are an integral part of these statements.
3
THE GREENBRIER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Nine Months Ended
May 31,
--------------------
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 13,843 $ 12,005
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Deferred income taxes 2,666 2,255
Deferred participation 2,584 7,203
Depreciation and amortization 17,886 16,180
Gain on sales of equipment (3,853) (3,029)
Other (1,133) 1,033
Decrease (increase) in assets:
Accounts and notes receivable (10,244) (21,158)
Inventories 21,215 (30,141)
Prepaid expenses and other (2,991) (656)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 10,788 22,627
Deferred revenue 1,538 (907)
--------- ---------
Net cash provided by operating activities 52,299 5,412
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiary, net of cash acquired - (23,916)
Principal payments received under direct
finance leases 5,604 5,413
Investment in direct finance leases (21,030) (29,016)
Proceeds from sales of equipment 59,625 14,609
Purchase of property and equipment (102,125) (38,409)
Use of(investment in) restricted cash
and investments (9,349) 4,353
--------- ---------
Net cash used in investing activities (67,275) (66,966)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 28,337 30,966
Repayments of borrowings (15,358) (17,728)
Proceeds from minority investors - 9,221
Dividends (2,549) (2,548)
--------- ---------
Net cash provided by financing activities 10,430 19,911
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (4,546) (41,643)
Cash and cash equivalents
Beginning of period 10,350 50,196
--------- ---------
End of period $ 5,804 $ 8,553
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 16,471 $ 16,366
Income taxes 9,880 4,602
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Equipment obtained through borrowings $ 6,680 $ 3,939
Repayment of borrowings through return of
railcars held for refurbishment 1,534 5,315
The accompanying notes are an integral part of these statements.
4
THE GREENBRIER COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, unaudited)
Note 1 - INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of The Greenbrier Companies,
Inc. and Subsidiaries (the "Company") as of May 31, 1996 and for
the three and nine months ended May 31, 1996 and 1995, have been
prepared without audit and reflect all adjustments (consisting of
normal recurring accruals) which in the opinion of management are
necessary for a fair presentation of the financial position and
operating results for the periods indicated. The results of
operations for the nine months ended May 31, 1996 are not
necessarily indicative of the results to be expected for the
entire year ending August 31, 1996.
Certain notes and other information have been condensed or omitted
from the interim financial statements presented in this Quarterly
Report on Form 10-Q. Therefore, these financial statements should
be read in conjunction with the consolidated financial statements
contained in the Company's 1995 Annual Report to Stockholders
incorporated by reference into the Company's 1995 Annual Report on
Form 10-K.
Note 2 - INVENTORIES
May 31, August 31,
1996 1995
----------- -----------
Manufacturing supplies and raw materials $ 8,551 $ 7,832
Work-in-process 56,514 78,448
----------- -----------
$ 65,065 $ 86,280
=========== ===========
Note 3 - COMMITMENTS AND CONTINGENCIES
Purchase commitments of approximately $3,714 for leasing and
services operating equipment were outstanding as of May 31, 1996.
Note 4 - SUBSEQUENT EVENT
Subsequent to May 31, 1996, the Company consummated the
acquisition of Superior Transportation Systems, Inc. and the
remaining interest in its existing fifty percent owned subsidiary,
Tolan O'Neal Transportation & Logistics, Inc. as part of a planned
expansion of the Company's third-party transportation logistics
services. The acquisitions will be accounted for using the
purchase method.
5
THE GREENBRIER COMPANIES, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Greenbrier Companies, Inc. and Subsidiaries ("Greenbrier")
currently operates in two primary business segments: the
manufacture of railcars and marine vessels and the refurbishment
of railcars; and the leasing and management of surface
transportation equipment and related services. The two business
segments are operationally integrated. The manufacturing
operations produce double-stack intermodal railcars, conventional
railcars and marine vessels and perform refurbishment and
maintenance activity, a portion of which is for railcar leasing
operations. The leasing and services operation undertakes most of
the sales and marketing activities for the manufacturing
operations. New product development is also conducted on an
integrated basis.
Subsequent to May 31, 1996, Greenbrier acquired Superior
Transportation Systems, Inc. and the remaining interest in its
existing fifty percent owned subsidiary, Tolan O'Neal
Transportation & Logistics, Inc. These transactions, along with
the planned acquisition of Interamerican Logistics Inc. discussed
in the February 29, 1996 Form 10-Q, are the first steps in a
planned expansion of Greenbrier's third-party transportation
logistics services. The Interamerican transaction is anticipated
to be complete early in fiscal 1997. Synergies with the existing
manufacturing and leasing businesses include building stronger
relationships with customers in the railroad and shipping
community and providing access to Greenbrier's asset base in
railcars, trailers and containers. The acquisitions were funded
from working capital and are not expected to have a significant
impact on 1996 earnings.
The following table sets forth information regarding costs and
expenses expressed as a percentage of the associated manufacturing
or leasing and services revenue.
Three Months Ended Nine Months Ended
May 31, May 31,
------------------- -------------------
1996 1995 1996 1995
------------------- -------------------
Manufacturing:
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 89.2 86.6 89.7 88.7
Selling and administrative
expense 4.0 3.2 3.5 3.9
Interest expense 0.6 0.8 0.8 0.8
Minority interest 0.5 (0.5) (0.1) (0.2)
Earnings before income tax
expense 5.7 9.9 6.1 6.8
Leasing and services:
Revenues 100.0% 100.0% 100.0% 100.0%
Operating expense 42.4 42.0 44.2 42.4
Selling and administrative
expense 16.3 13.0 15.6 12.8
Interest expense 22.0 25.1 23.0 25.1
Minority interest 3.0 4.0 3.0 3.7
Earnings before income tax
expense 16.3 15.9 14.2 16.0
Corporate expense as a
percentage of total revenues 1.2 1.5 1.3 1.6
Income tax expense as a percentage
of pre-tax earnings 39.7 43.7 42.2 42.9
Net earnings as a percentage of
total revenues 4.0 5.4 3.6 4.2
Three Months Ended May 31, 1996 Compared to Three Months Ended May
31, 1995
Revenues. Manufacturing revenue for the three-month period ended
May 31, 1996 increased slightly over the corresponding period in
the prior year. Revenue from Canadian operations was
substantially greater than the prior comparable period due to
increased volume and a product mix with higher unit sales value.
During the 1995 period the Canadian facility experienced
production difficulties. The increase in revenue from Canadian
operations in 1996 was largely offset by decreased revenue from
U.S. operations resulting from fewer railcar deliveries, partially
offset by a product mix including railcars with a higher unit
sales value. Total deliveries decreased by 237 to 1,362 in the
current quarter, compared to 1,599 in the prior comparable period.
The manufacturing backlog of railcars for sale and lease was
approximately 2,700 railcar platforms with an estimated value of
$165 million as of May 31, 1996.
6
THE GREENBRIER COMPANIES, INC.
Leasing and services revenue increased $3 million, or 12%, for
the quarter ended May 31, 1996 compared to the quarter ended May
31, 1995. This increase is primarily due to revenue from
additional railcars placed in lease service partially offset by a
decrease in revenue from automobile transportation services as a
result of the lower volume of automobiles transported.
Pre-tax earnings realized on the disposition of leased equipment
during the quarter were 50% more than the $1 million realized in
the corresponding prior period.
Cost of Manufacturing Sales. Cost of sales as a percentage of
manufacturing revenue increased in the quarter ended May 31, 1996
to 89% from 87% in the quarter ended May 31, 1995. The lower
margins achieved in the current quarter result from line
changeovers and a less favorable product mix at U.S. operations
partially offset by continuing improvement in manufacturing
efficiencies at the Canadian operation. The prior period margin
benefited from efficiencies of longer production runs on a product
mix that included a greater proportion of higher margin products.
Leasing and Services Expense. Leasing and services expense as a
percentage of revenue remained consistent at 42% for the three-
month period ended May 31, 1996 compared to the corresponding
prior period. Reduced contribution from automobile transportation
services due to lower volumes, start-up utilization of the highway
trailer rental operation and softening of the intermodal trailer
and container market were offset by a restructuring of certain
lease participation costs.
Selling and Administrative Expense. As a percentage of revenue,
total selling and administrative expense for the three months
ended May 31, 1996 increased compared to the corresponding prior
period. Lower manufacturing volume and increased leasing and
services costs associated with the start up of the highway trailer
rental operation were the primary contributors to the increase in
expense as a percentage of revenue.
Interest Expense. Interest expense decreased slightly as the
effect of lower interest rates on working capital borrowings and
normal paydowns of term debt exceeded current year borrowings.
Minority Interest. Manufacturing minority interest increased as
a result of improved earnings of the Canadian operation. Leasing
minority interest decreased due to reduced earnings from
automobile transportation services.
Income Tax Expense. The income tax provision for the quarter
ended May 31, 1996 represents an effective tax rate of 42% on U.S.
operations which is consistent with the corresponding prior
period. Consolidated income taxes as a percentage of pre-tax
earnings are less than 42% as the Canadian operation had generated
operating loss carryforwards which offset current period earnings.
Nine Months Ended May 31, 1996 Compared to Nine Months Ended May
31, 1995
Revenues. Manufacturing revenues for the nine-month period ended
May 31, 1996 increased $93 million, or 43%, over the corresponding
prior period. Canadian operations, acquired in March 1995,
contributed the majority of the increase. Revenue from U.S.
operations decreased slightly due to a product mix characterized
by higher unit sales value on fewer railcars delivered than the
product mix in the prior comparable period. The number of
railcars sold increased by 856 to 4,689 for the nine months ended
May 31, 1996 from 3,833 in the prior year comparable period.
Leasing and services revenue increased $4 million, or 6%, for the
nine-month period ended May 31, 1996 compared to the nine-month
period ended May 31, 1995. This increase is primarily due to
revenue from additional railcars placed in lease service partially
offset by a decrease in revenue from automobile transportation
services as a result of the lower volume of automobiles
transported.
Pre-tax income realized on disposition of leased equipment during
the nine-month period ended May 31, 1996 amounted to $3.4 million
compared to $2.8 million in the corresponding prior period.
7
THE GREENBRIER COMPANIES, INC.
Cost of Manufacturing Sales. Cost of sales as a percentage of
manufacturing revenue for the nine-month period ended May 31, 1996
increased slightly compared to the corresponding prior period.
Improved margins achieved by U.S. operations due to a favorable
product mix and the efficiencies of long production runs early in
the year were offset by lower margins achieved at the Canadian
operation.
Leasing and Services Expense. Leasing and services expense as a
percentage of revenue increased to 44% for the nine-month period
ended May 31, 1996 as compared to 42% for the corresponding prior
period. Reduced contribution from automobile transportation
services due to lower volume, as well as start-up utilization of
the highway trailer rental operation and the softening of the
intermodal trailer and container market were the primary reasons
for the increased percentage.
Selling and Administrative Expense. As a percentage of revenue,
total selling and administrative expense declined due to increased
manufacturing volume reduced by higher leasing and services costs
associated with the start up of the highway trailer rental
operation.
Interest Expense. The increase in manufacturing interest expense
for the nine-month period ended May 31, 1996 compared to the
corresponding prior period relates mainly to working capital
borrowings associated with the Canadian operation and to increased
production and inventory levels. The slight decrease in leasing
and services interest expense results from normal paydowns of term
debt offset somewhat by current year borrowings.
Minority Interest. Minority interest for the nine-month period
ended May 31, 1996 is consistent with the corresponding prior
period. The minority investors' share of operating losses at the
Canadian facility was reduced due to improved operations during
the current year. Decreased operating earnings relating to
automobile transportation services has reduced the leasing and
services minority interest.
Income Tax Expense. The income tax provision for the nine-month
period ended May 31, 1996 represents an effective tax rate of 42%
on U.S. operations which is consistent with the prior period. As
the Canadian operation is not included in the U.S. consolidated
tax return, no tax benefit has been recognized on the losses
incurred by Canadian operations.
Liquidity and Capital Resources
Cash provided by operations totaled $52 million for the nine-
month period ended May 31, 1996 compared to $5 million for the
corresponding prior period. The fluctuation in cash from
operations is due to the decrease in inventory resulting primarily
from increased railcar deliveries offset somewhat by purchases of
materials required for the construction of two marine barges.
Inventory levels at August 31, 1995 were higher than anticipated
due to the temporary suspension of production at the Canadian
operation.
Existing credit facilities for operations aggregate approximately
$101 million at May 31, 1996. A $43 million revolving credit line
is available through March 1997 which provides working capital and
interim financing of equipment for leasing and services
operations. Borrowings under the revolving credit line were $9
million at May 31, 1996. A $30 million operating line for working
capital and a $10 million five-year term facility for certain
manufacturing capital expenditures are available through February
1999 and December 1997 for U.S. manufacturing operations.
Borrowings outstanding under the operating line were $11 million
at May 31, 1996 and there were no borrowings outstanding under the
term facility. An $18 million (at the May 31, 1996 exchange rate)
operating line is available through March 1997 for working capital
and certain capital expenditures for Canadian operations.
Borrowings outstanding under this line at May 31, 1996 were $11
million. The weighted average interest rate on amounts
outstanding with respect to these credit facilities was 9% for the
nine-months ended May 31, 1996.
8
THE GREENBRIER COMPANIES, INC.
Capital expenditures totaled $130 million for the nine-months
ended May 31, 1996 compared to $71 million for the nine-months
ended May 31, 1995. Of these capital expenditures, approximately
$125 million and $65 million were attributable to leasing and
services operations. Leasing and services capital expenditure
programs included additions to the leased railcar fleet under
refurbishment programs and various additions to the lease fleet
related to other equipment purchases. Certain of these additions
are not anticipated to be held long-term but rather sold to other
parties and accordingly are included in Railcars held for
refurbishment or sale. Leasing and services capital expenditures
for the remainder of 1996 are expected to be approximately $23
million.
Approximately $5 million and $6 million of the total capital
expenditures for the nine-months ended May 31, 1996 and May 31,
1995 were attributable to manufacturing operations. Capital
expenditure programs included new and upgraded manufacturing plant
and equipment to improve efficiencies and increase capacity.
Manufacturing capital expenditures for the remainder of 1996 are
expected to be approximately $2 million and will include plant
improvements and equipment acquisitions to further increase
production capacity and efficiency.
Operations in Canada give rise to market risks from changes in
foreign currency exchange rates. Forward exchange contracts have
been entered into to hedge these risks. At May 31, 1996 the net
amount of foreign exchange contracts outstanding for the purchase
of Canadian dollars was $15 million maturing at various dates
through November 1996. Realized and unrealized gains and losses
from such off-balance sheet contracts are deferred and recognized
in earnings concurrent with the hedged transaction.
Dividends of $.06 per share have been paid quarterly beginning in
1995. Additionally, the next quarterly dividend of $.06 per share
was declared in July 1996 to be paid in August 1996.
Management expects existing funds and cash generated from
operations, together with borrowings under existing credit
facilities, will be sufficient to fund dividends, working capital
needs, planned capital expenditures and expected debt repayments.
Management anticipates long-term financing will be required and
will continue to be available for the purchase of equipment to
expand Greenbrier's lease fleet.
9
THE GREENBRIER COMPANIES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.32 Stock Purchase Agreement between and among Greenbrier
Logistics, Inc. and A. Daniel O'Neal dated as of June 28, 1996.
10.33 Employment Agreement dated June 1, 1996 between
Greenbrier Logistics, Inc. and A. Daniel O'Neal, Jr.
27. Financial Data Schedule
(b) Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
10
THE GREENBRIER COMPANIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE GREENBRIER COMPANIES, INC.
Date: July 12, 1996 By: /s/ Larry G. Brady
------------------ --------------------------
Larry G. Brady
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)