Item 1.
|
Condensed Financial Statements
|
Consolidated Balance Sheets
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
465,413
|
|
|
$
|
222,679
|
|
Restricted cash
|
|
|
8,753
|
|
|
|
24,279
|
|
Accounts receivable, net
|
|
|
267,830
|
|
|
|
232,517
|
|
Inventories
|
|
|
414,012
|
|
|
|
365,805
|
|
Leased railcars for syndication
|
|
|
149,119
|
|
|
|
144,932
|
|
Equipment on operating leases, net
|
|
|
315,976
|
|
|
|
306,266
|
|
Property, plant and equipment, net
|
|
|
330,471
|
|
|
|
329,990
|
|
Investment in unconsolidated affiliates
|
|
|
110,058
|
|
|
|
98,682
|
|
Intangibles and other assets, net
|
|
|
68,930
|
|
|
|
67,359
|
|
Goodwill
|
|
|
43,265
|
|
|
|
43,265
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,173,827
|
|
|
$
|
1,835,774
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
339,001
|
|
|
$
|
369,754
|
|
Deferred income taxes
|
|
|
80,482
|
|
|
|
51,619
|
|
Deferred revenue
|
|
|
82,006
|
|
|
|
95,721
|
|
Notes payable, net
|
|
|
532,638
|
|
|
|
301,853
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Greenbrier
|
|
|
|
|
|
|
|
|
Preferred stock - without par value; 25,000 shares authorized; none outstanding
|
|
|
|
|
|
|
|
|
Common stock - without par value; 50,000 shares authorized; 28,503 and 28,205 shares outstanding
at May 31, 2017 and August 31, 2016
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
|
310,074
|
|
|
|
282,886
|
|
Retained earnings
|
|
|
691,808
|
|
|
|
618,178
|
|
Accumulated other comprehensive loss
|
|
|
(15,661
|
)
|
|
|
(26,753
|
)
|
|
|
|
|
|
|
|
|
|
Total equity Greenbrier
|
|
|
986,221
|
|
|
|
874,311
|
|
Noncontrolling interest
|
|
|
153,479
|
|
|
|
142,516
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
1,139,700
|
|
|
|
1,016,827
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,173,827
|
|
|
$
|
1,835,774
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
5
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Income
(In thousands, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$
|
317,104
|
|
|
$
|
458,494
|
|
|
$
|
1,216,641
|
|
|
$
|
1,611,686
|
|
Wheels & Parts
|
|
|
85,231
|
|
|
|
78,417
|
|
|
|
237,580
|
|
|
|
247,604
|
|
Leasing & Services
|
|
|
36,826
|
|
|
|
75,955
|
|
|
|
103,536
|
|
|
|
225,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439,161
|
|
|
|
612,866
|
|
|
|
1,557,757
|
|
|
|
2,084,334
|
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
245,228
|
|
|
|
352,775
|
|
|
|
948,436
|
|
|
|
1,247,635
|
|
Wheels & Parts
|
|
|
77,985
|
|
|
|
69,818
|
|
|
|
218,460
|
|
|
|
224,208
|
|
Leasing & Services
|
|
|
26,247
|
|
|
|
63,175
|
|
|
|
69,484
|
|
|
|
180,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349,460
|
|
|
|
485,768
|
|
|
|
1,236,380
|
|
|
|
1,652,580
|
|
Margin
|
|
|
89,701
|
|
|
|
127,098
|
|
|
|
321,377
|
|
|
|
431,754
|
|
Selling and administrative expense
|
|
|
42,810
|
|
|
|
43,280
|
|
|
|
123,518
|
|
|
|
118,073
|
|
Net gain on disposition of equipment
|
|
|
(1,581
|
)
|
|
|
(311
|
)
|
|
|
(4,793
|
)
|
|
|
(11,326
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
48,472
|
|
|
|
84,129
|
|
|
|
202,652
|
|
|
|
325,007
|
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and foreign exchange
|
|
|
7,894
|
|
|
|
3,712
|
|
|
|
15,291
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and earnings (loss) from unconsolidated affiliates
|
|
|
40,578
|
|
|
|
80,417
|
|
|
|
187,361
|
|
|
|
314,442
|
|
Income tax expense
|
|
|
(8,656
|
)
|
|
|
(22,449
|
)
|
|
|
(53,900
|
)
|
|
|
(92,902
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before earnings (loss) from unconsolidated affiliates
|
|
|
31,922
|
|
|
|
57,968
|
|
|
|
133,461
|
|
|
|
221,540
|
|
Earnings (loss) from unconsolidated affiliates
|
|
|
(681
|
)
|
|
|
1,564
|
|
|
|
(5,253
|
)
|
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
31,241
|
|
|
|
59,532
|
|
|
|
128,208
|
|
|
|
224,461
|
|
Net (earnings) loss attributable to noncontrolling interest
|
|
|
1,582
|
|
|
|
(24,180
|
)
|
|
|
(35,887
|
)
|
|
|
(74,808
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Greenbrier
|
|
$
|
32,823
|
|
|
$
|
35,352
|
|
|
$
|
92,321
|
|
|
$
|
149,653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
|
$
|
1.12
|
|
|
$
|
1.22
|
|
|
$
|
3.16
|
|
|
$
|
5.13
|
|
Diluted earnings per common share
|
|
$
|
1.03
|
|
|
$
|
1.12
|
|
|
$
|
2.91
|
|
|
$
|
4.67
|
|
Weighted average common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
29,348
|
|
|
|
29,059
|
|
|
|
29,192
|
|
|
|
29,182
|
|
Diluted
|
|
|
32,690
|
|
|
|
32,342
|
|
|
|
32,515
|
|
|
|
32,475
|
|
Dividends declared per common share
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.64
|
|
|
$
|
0.60
|
|
The accompanying notes are an integral part of these financial statements
6
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net earnings
|
|
$
|
31,241
|
|
|
$
|
59,532
|
|
|
$
|
128,208
|
|
|
$
|
224,461
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment
|
|
|
8,334
|
|
|
|
1,477
|
|
|
|
5,624
|
|
|
|
(3,655
|
)
|
Reclassification of derivative financial instruments recognized in net earnings
1
|
|
|
871
|
|
|
|
659
|
|
|
|
4,022
|
|
|
|
1,710
|
|
Unrealized gain (loss) on derivative financial instruments
2
|
|
|
4,420
|
|
|
|
1,113
|
|
|
|
2,232
|
|
|
|
(6,417
|
)
|
Other (net of tax effect)
|
|
|
64
|
|
|
|
7
|
|
|
|
(786
|
)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,689
|
|
|
|
3,256
|
|
|
|
11,092
|
|
|
|
(8,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
44,930
|
|
|
|
62,788
|
|
|
|
139,300
|
|
|
|
216,100
|
|
Comprehensive income attributable to noncontrolling interest
|
|
|
1,582
|
|
|
|
(24,195
|
)
|
|
|
(35,887
|
)
|
|
|
(74,761
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to Greenbrier
|
|
$
|
46,512
|
|
|
$
|
38,593
|
|
|
$
|
103,413
|
|
|
$
|
141,339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Net of tax effect of $0.2 million and $0.3 million for the three months ended May 31, 2017 and 2016 and $1.2 million and $0.7 million for the nine months ended May 31, 2017 and 2016.
|
2
|
Net of tax effect of $1.1 million and $0.3 million for the three months ended May 31, 2017 and 2016 and $0.9 million and $2.2 million for the nine months ended May 31, 2017 and 2016.
|
The accompanying notes are an integral part of these financial statements
7
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Equity
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Greenbrier
|
|
|
|
|
|
|
|
|
|
Common
Stock
Shares
|
|
|
Additional
Paid-in Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
Total
Attributable to
Greenbrier
|
|
|
Attributable to
Noncontrolling
Interest
|
|
|
Total Equity
|
|
Balance September 1, 2016
|
|
|
28,205
|
|
|
$
|
282,886
|
|
|
$
|
618,178
|
|
|
$
|
(26,753
|
)
|
|
$
|
874,311
|
|
|
$
|
142,516
|
|
|
$
|
1,016,827
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
92,321
|
|
|
|
|
|
|
|
92,321
|
|
|
|
35,887
|
|
|
|
128,208
|
|
Other comprehensive income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,092
|
|
|
|
11,092
|
|
|
|
|
|
|
|
11,092
|
|
Noncontrolling interest adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,203
|
|
|
|
1,203
|
|
Joint venture partner distribution declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,127
|
)
|
|
|
(26,127
|
)
|
Restricted stock awards (net of cancellations)
|
|
|
298
|
|
|
|
5,567
|
|
|
|
|
|
|
|
|
|
|
|
5,567
|
|
|
|
|
|
|
|
5,567
|
|
Unamortized restricted stock
|
|
|
|
|
|
|
(10,775
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,775
|
)
|
|
|
|
|
|
|
(10,775
|
)
|
Restricted stock amortization
|
|
|
|
|
|
|
14,645
|
|
|
|
|
|
|
|
|
|
|
|
14,645
|
|
|
|
|
|
|
|
14,645
|
|
Tax deficiency from restricted stock awards
|
|
|
|
|
|
|
(2,396
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,396
|
)
|
|
|
|
|
|
|
(2,396
|
)
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
(18,691
|
)
|
|
|
|
|
|
|
(18,691
|
)
|
|
|
|
|
|
|
(18,691
|
)
|
2024 Convertible Senior Notes equity component, net of tax
|
|
|
|
|
|
|
20,818
|
|
|
|
|
|
|
|
|
|
|
|
20,818
|
|
|
|
|
|
|
|
20,818
|
|
2024 Convertible Senior Notes issuance costs equity component, net of tax
|
|
|
|
|
|
|
(671
|
)
|
|
|
|
|
|
|
|
|
|
|
(671
|
)
|
|
|
|
|
|
|
(671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance May 31, 2017
|
|
|
28,503
|
|
|
$
|
310,074
|
|
|
$
|
691,808
|
|
|
$
|
(15,661
|
)
|
|
$
|
986,221
|
|
|
$
|
153,479
|
|
|
$
|
1,139,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Greenbrier
|
|
|
|
|
|
|
|
|
|
Common
Stock
Shares
|
|
|
Additional
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
|
Total
Attributable to
Greenbrier
|
|
|
Attributable to
Noncontrolling
Interest
|
|
|
Total Equity
|
|
Balance September 1, 2015
|
|
|
28,907
|
|
|
$
|
295,444
|
|
|
$
|
458,599
|
|
|
$
|
(21,205
|
)
|
|
$
|
732,838
|
|
|
$
|
130,651
|
|
|
$
|
863,489
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
149,653
|
|
|
|
|
|
|
|
149,653
|
|
|
|
74,808
|
|
|
|
224,461
|
|
Other comprehensive loss, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,314
|
)
|
|
|
(8,314
|
)
|
|
|
(47
|
)
|
|
|
(8,361
|
)
|
Noncontrolling interest adjustments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
837
|
|
|
|
837
|
|
Purchase of noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Joint venture partner distribution declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,855
|
)
|
|
|
(61,855
|
)
|
Investment by joint venture partner
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,400
|
|
|
|
5,400
|
|
Restricted stock awards (net of cancellations)
|
|
|
350
|
|
|
|
6,186
|
|
|
|
|
|
|
|
|
|
|
|
6,186
|
|
|
|
|
|
|
|
6,186
|
|
Unamortized restricted stock
|
|
|
|
|
|
|
(11,646
|
)
|
|
|
|
|
|
|
|
|
|
|
(11,646
|
)
|
|
|
|
|
|
|
(11,646
|
)
|
Restricted stock amortization
|
|
|
|
|
|
|
18,483
|
|
|
|
|
|
|
|
|
|
|
|
18,483
|
|
|
|
|
|
|
|
18,483
|
|
Excess tax benefit from restricted stock awards
|
|
|
|
|
|
|
2,786
|
|
|
|
|
|
|
|
|
|
|
|
2,786
|
|
|
|
|
|
|
|
2,786
|
|
Cash dividends
|
|
|
|
|
|
|
|
|
|
|
(17,527
|
)
|
|
|
|
|
|
|
(17,527
|
)
|
|
|
|
|
|
|
(17,527
|
)
|
Repurchase of stock
|
|
|
(1,055
|
)
|
|
|
(32,373
|
)
|
|
|
|
|
|
|
|
|
|
|
(32,373
|
)
|
|
|
|
|
|
|
(32,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance May 31, 2016
|
|
|
28,202
|
|
|
$
|
278,880
|
|
|
$
|
590,725
|
|
|
$
|
(29,519
|
)
|
|
$
|
840,086
|
|
|
$
|
149,790
|
|
|
$
|
989,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements
8
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Cash Flows
(In thousands, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
128,208
|
|
|
$
|
224,461
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
16,815
|
|
|
|
(10,143
|
)
|
Depreciation and amortization
|
|
|
46,616
|
|
|
|
41,681
|
|
Net gain on disposition of equipment
|
|
|
(4,793
|
)
|
|
|
(11,326
|
)
|
Accretion of debt discount
|
|
|
1,329
|
|
|
|
|
|
Stock based compensation expense
|
|
|
19,007
|
|
|
|
19,055
|
|
Noncontrolling interest adjustments
|
|
|
1,203
|
|
|
|
837
|
|
Other
|
|
|
1,017
|
|
|
|
564
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(27,109
|
)
|
|
|
(14,333
|
)
|
Inventories
|
|
|
(47,209
|
)
|
|
|
(15,346
|
)
|
Leased railcars for syndication
|
|
|
(16,122
|
)
|
|
|
28,823
|
|
Other
|
|
|
8,419
|
|
|
|
(5,191
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
(41,008
|
)
|
|
|
(88,707
|
)
|
Deferred revenue
|
|
|
(13,650
|
)
|
|
|
24,303
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
72,723
|
|
|
|
194,678
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Proceeds from sales of assets
|
|
|
20,344
|
|
|
|
88,707
|
|
Capital expenditures
|
|
|
(53,848
|
)
|
|
|
(51,707
|
)
|
Decrease in restricted cash
|
|
|
15,526
|
|
|
|
200
|
|
Investment in and advances to unconsolidated affiliates
|
|
|
(34,068
|
)
|
|
|
(9,088
|
)
|
Cash distribution from unconsolidated affiliates
|
|
|
550
|
|
|
|
5,338
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(51,496
|
)
|
|
|
33,450
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Net change in revolving notes with maturities of 90 days or less
|
|
|
|
|
|
|
(49,000
|
)
|
Proceeds from revolving notes with maturities longer than 90 days
|
|
|
|
|
|
|
|
|
Repayments of revolving notes with maturities longer than 90 days
|
|
|
|
|
|
|
(1,888
|
)
|
Proceeds from issuance of notes payable
|
|
|
275,000
|
|
|
|
|
|
Repayments of notes payable
|
|
|
(5,469
|
)
|
|
|
(19,461
|
)
|
Debt issuance costs
|
|
|
(9,082
|
)
|
|
|
(4,160
|
)
|
Repurchase of stock
|
|
|
|
|
|
|
(33,498
|
)
|
Dividends
|
|
|
(18,619
|
)
|
|
|
(17,362
|
)
|
Cash distribution to joint venture partner
|
|
|
(27,267
|
)
|
|
|
(62,710
|
)
|
Investment by joint venture partner
|
|
|
|
|
|
|
5,400
|
|
Excess tax benefit (deficiency) from restricted stock awards
|
|
|
(2,396
|
)
|
|
|
2,786
|
|
Other
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
212,167
|
|
|
|
(179,900
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
|
|
|
9,340
|
|
|
|
(6,718
|
)
|
Increase in cash and cash equivalents
|
|
|
242,734
|
|
|
|
41,510
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
222,679
|
|
|
|
172,930
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
465,413
|
|
|
$
|
214,440
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
8,500
|
|
|
$
|
10,852
|
|
Income taxes, net
|
|
$
|
40,587
|
|
|
$
|
77,867
|
|
Non-cash
activity
|
|
|
|
|
|
|
|
|
Transfer from Leased railcars for syndication to Equipment on operating leases, net
|
|
$
|
8,597
|
|
|
$
|
45,535
|
|
Capital expenditures accrued in Accounts payable and accrued liabilities
|
|
$
|
4,301
|
|
|
$
|
3,529
|
|
Change in Accounts payable and accrued liabilities associated with cash distributions to joint
venture partner
|
|
$
|
1,140
|
|
|
$
|
855
|
|
Change in Accounts payable and accrued liabilities associated with dividends declared
|
|
$
|
(72
|
)
|
|
$
|
(165
|
)
|
Change in Accounts payable and accrued liabilities associated with repurchase of stock
|
|
$
|
|
|
|
$
|
1,125
|
|
The accompanying notes are an integral part of these financial statements
9
THE GREENBRIER COMPANIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Interim Financial
Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of
May 31, 2017 and for the three and nine months ended May 31, 2017 and 2016 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for a fair
presentation of the financial position, operating results and cash flows for the periods indicated. The results of operations for the three and nine months ended May 31, 2017 are not necessarily indicative of the results to be expected for the
entire year ending August 31, 2017.
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 Companys 2016 Annual
Report on Form
10-K.
Management Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the U.S. requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities,
revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future
periods. Actual results could differ from those estimates.
Initial Adoption of Accounting Policies
In the first quarter of 2017, the
Company adopted Accounting Standards Update
2015-03,
Simplifying the Presentation of Debt Issuance Costs
(ASU
2015-03).
The FASB issued this update to simplify
the presentation of debt issuance costs related to a recognized debt liability to present the debt issuance costs as a direct deduction from the carrying value of the debt liability rather than showing the debt issuance costs as an asset. As the
adoption of this new guidance only amended presentation and disclosure requirements and did not impact its recognition and measurement, the adoption did not materially affect the Companys financial position, results of operations or cash
flows. As ASU
2015-03
requires retrospective application, the Company reclassified $2.1 million of debt issuance costs included in Intangibles and other assets, net to Notes payable, net at
August 31, 2016.
In the first quarter of 2017, the Company adopted Accounting Standards Update
2015-15,
Interest-Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements
(ASU
2015-15).
This update was released because the guidance
within ASU
2015-03
for debt issuance costs does not address presentation or subsequent measurement of debt issuance costs related to line of credit arrangements. The SEC staff would not object to an entity
deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the line of
credit arrangement. Upon adoption, the Company continued to present debt issuance costs related to line of credit arrangements as an asset. The adoption of this new guidance did not affect the Companys financial position, results of operations
or cash flows.
In the second quarter of 2017, the Company adopted Accounting Standards Update
2017-04,
Simplifying the Test for Goodwill Impairment
(ASU
2017-04)
which was issued by the FASB in January 2017. This update simplifies the subsequent measurement of goodwill by eliminating Step 2 from the
goodwill impairment test. Under the new guidance, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for
the amount by which the carrying amount exceeds the reporting units fair value. However, the loss should not exceed the total amount of goodwill allocated to that reporting unit. This new guidance is effective for annual or any interim
goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The early adoption of ASU
2017-04
by the Company reduced the complexity surrounding the evaluation of its goodwill for impairment and did not have a material impact on its consolidated financial statements.
10
THE GREENBRIER COMPANIES, INC.
Prospective Accounting Changes
In May 2014, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update
2014-09,
Revenue from Contracts with Customers
(ASU
2014-09).
The issued guidance converges the criteria for reporting revenue,
and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Companies can transition to the standard either retrospectively or as a cumulative effect adjustment
as of the date of adoption. The FASB issued a one year deferral and the new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance beginning
September 1, 2018. The Company is evaluating the impact of this standard as well as its method of adoption on its consolidated financial statements and disclosures.
In February 2016, the FASB issued Accounting Standards Update
2016-02,
Leases
(ASU
2016-02).
The new guidance supersedes existing guidance on accounting for leases in Topic 840 and is intended to increase the transparency and comparability of accounting for lease transactions. ASU
2016-02
requires most leases to be recognized on the balance sheet. Lessees will need to recognize a
right-of-use
asset and a lease
liability for virtually all leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB
retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting remains similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard.
The ASU will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest
comparative period presented. The Company plans to adopt this guidance beginning September 1, 2019. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.
In March 2016, the FASB issued Accounting Standards Update
2016-09,
Improvements to Employee Share-Based Payment
Accounting
(ASU
2016-09).
This update will change how companies account for certain aspects of share-based payments to employees. Excess tax benefits or deficiencies related to vested awards, previously
recognized in stockholders equity, will be required to be recognized in the income statement when the awards vest. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2016,
with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2017. The effect of adopting this standard will result in volatility in the provision for income taxes depending on fluctuations in the price of the
Companys stock.
In December 2016, the FASB issued Accounting Standards Update
2016-18,
Restricted
Cash
(ASU
2016-18).
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 should be included with cash & cash equivalents when reconciling the
beginning-of-period
and
end-of-period
total amounts shown on the Statement of Cash Flows.
The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017 with early adoption permitted. The Company plans to adopt this guidance beginning September 1, 2018.
Share Repurchase Program
The Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the
Companys common stock. The program may be modified, suspended or discontinued at any time without prior notice. 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 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 nine months ended May 31, 2017. As of May 31, 2017, the Company had cumulatively repurchased 3,206,226 shares for approximately $137.0 million since October 2013 and had $88.0 million available under the share repurchase
program with an expiration date of January 1, 2018.
11
THE GREENBRIER COMPANIES, INC.
Note 2 Inventories
Inventories are valued at the lower of cost
(first-in,
first-out)
or market.
Work-in-process
includes material, labor and overhead. The following table summarizes the Companys inventory balance:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Manufacturing supplies and raw materials
|
|
$
|
241,753
|
|
|
$
|
240,865
|
|
Work-in-process
|
|
|
89,091
|
|
|
|
68,727
|
|
Finished goods
|
|
|
86,987
|
|
|
|
59,470
|
|
Excess and obsolete adjustment
|
|
|
(3,819
|
)
|
|
|
(3,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
414,012
|
|
|
$
|
365,805
|
|
|
|
|
|
|
|
|
|
|
Note 3 Intangibles and Other Assets, net
Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not
amortized and are periodically evaluated for impairment.
The following table summarizes the Companys identifiable intangible and other assets
balance:
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Intangible assets subject to amortization:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
$
|
64,521
|
|
|
$
|
65,023
|
|
Accumulated amortization
|
|
|
(39,306
|
)
|
|
|
(37,251
|
)
|
Other intangibles
|
|
|
5,105
|
|
|
|
6,298
|
|
Accumulated amortization
|
|
|
(4,253
|
)
|
|
|
(5,967
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
26,067
|
|
|
|
28,103
|
|
Intangible assets not subject to amortization
|
|
|
912
|
|
|
|
912
|
|
Prepaid and other assets
|
|
|
14,091
|
|
|
|
14,891
|
|
Nonqualified savings plan investments
|
|
|
20,985
|
|
|
|
15,864
|
|
Revolving notes issuance costs, net
|
|
|
2,830
|
|
|
|
3,481
|
|
Assets held for sale
|
|
|
4,045
|
|
|
|
4,108
|
|
|
|
|
|
|
|
|
|
|
Total Intangible and other assets, net
|
|
$
|
68,930
|
|
|
$
|
67,359
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the three and nine months ended May 31, 2017 was $0.9 million and $3.5 million and for
the three and nine months ended May 31, 2016 was $1.5 million and $5.3 million. Amortization expense for the years ending August 31, 2017, 2018, 2019, 2020 and 2021 is expected to be $4.4 million, $3.8 million,
$3.4 million, $3.7 million and $3.4 million.
12
THE GREENBRIER COMPANIES, INC.
Note 4 Revolving Notes
Senior secured credit facilities, consisting of three components, aggregated to $616.3 million as of May 31, 2017.
As of May 31, 2017, a $550.0 million revolving line of credit, maturing October 2020, secured by substantially all the Companys 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 1.75%
or Prime plus 0.75% 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.
As of May 31, 2017, lines of credit totaling $16.3 million secured by certain of
the Companys European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3%, were available for working capital needs of the European manufacturing operation. European credit
facilities are continually being renewed. Currently these European credit facilities have maturities that range from February 2018 through June 2019.
As
of May 31, 2017, the Companys 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 the Company and its joint
venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to
$20.0 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 August 2017.
As of May 31, 2017, the Company had no borrowings outstanding under our senior secured credit facilities
and outstanding commitments consisted of $79.2 million in letters of credit under the North American credit facility.
As of August 31, 2016,
the Company had no borrowings outstanding under our senior secured credit facilities and outstanding commitments consisted of $81.3 million in letters of credit under the North American credit facility.
13
THE GREENBRIER COMPANIES, INC.
Note 5 Accounts Payable and Accrued Liabilities
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Trade payables
|
|
$
|
172,324
|
|
|
$
|
182,334
|
|
Accrued payroll and related liabilities
|
|
|
69,403
|
|
|
|
76,058
|
|
Other accrued liabilities
|
|
|
58,682
|
|
|
|
71,260
|
|
Accrued maintenance
|
|
|
17,780
|
|
|
|
18,646
|
|
Accrued warranty
|
|
|
16,222
|
|
|
|
12,159
|
|
Income taxes payable
|
|
|
|
|
|
|
3,991
|
|
Other
|
|
|
4,590
|
|
|
|
5,306
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
339,001
|
|
|
$
|
369,754
|
|
|
|
|
|
|
|
|
|
|
Note 6 Warranty Accruals
Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on the history of warranty
claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in Accounts payable and accrued
liabilities on the Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirations of warranty periods.
Warranty accrual activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
May 31,
2017
|
|
|
May 31,
2016
|
|
|
May 31,
2017
|
|
|
May 31,
2016
|
|
Balance at beginning of period
|
|
$
|
14,582
|
|
|
$
|
12,147
|
|
|
$
|
12,159
|
|
|
$
|
11,512
|
|
Charged to cost of revenue, net
|
|
|
1,574
|
|
|
|
1,202
|
|
|
|
5,219
|
|
|
|
4,086
|
|
Payments
|
|
|
(377
|
)
|
|
|
(1,205
|
)
|
|
|
(1,509
|
)
|
|
|
(3,386
|
)
|
Currency translation effect
|
|
|
443
|
|
|
|
(12
|
)
|
|
|
353
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
16,222
|
|
|
$
|
12,132
|
|
|
$
|
16,222
|
|
|
$
|
12,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
THE GREENBRIER COMPANIES, INC.
Note 7 Notes Payable, Net
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Convertible senior notes, due 2018, net
|
|
$
|
118,577
|
|
|
$
|
118,140
|
|
Convertible senior notes, due 2024, net
|
|
|
235,557
|
|
|
|
|
|
Term loans, net
|
|
|
178,504
|
|
|
|
183,713
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
532,638
|
|
|
$
|
301,853
|
|
|
|
|
|
|
|
|
|
|
In February 2017, the Company issued $275 million of convertible senior notes, due 2024 (2024 Convertible Notes). The
notes are senior unsecured obligations and rank equally with other senior unsecured debt. The notes bear interest at an annual rate of 2.875% payable semiannually in arrears on February 1 and August 1 of each year, commencing
August 1, 2017. The notes will mature on February 1, 2024, unless earlier repurchased or converted in accordance with their terms prior to such date. The notes are convertible into shares of the Companys common stock, at an initial
conversion rate of 16.6234 per $1,000 principal amount of the notes which is equivalent to an initial conversion price of approximately $60.16 per share. The conversion rate and the resulting conversion price are subject to adjustment in certain
events. Prior to November 1, 2023, the notes are convertible at the option of the holders only upon the satisfaction of certain conditions and during certain periods and thereafter, at any time until the close of business on the business day
immediately preceding the maturity date. Upon conversion, the notes may be settled, at the Companys election, in cash, shares of the Companys common stock, or a combination of cash and shares.
2024 Convertible Notes:
|
|
|
|
|
(In thousands)
|
|
May 31,
2017
|
|
Debt principal
|
|
$
|
275,000
|
|
Debt discount, net
|
|
|
(31,775
|
)
|
Debt issuance costs, net
|
|
|
(7,668
|
)
|
|
|
|
|
|
|
|
$
|
235,557
|
|
|
|
|
|
|
As of May 31, 2017, the 2024 Convertible Notes had a balance of $235.6 million, reflecting the $275 million
debt principal net of $31.8 million of net debt discount and $7.7 million of net debt issuance costs, which was included in Notes payable, net on the Companys Consolidated Balance Sheet. The debt discount represents the difference
between the debt principal and the fair value of a similar debt instrument that does not have a conversion feature at issuance. The debt discount is being amortized using the effective interest rate method through February 2024 and the amortization
expense is included in Interest and foreign exchange on the Companys Consolidated Statement of Income.
In accordance with ASC
470-20,
the Company separately accounts for the liability component (debt principal net of debt discount) and equity component. The liability component is recognized as the fair value of a similar instrument that
does not have a conversion feature at issuance. To determine the fair value of the liability component, the Company assumed an interest rate of approximately 5% which resulted in a fair value of $241.9 million. The equity component, which is
the conversion feature at issuance, is recognized as the difference between the proceeds from the issuance of the notes ($275 million) and the fair value of the liability component ($241.9 million). As of May 31, 2017, the equity component was
$33.1 million which was recorded on the Companys Consolidated Balance Sheet in Additional
paid-in
capital, net of tax of $12.3 million.
15
THE GREENBRIER COMPANIES, INC.
Note 8 Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Unrealized
Loss on
Derivative
Financial
Instruments
|
|
|
Foreign
Currency
Translation
Adjustment
|
|
|
Other
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Balance, August 31, 2016
|
|
$
|
(5,492
|
)
|
|
$
|
(20,832
|
)
|
|
$
|
(429
|
)
|
|
$
|
(26,753
|
)
|
Other comprehensive loss before reclassifications
|
|
|
2,232
|
|
|
|
5,624
|
|
|
|
(786
|
)
|
|
|
7,070
|
|
Amounts reclassified from Accumulated other comprehensive loss
|
|
|
4,022
|
|
|
|
|
|
|
|
|
|
|
|
4,022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, May 31, 2017
|
|
$
|
762
|
|
|
$
|
(15,208
|
)
|
|
$
|
(1,215
|
)
|
|
$
|
(15,661
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income, with
presentation location, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
|
Financial Statement
Location
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Loss on derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
862
|
|
|
$
|
561
|
|
|
$
|
4,304
|
|
|
$
|
1,203
|
|
|
Revenue
|
Interest rate swap contracts
|
|
|
245
|
|
|
|
370
|
|
|
|
871
|
|
|
|
1,247
|
|
|
Interest and foreign exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,107
|
|
|
|
931
|
|
|
|
5,175
|
|
|
|
2,450
|
|
|
Total before tax
|
|
|
|
(236
|
)
|
|
|
(272
|
)
|
|
|
(1,153
|
)
|
|
|
(740
|
)
|
|
Tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
871
|
|
|
$
|
659
|
|
|
$
|
4,022
|
|
|
$
|
1,710
|
|
|
Net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
THE GREENBRIER COMPANIES, INC.
Note 9 Earnings Per Share
The shares used in the computation of the Companys basic and diluted earnings per common share are reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands
)
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Weighted average basic common shares outstanding
(1)
|
|
|
29,348
|
|
|
|
29,059
|
|
|
|
29,192
|
|
|
|
29,182
|
|
Dilutive effect of 2018 Convertible notes
(2)
|
|
|
3,305
|
|
|
|
3,224
|
|
|
|
3,286
|
|
|
|
3,202
|
|
Dilutive effect of 2024 Convertible notes
(3)
|
|
|
|
|
|
|
n/a
|
|
|
|
|
|
|
|
n/a
|
|
Dilutive effect of 2026 Convertible notes
(4)
|
|
|
n/a
|
|
|
|
|
|
|
|
n/a
|
|
|
|
|
|
Dilutive effect of performance based restricted stock units
(5)
|
|
|
37
|
|
|
|
59
|
|
|
|
37
|
|
|
|
91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding
|
|
|
32,690
|
|
|
|
32,342
|
|
|
|
32,515
|
|
|
|
32,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net
earnings position.
|
(2)
|
The dilutive effect of the 2018 Convertible notes was included as they were considered dilutive under the if converted method as further discussed below.
|
(3)
|
The 2024 Convertible notes were issued in February 2017. The dilutive effect of the 2024 Convertible notes was excluded for the three and nine months ended May 31, 2017 as the average stock price was less
than the applicable conversion price and therefore was considered anti-dilutive.
|
(4)
|
The 2026 Convertible notes were retired in August 2016. The dilutive effect of the 2026 Convertible notes was excluded for the three and nine months ended May 31, 2016 as the average stock price was less
than the applicable conversion price and therefore was considered anti-dilutive.
|
(5)
|
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.
|
Dilutive EPS is calculated using the more dilutive of two approaches. The first approach includes the
dilutive effect, using the treasury stock method, associated with shares underlying the 2024 Convertible notes and 2026 Convertible notes 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. 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 and 2026 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
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net earnings attributable to Greenbrier
|
|
$
|
32,823
|
|
|
$
|
35,352
|
|
|
$
|
92,321
|
|
|
$
|
149,653
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and debt issuance costs on the 2018 Convertible notes, net of tax
|
|
|
733
|
|
|
|
733
|
|
|
|
2,199
|
|
|
|
1,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and debt issuance costs on convertible notes
|
|
$
|
33,556
|
|
|
$
|
36,085
|
|
|
$
|
94,520
|
|
|
$
|
151,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding
|
|
|
32,690
|
|
|
|
32,342
|
|
|
|
32,515
|
|
|
|
32,475
|
|
Diluted earnings per share
(1)
|
|
$
|
1.03
|
|
|
$
|
1.12
|
|
|
$
|
2.91
|
|
|
$
|
4.67
|
|
(1)
|
Diluted earnings per share was calculated as follows:
|
Earnings before interest and
debt issuance costs (net of tax) on convertible notes
Weighted average diluted common shares outstanding
17
THE GREENBRIER COMPANIES, INC.
Note 10 Stock Based Compensation
The value of stock based compensation awards is amortized as compensation expense from the date of grant through the earlier of the vesting period or the
recipients eligible retirement date. Awards are expensed upon grant when the recipients eligible retirement date precedes the grant date.
Stock based compensation expense was $8.2 million and $19.0 million for the three and nine months ended May 31, 2017, respectively and
$8.3 million and $19.1 million for the three and nine months ended May 31, 2016, respectively. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income.
Note 11 Derivative Instruments
Foreign operations
give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are used to
reduce the impact of changes in interest rates on certain debt. The Companys foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized
gains and losses is recorded in accumulated other comprehensive income or loss.
At May 31, 2017 exchange rates, forward exchange contracts for the
purchase of Polish Zlotys and the sale of Euros and U.S. Dollars; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $321.8 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 July 2019, any such gain
or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the
hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest and foreign exchange at the time of occurrence. At May 31, 2017 exchange rates, approximately $1.5 million
would be reclassified to revenue or cost of revenue in the next 12 months.
At May 31, 2017, an interest rate swap agreement maturing in March 2020
had a notional amount of $89.5 million. The fair value of the contract is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. As interest expense on the underlying debt is recognized, amounts corresponding
to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At May 31, 2017 interest rates, approximately $0.9 million would be reclassified to interest expense in the
next 12 months.
Fair Values of Derivative Instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
|
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
(In thousands)
|
|
Balance sheet location
|
|
Fair
Value
|
|
|
Fair
Value
|
|
|
Balance sheet location
|
|
Fair
Value
|
|
|
Fair
Value
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
Foreign forward exchange contracts
|
|
Accounts receivable, net
|
|
$
|
2,810
|
|
|
$
|
1,570
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
1,704
|
|
|
$
|
4,287
|
|
Interest rate swap contracts
|
|
Intangibles and other assets, net
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
1,104
|
|
|
|
3,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,810
|
|
|
$
|
1,570
|
|
|
|
|
$
|
2,808
|
|
|
$
|
7,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
Foreign forward exchange contracts
|
|
Accounts receivable, net
|
|
$
|
233
|
|
|
$
|
25
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
331
|
|
|
$
|
22
|
|
18
THE GREENBRIER COMPANIES, INC.
The Effect of Derivative Instruments on the Statements of Income
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships
|
|
Location of gain (loss) recognized in
income on derivatives
|
|
Gain (loss)
recognized in
income on
derivatives nine
months ended
May 31,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Foreign forward exchange contract
|
|
Interest and foreign exchange
|
|
$
|
2,494
|
|
|
$
|
(245
|
)
|
Interest rate swap contracts
|
|
Interest and foreign exchange
|
|
|
24
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,518
|
|
|
$
|
(157
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives in cash flow
hedging relationships
|
|
Gain (loss)
recognized in OCI on
derivatives
(effective portion)
nine months ended
May 31,
|
|
|
Location of gain (loss)
reclassified from
accumulated OCI
into income
|
|
|
Gain (loss)
reclassified from
accumulated OCI into
income
(effective portion)
nine months ended
May 31,
|
|
|
Location of gain (loss) on
derivative (ineffective
portion and amount
excluded from
effectiveness testing)
|
|
|
Gain (loss) recognized on
derivative
(ineffective portion
and amount
excluded from
effectiveness
testing)
nine
months ended
May 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
2017
|
|
|
2016
|
|
Foreign forward exchange contracts
|
|
$
|
1,888
|
|
|
$
|
(5,430
|
)
|
|
|
Revenue
|
|
|
$
|
(4,130
|
)
|
|
$
|
(835
|
)
|
|
|
Revenue
|
|
|
$
|
(3,216
|
)
|
|
$
|
2,572
|
|
Foreign forward exchange contracts
|
|
|
166
|
|
|
|
(919
|
)
|
|
|
Cost of revenue
|
|
|
|
(174
|
)
|
|
|
(412
|
)
|
|
|
Cost of revenue
|
|
|
|
205
|
|
|
|
88
|
|
Interest rate swap contracts
|
|
|
1,248
|
|
|
|
(2,274
|
)
|
|
|
Interest and foreign
exchange
|
|
|
|
(871
|
)
|
|
|
(1,203
|
)
|
|
|
Interest and foreign
exchange
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,302
|
|
|
$
|
(8,623
|
)
|
|
|
|
|
|
$
|
(5,175
|
)
|
|
$
|
(2,450
|
)
|
|
|
|
|
|
$
|
(3,011
|
)
|
|
$
|
2,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12 Segment Information
Greenbrier operates in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture. The results of GBW
Joint Venture are included as part of Earnings (loss) from unconsolidated affiliates as the Company accounts for its interest in GBW Railcar Services LLC (GBW) under the equity method of accounting.
The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in
the Companys 2016 Annual Report on Form
10-K.
Performance is evaluated based on Earnings from operations. Corporate includes selling and administrative costs not directly related to goods and services
and certain costs that are intertwined among segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes. Intersegment sales and
transfers are valued as if the sales or transfers were to third parties. Related revenue and margin are eliminated in consolidation and therefore are not included in consolidated results in the Companys Consolidated Financial Statements.
The information in the following table is derived directly from the segments internal financial reports used for corporate management purposes. The
results of operations for the GBW Joint Venture are not reflected in the tables below as the investment is accounted for under the equity method of accounting.
19
THE GREENBRIER COMPANIES, INC.
For the three months ended May 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Earnings (loss) from operations
|
|
(In thousands)
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
Manufacturing
|
|
$
|
317,104
|
|
|
$
|
19,291
|
|
|
$
|
336,395
|
|
|
$
|
57,901
|
|
|
$
|
1,022
|
|
|
$
|
58,923
|
|
Wheels & Parts
|
|
|
85,231
|
|
|
|
8,959
|
|
|
|
94,190
|
|
|
|
4,239
|
|
|
|
839
|
|
|
|
5,078
|
|
Leasing & Services
|
|
|
36,826
|
|
|
|
595
|
|
|
|
37,421
|
|
|
|
7,084
|
|
|
|
427
|
|
|
|
7,511
|
|
Eliminations
|
|
|
|
|
|
|
(28,845
|
)
|
|
|
(28,845
|
)
|
|
|
|
|
|
|
(2,288
|
)
|
|
|
(2,288
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,752
|
)
|
|
|
|
|
|
|
(20,752
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
439,161
|
|
|
$
|
|
|
|
$
|
439,161
|
|
|
$
|
48,472
|
|
|
$
|
|
|
|
$
|
48,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended May 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Earnings (loss) from operations
|
|
(In thousands)
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
Manufacturing
|
|
$
|
1,216,641
|
|
|
$
|
19,291
|
|
|
$
|
1,235,932
|
|
|
$
|
226,611
|
|
|
$
|
1,022
|
|
|
$
|
227,633
|
|
Wheels & Parts
|
|
|
237,580
|
|
|
|
23,393
|
|
|
|
260,973
|
|
|
|
12,702
|
|
|
|
1,962
|
|
|
|
14,664
|
|
Leasing & Services
|
|
|
103,536
|
|
|
|
8,040
|
|
|
|
111,576
|
|
|
|
24,363
|
|
|
|
7,602
|
|
|
|
31,965
|
|
Eliminations
|
|
|
|
|
|
|
(50,724
|
)
|
|
|
(50,724
|
)
|
|
|
|
|
|
|
(10,586
|
)
|
|
|
(10,586
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,024
|
)
|
|
|
|
|
|
|
(61,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,557,757
|
|
|
$
|
|
|
|
$
|
1,557,757
|
|
|
$
|
202,652
|
|
|
$
|
|
|
|
$
|
202,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended May 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Earnings (loss) from operations
|
|
(In thousands)
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
Manufacturing
|
|
$
|
458,494
|
|
|
$
|
5,595
|
|
|
$
|
464,089
|
|
|
$
|
92,713
|
|
|
$
|
923
|
|
|
$
|
93,636
|
|
Wheels & Parts
|
|
|
78,417
|
|
|
|
10,058
|
|
|
|
88,475
|
|
|
|
5,811
|
|
|
|
711
|
|
|
|
6,522
|
|
Leasing & Services
|
|
|
75,955
|
|
|
|
601
|
|
|
|
76,556
|
|
|
|
8,298
|
|
|
|
601
|
|
|
|
8,899
|
|
Eliminations
|
|
|
|
|
|
|
(16,254
|
)
|
|
|
(16,254
|
)
|
|
|
|
|
|
|
(2,235
|
)
|
|
|
(2,235
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,693
|
)
|
|
|
|
|
|
|
(22,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
612,866
|
|
|
$
|
|
|
|
$
|
612,866
|
|
|
$
|
84,129
|
|
|
$
|
|
|
|
$
|
84,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended May 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
Earnings (loss) from operations
|
|
(In thousands)
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
|
External
|
|
|
Intersegment
|
|
|
Total
|
|
Manufacturing
|
|
$
|
1,611,686
|
|
|
$
|
5,595
|
|
|
$
|
1,617,281
|
|
|
$
|
325,215
|
|
|
$
|
941
|
|
|
$
|
326,156
|
|
Wheels & Parts
|
|
|
247,604
|
|
|
|
24,074
|
|
|
|
271,678
|
|
|
|
15,720
|
|
|
|
2,155
|
|
|
|
17,875
|
|
Leasing & Services
|
|
|
225,044
|
|
|
|
10,444
|
|
|
|
235,488
|
|
|
|
42,668
|
|
|
|
10,444
|
|
|
|
53,112
|
|
Eliminations
|
|
|
|
|
|
|
(40,113
|
)
|
|
|
(40,113
|
)
|
|
|
|
|
|
|
(13,540
|
)
|
|
|
(13,540
|
)
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,596
|
)
|
|
|
|
|
|
|
(58,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,084,334
|
|
|
$
|
|
|
|
$
|
2,084,334
|
|
|
$
|
325,007
|
|
|
$
|
|
|
|
$
|
325,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
(In thousands)
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
Manufacturing
|
|
$
|
705,229
|
|
|
$
|
701,296
|
|
Wheels & Parts
|
|
|
264,308
|
|
|
|
275,599
|
|
Leasing & Services
|
|
|
625,569
|
|
|
|
516,147
|
|
Unallocated
|
|
|
578,721
|
|
|
|
342,732
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,173,827
|
|
|
$
|
1,835,774
|
|
|
|
|
|
|
|
|
|
|
20
THE GREENBRIER COMPANIES, INC.
Reconciliation of Earnings from operations to Earnings before income tax and earnings (loss) from
unconsolidated affiliates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Earnings from operations
|
|
$
|
48,472
|
|
|
$
|
84,129
|
|
|
$
|
202,652
|
|
|
$
|
325,007
|
|
Interest and foreign exchange
|
|
|
7,894
|
|
|
|
3,712
|
|
|
|
15,291
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax and earnings (loss) from unconsolidated affiliates
|
|
$
|
40,578
|
|
|
$
|
80,417
|
|
|
$
|
187,361
|
|
|
$
|
314,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The results of operations for the GBW Joint Venture are accounted for under the equity method of accounting. The GBW Joint
Venture is the Companys fourth reportable segment and information as of May 31, 2017 and August 31, 2016 and for the three and nine months ended May 31, 2017 and 2016 are included in the tables below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
|
Nine Months Ended
May 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenue
|
|
$
|
62,674
|
|
|
$
|
95,699
|
|
|
$
|
197,176
|
|
|
$
|
289,381
|
|
Earnings (loss) from operations
|
|
$
|
(5,525
|
)
|
|
$
|
3,030
|
|
|
$
|
(16,988
|
)
|
|
$
|
9,065
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
|
May 31,
2017
|
|
|
August 31,
2016
|
|
GBW
(1)
|
|
$
|
218,789
|
|
|
$
|
247,610
|
|
(1)
|
Includes goodwill and intangible assets of $90.8 million and $93.4 million as of May 31, 2017 and August 31, 2016.
|
Note 13 Commitments and Contingencies
The
Companys Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The Company has entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (DEQ) in which the Company agreed to
conduct an investigation of whether, and to what extent, past or present operations at the Portland property may have released hazardous substances into the environment.
In December 2000, the U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as the Portland Harbor, including the
portion fronting the Companys manufacturing facility, as a federal National Priority List or Superfund site due to sediment contamination (the Portland Harbor Site). The Company and more than 140 other parties have
received a General Notice of potential liability from the EPA relating to the Portland Harbor Site. The letter advised the Company that it may be liable for the costs of investigation and remediation (which liability may be joint and
several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including the Company (the Lower Willamette Group
or LWG), have signed an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but are
nevertheless contributing money to the effort. The
EPA-mandated
RI/FS was produced by the LWG and has cost over $110 million during a
17-year
period. The Company
bore a percentage of the total costs incurred by the LWG in connection with the investigation. The Companys aggregate expenditure has not been material during the
17-year
period. Some or all of any such
outlay may be recoverable from other responsible parties.
Eighty-three parties, including the State of Oregon and the federal government, have entered
into a
non-judicial
mediation process to try to allocate costs associated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On
April 23, 2009, the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims;
Arkema Inc. et al v. A
& C Foundry Products, Inc. et al
, U.S.
District Court, District of Oregon, Case
#3:09-cv-453-PK.
All but 12 of these parties elected to sign tolling agreements and be
dismissed without prejudice, and the case has now been stayed by the court.
21
THE GREENBRIER COMPANIES, INC.
On January 6, 2017, the EPA issued its Record of Decision (ROD) for the Portland Harbor Site. The ROD
identifies a
clean-up
remedy that it estimates will take 13 years of active remediation, followed by 30 years of monitoring with an estimated undiscounted cost of $1.7 billion. The EPA typically expects
its cost estimates to be accurate within a range of +50 to
-30 percent,
but this ROD states that changes in costs are likely to occur as a result of new data it wants to collect over a
2-year
period prior to final remedy design. The ROD identifies 13 Sediment Decision Units. One of the units, RM9W, includes the nearshore area of the river sediments offshore of the Companys Portland, Oregon
manufacturing facility as well as upstream and downstream of the facility. It also includes a portion of our riverbank. The ROD does not break down total remediation costs by Sediment Decision Unit.
The ROD does not address responsibility for the costs of
clean-up,
nor does it allocate such costs among the
potentially responsible parties. Responsibility for funding and implementing the EPAs selected cleanup remedy will be determined at an unspecified later date. Based on the investigation to date, the Company believes that it did not contribute
in any material way to contamination in the river sediments or the damage of natural resources in the Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland,
Oregon manufacturing facility. Because these environmental investigations are still underway, including the collection of new
pre-remedial
design sampling data by EPA, sufficient information is currently not
available to determine the Companys liability, if any, for the cost of any required remediation or restoration of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future
assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required
to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the rivers classification as a Superfund site could result in some limitations on future
dredging and launch activities. Any of these matters could adversely affect the Companys business and Consolidated Financial Statements, or the value of its Portland property.
The Company has also signed an Order on Consent with the DEQ to finalize the investigation of potential onsite sources of contamination that may have a
release pathway to the Willamette River. Interim precautionary measures are also required in the order and the Company is currently discussing with the DEQ potential remedial actions which may be required. Our aggregate expenditure has not been
material, however the Company could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.
From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcomes of which cannot be predicted with
certainty. In the quarter ended November 30, 2016, the Company received an adverse judgment of approximately $15 million on one matter related to commercial litigation in a foreign jurisdiction. The judgment was reversed on appeal and the
case was remanded to the trial court. In June 2017 the court issued a new judgment against the Company of approximately $10 million. The Company is in the process of appealing the judgment. While the ultimate outcome of such legal proceedings
cannot be determined at this time, the Company believes that the resolution of pending litigation will not have a material adverse effect on the Companys Consolidated Financial Statements.
In accordance with customary business practices in Europe, the Company has $1.2 million in third party performance and warranty guarantee facilities. To
date no amounts have been drawn under these guarantee facilities.
As of May 31, 2017, the Mexican railcar manufacturing joint venture had
$0.4 million of third party debt outstanding, for which the Company and its joint venture partner had each guaranteed approximately $0.2 million.
As of May 31, 2017, the Company had outstanding letters of credit aggregating $79.2 million associated with performance guarantees and workers
compensation insurance.
22
THE GREENBRIER COMPANIES, INC.
The Company made $0.6 million in cash contributions to GBW, an unconsolidated 50/50 joint venture, for
the nine months ended May 31, 2017 which represented a reinvestment of a distribution received from GBW during the year. The Company is likely to make additional capital contributions or loans to GBW in the future. As of May 31, 2017, the
Company had a $36.5 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net.
Note 14 Fair Value Measures
Certain assets and
liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
|
|
|
Level 1 -
|
|
observable inputs such as unadjusted quoted prices in active markets for identical instruments;
|
|
|
Level 2 -
|
|
inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and
|
|
|
Level 3 -
|
|
unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
|
Assets and liabilities measured at fair value on a recurring basis as of May 31, 2017 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
(1)
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
$
|
3,043
|
|
|
$
|
|
|
|
$
|
3,043
|
|
|
$
|
|
|
Nonqualified savings plan investments
|
|
|
20,985
|
|
|
|
20,985
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
|
95,154
|
|
|
|
95,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
119,182
|
|
|
$
|
116,139
|
|
|
$
|
3,043
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
$
|
3,139
|
|
|
$
|
|
|
|
$
|
3,139
|
|
|
$
|
|
|
(1)
|
Level 2 assets and liabilities include derivative financial instruments that are valued based on observable inputs. See Note 11 Derivative Instruments for further discussion.
|
Assets and liabilities measured at fair value on a recurring basis as of August 31, 2016 were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
$
|
1,595
|
|
|
$
|
|
|
|
$
|
1,595
|
|
|
$
|
|
|
Nonqualified savings plan investments
|
|
|
15,864
|
|
|
|
15,864
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
|
5,077
|
|
|
|
5,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,536
|
|
|
$
|
20,941
|
|
|
$
|
1,595
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
$
|
7,466
|
|
|
$
|
|
|
|
$
|
7,466
|
|
|
$
|
|
|
23
THE GREENBRIER COMPANIES, INC.
Note 15 Related Party Transactions
In April 2010, WLRGreenbrier Rail Inc.
(WLR-GBX)
was formed and acquired a lease fleet of nearly 4,000 railcars
valued at approximately $256.0 million.
WLR-GBX
was wholly owned by affiliates of WL Ross & Co, LLC (WL Ross) and Wendy Teramoto, who was then a member of the Companys board of directors
was also an affiliate of WL Ross. On March 14, 2017, Ms. Teramoto resigned from her position as a member of the Companys board of directors effective March 31, 2017. In September 2015, the Company purchased the entire remaining
WLR-GBX
lease fleet of 3,885 railcars for approximately $148.0 million plus a $1.0 million fee. The transaction was approved by the Companys disinterested, independent directors. The Company acquired
the railcars with the intent to sell them with the underlying leases attached to third parties in the short-term. As of May 31, 2017 all 3,885 railcars have been either sold to third parties, scrapped or transferred to equipment on operating
leases.
During the first quarter of 2017, the Company paid profit sharing of $4.5 million to WL Ross and during the second quarter of 2017, the
Company paid $3.6 million to WL Ross to complete this agreement.
Note 16 Acquisitions
In May 2017, the Company completed its previously announced additional investment in Amsted-Maxion Equipamentos E Serviços Ferroviários S.A.
(Greenbrier-Maxion), a railcar manufacturer in Brazil, which resulted in an increase in the Companys ownership from 19.5% to 60% for $20 million, which was used to retire third-party debt at Greenbrier-Maxion. Simultaneously with the
closing of its investment into Greenbrier-Maxion, the Company increased its ownership from 19.5% to 24.5% for $3.25 million in Amsted-Maxion Fundição E Equipamentos Ferroviários S.A. (Amsted-Maxion Cruzeiro), a manufacturer
of castings and components for railcars and other heavy equipment. Proceeds from the Companys increased ownership in Amsted-Maxion Cruzeiro, along with loans from each of the partners, were used to retire third-party debt at Amsted-Maxion
Cruzeiro. The Company retains an option to increase its ownership in Amsted-Maxion Cruzeiro to 29.5% subject to certain conditions. The Company will continue to account for these investments under the equity method of accounting.
Note 17 Subsequent Events
In June 2017, the
Company completed its previously announced plans to create Greenbrier-Astra Rail. The combined enterprise was formed between the Companys European operations headquartered in Swidnica, Poland and Astra Rail, based in Germany and Arad, Romania.
Greenbrier-Astra Rail is controlled by the Company with an approximate 75% interest and the Company will consolidate Greenbrier-Astra Rail for financial reporting purposes. Greenbrier paid 30 million in June 2017 and will pay an
additional 30 million in June 2018 as consideration for this transaction.
In June 2017, the Company completed agreements with Mitsubishi UFJ
Lease & Finance (MUL) to expand their existing commercial relationship in North America consistent with the previously announced Memorandum of Understanding. MUL intends to grow its portfolio from 5,000 railcars to a total of 25,000
railcars over the next four years. As part of these growth plans, MUL has entered a multi-year purchase commitment for 6,000 newly-manufactured railcars from Greenbrier, with deliveries commencing during the fourth calendar quarter of 2017 and
continuing through calendar 2020. Further, MUL will obtain all its newly-manufactured railcars exclusively from Greenbrier through calendar 2023. In addition to the new equipment ordered, over the next several years, MUL will supplement its
portfolio growth through a combination of lease syndications and used equipment originated and owned by Greenbrier. The parties have also formed MUL Greenbrier Management Services, LLC, a new railcar management services entity owned 50% by each
company that will solely manage all railcars in the MUL fleet. Greenbrier will receive continuing fee income related to the ongoing railcar asset management services provided for the MUL fleet.
24
THE GREENBRIER COMPANIES, INC.
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
Executive
Summary
We operate in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture. Our
segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland and Romania, produces double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar
products and marine vessels. The Wheels & Parts segment performs wheel and axle servicing, as well as production of a variety of parts for the railroad industry in North America. The Leasing & Services segment owns approximately
9,100 railcars (6,900 railcars held as equipment on operating leases, 1,900 held as leased railcars for syndication and 300 held as finished goods inventory) and provides management services for approximately 267,000 railcars for railroads,
shippers, carriers, institutional investors and other leasing and transportation companies in North America. The GBW Joint Venture segment provides repair services across North America, including facilities certified by the Association of American
Railroads. The results of these operations were included as part of Earnings (loss) from unconsolidated affiliates as we account for our interest in GBW under the equity method of accounting. Through unconsolidated joint ventures we also produce
rail castings, tank heads and other components and have an ownership stake in a railcar manufacturer in Brazil.
Our total manufacturing backlog of
railcar units as of May 31, 2017 (which includes the backlog of Astra Rail and a multi-year order from MUL) was approximately 31,000 units with an estimated value of $3.10 billion, of which 26,200 units are for direct sales and 4,800 units
are for lease to third parties. Backlog units for lease may be syndicated to third parties or held in our own fleet depending on a variety of factors. Backlog as of May 31, 2016 was approximately 31,200 units with an estimated value of
$3.62 billion. 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 May 31, 2017 was $63 million compared to $51 million as of May 31, 2016.
Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Certain orders in backlog are subject to
customary documentation and completion of terms. Customers may attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of
deliveries may be modified from time to time. We cannot guarantee that our reported railcar backlog will convert to revenue in any particular period, if at all.
In May 2017, we completed our previously announced additional investment in Greenbrier-Maxion, a railcar manufacturer in Brazil, which resulted in an increase
in our ownership from 19.5% to 60% for $20 million, which was used to retire third-party debt at Greenbrier-Maxion. Simultaneously with the closing of our investment into Greenbrier-Maxion, we increased our ownership from 19.5% to 24.5% for
$3.25 million in Amsted-Maxion Cruzeiro, a manufacturer of castings and components for railcars and other heavy equipment. Proceeds from our increased ownership in Amsted-Maxion Cruzeiro, along with loans from each of the partners, were used to
retire third-party debt at Amsted-Maxion Cruzeiro. We retain an option to increase our ownership in Amsted-Maxion Cruzeiro to 29.5% subject to certain conditions. With an increased ownership position in both companies, we expect to benefit from the
anticipated economic growth and infrastructure development in Brazil. Our investments in Greenbrier-Maxion and Amsted-Maxion Cruziero improved the capital structure of both companies, positioning each business for growth. We continue to account for
these investments under the equity method of accounting.
25
THE GREENBRIER COMPANIES, INC.
In June 2017, we completed our previously announced plans to create Greenbrier-Astra Rail. The combined
enterprise was formed between our European operations headquartered in Swidnica, Poland and Astra Rail, based in Germany and Arad, Romania. The combination creates Europes largest
end-to-end
freight railcar manufacturing, engineering and repair business. Greenbrier-Astra Rail is controlled by us with an approximate 75% interest and we will
consolidate Greenbrier-Astra Rail for financial reporting purposes. We paid 30 million in June 2017 and will pay an additional 30 million in June 2018 as consideration for this transaction.
In June 2017, we completed agreements with MUL to expand our existing commercial relationship in North America consistent with the previously announced
Memorandum of Understanding. MUL intends to grow its portfolio from 5,000 railcars to a total of 25,000 railcars over the next four years. As part of these growth plans, MUL has entered a multi-year purchase commitment for 6,000 newly-manufactured
railcars from us, with deliveries commencing during the fourth calendar quarter of 2017 and continuing through calendar 2020. Further, MUL will obtain all its newly-manufactured railcars exclusively from us through calendar 2023. In addition to the
new equipment ordered, over the next several years, MUL will supplement its portfolio growth through a combination of lease syndications and used equipment originated and owned by us. The parties have also formed MUL Greenbrier Management Services,
LLC, a new railcar management services entity owned 50% by each company that will solely manage all railcars in the MUL fleet. We will receive continuing fee income related to the ongoing railcar asset management services provided for the MUL fleet.
The combined value of these transactions exceeds $1 billion.
26
THE GREENBRIER COMPANIES, INC.
Three Months Ended May 31, 2017 Compared to Three Months Ended May 31, 2016
Overview
Revenue, cost of revenue, margin and operating
profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$
|
317,104
|
|
|
$
|
458,494
|
|
Wheels & Parts
|
|
|
85,231
|
|
|
|
78,417
|
|
Leasing & Services
|
|
|
36,826
|
|
|
|
75,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
439,161
|
|
|
|
612,866
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
245,228
|
|
|
|
352,775
|
|
Wheels & Parts
|
|
|
77,985
|
|
|
|
69,818
|
|
Leasing & Services
|
|
|
26,247
|
|
|
|
63,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349,460
|
|
|
|
485,768
|
|
Margin:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
71,876
|
|
|
|
105,719
|
|
Wheels & Parts
|
|
|
7,246
|
|
|
|
8,599
|
|
Leasing & Services
|
|
|
10,579
|
|
|
|
12,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,701
|
|
|
|
127,098
|
|
Selling and administrative
|
|
|
42,810
|
|
|
|
43,280
|
|
Net gain on disposition of equipment
|
|
|
(1,581
|
)
|
|
|
(311
|
)
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
48,472
|
|
|
|
84,129
|
|
Interest and foreign exchange
|
|
|
7,894
|
|
|
|
3,712
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and earnings (loss) from unconsolidated affiliates
|
|
|
40,578
|
|
|
|
80,417
|
|
Income tax expense
|
|
|
(8,656
|
)
|
|
|
(22,449
|
)
|
|
|
|
|
|
|
|
|
|
Earnings before earnings (loss) from unconsolidated affiliates
|
|
|
31,922
|
|
|
|
57,968
|
|
Earnings (loss) from unconsolidated affiliates
|
|
|
(681
|
)
|
|
|
1,564
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
31,241
|
|
|
|
59,532
|
|
Net (earnings) loss attributable to noncontrolling interest
|
|
|
1,582
|
|
|
|
(24,180
|
)
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Greenbrier
|
|
$
|
32,823
|
|
|
$
|
35,352
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
1.03
|
|
|
$
|
1.12
|
|
Performance for our segments is evaluated based on 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.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
May 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
Operating profit (loss):
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$
|
57,901
|
|
|
$
|
92,713
|
|
Wheels & Parts
|
|
|
4,239
|
|
|
|
5,811
|
|
Leasing & Services
|
|
|
7,084
|
|
|
|
8,298
|
|
Corporate
|
|
|
(20,752
|
)
|
|
|
(22,693
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
48,472
|
|
|
$
|
84,129
|
|
|
|
|
|
|
|
|
|
|
27
THE GREENBRIER COMPANIES, INC.
Consolidated Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
439,161
|
|
|
$
|
612,866
|
|
|
$
|
(173,705
|
)
|
|
|
(28.3%)
|
|
Cost of revenue
|
|
$
|
349,460
|
|
|
$
|
485,768
|
|
|
$
|
(136,308
|
)
|
|
|
(28.1%)
|
|
Margin (%)
|
|
|
20.4
|
%
|
|
|
20.7
|
%
|
|
|
(0.3
|
%)
|
|
|
*
|
|
Net earnings attributable to Greenbrier
|
|
$
|
32,823
|
|
|
$
|
35,352
|
|
|
$
|
(2,529
|
)
|
|
|
(7.2%)
|
|
Through our integrated business model, we provide a broad range of custom products and
services in each of our segments, which have various average selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.
The 28.3% decrease in revenue for the three months ended May 31, 2017 as compared to the three months ended May 31, 2016 was primarily due to a
30.8% decrease in Manufacturing revenue. The decrease in Manufacturing revenue was primarily due to a 39.5% decrease in the volume of railcar deliveries which was partially offset by a higher average selling price. The decrease was also attributed
to a 51.5% decrease in Leasing & Services revenue, which is the result of the decrease in the sale of railcars which we had purchased from third parties with the intent to resell them. These were partially offset by an 8.7% increase in
Wheels & Parts revenue, primarily a result of a change in product mix, an increase in scrap metal pricing and volume, and an increase in parts volume.
The 28.1% decrease in cost of revenue for the three months ended May 31, 2017 as compared to the three months ended May 31, 2016 was due to a 30.5%
decrease in Manufacturing cost of revenue. The decrease in Manufacturing cost of revenue was primarily due to a 39.5% decrease in the volume of railcar deliveries which was partially offset by a product mix which had a higher average labor and
material content. The decrease was also attributed to a 58.5% decrease in Leasing & Services cost of revenue primarily due to a decrease in costs associated with a decline in the volume of railcars sold that we purchased from third parties.
These were partially offset by an 11.7% increase in Wheels & Parts cost of revenue, primarily due to a change in product mix with a higher average cost and an increase in parts volume.
Margin as a percentage of revenue was 20.4% and 20.7% for the three months ended May 31, 2017 and 2016, respectively. The overall margin as a percentage
of revenue was negatively impacted by a decrease in Manufacturing margin to 22.7% from 23.1% primarily due to a change in product mix and a reduction in the volume of railcar deliveries. In addition, the overall margin as a percentage of revenue was
negatively impacted by a decrease in Wheels & Parts margin to 8.5% from 11.0%, primarily due to a change in wheel product mix. The margin decrease in Manufacturing and Wheels & Parts was partially offset by an increase in
Leasing & Services margin to 28.7% from 16.8% which was primarily a result of a decrease in the sale of railcars that we purchased from third parties which have lower margin percentages.
Net earnings attributable to Greenbrier is impacted by our operating activities and noncontrolling interest due to a 50/50 joint venture at one of our Mexican
railcar manufacturing facilities that we consolidate for financial reporting purposes. The $2.5 million decrease in net earnings for the three months ended May 31, 2017 as compared to the three months ended May 31, 2016 was primarily
attributable to a decrease in margin, net of tax, due to lower railcar deliveries. The margin decrease was partially offset by our Mexican railcar manufacturing 50/50 joint venture operating at lower volumes and margins in 2017 which resulted in a
decrease in attributable to noncontrolling interest in the current year.
28
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
317,104
|
|
|
$
|
458,494
|
|
|
$
|
(141,390
|
)
|
|
|
(30.8
|
%)
|
Cost of revenue
|
|
$
|
245,228
|
|
|
$
|
352,775
|
|
|
$
|
(107,547
|
)
|
|
|
(30.5
|
%)
|
Margin (%)
|
|
|
22.7
|
%
|
|
|
23.1
|
%
|
|
|
(0.4
|
%)
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
57,901
|
|
|
$
|
92,713
|
|
|
$
|
(34,812
|
)
|
|
|
(37.5
|
%)
|
Operating profit (%)
|
|
|
18.3
|
%
|
|
|
20.2
|
%
|
|
|
(1.9
|
%)
|
|
|
*
|
|
Deliveries
|
|
|
2,600
|
|
|
|
4,300
|
|
|
|
(1,700
|
)
|
|
|
(39.5
|
%)
|
Manufacturing revenue was $317.1 million and $458.5 million for the three months
ended May 31, 2017 and 2016, respectively. Manufacturing revenue decreased $141.4 million or 30.8% in 2017 primarily due to a 39.5% decrease in the volume of railcar deliveries which was partially offset by a higher average selling price
due to a change in product mix.
Manufacturing cost of revenue was $245.2 million and $352.8 million for the three months ended May 31,
2017 and 2016, respectively. Cost of revenue decreased $107.5 million or 30.5% primarily due to a 39.5% decrease in the volume of railcar deliveries which was partially offset by a product mix that had a higher average labor and material
content.
Manufacturing margin as a percentage of revenue for the three months ended May 31, 2017 was 22.7% compared to 23.1% for the three months
ended May 31, 2016. The 0.4% decrease in margin was primarily due to a change in product mix and a reduction in the volume of railcar deliveries. These were partially offset by a customer order renegotiation fee received during the three months
ended May 31, 2017.
Manufacturing operating profit was $57.9 million or 18.3% of revenue for the three months ended May 31, 2017 and
$92.7 million or 20.2% of revenue for the three months ended May 31, 2016. The $34.8 million or 37.5% decrease in operating profit was primarily attributed to a decrease in margin due to lower railcar deliveries.
29
THE GREENBRIER COMPANIES, INC.
Wheels & Parts Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
85,231
|
|
|
$
|
78,417
|
|
|
$
|
6,814
|
|
|
|
8.7
|
%
|
Cost of revenue
|
|
$
|
77,985
|
|
|
$
|
69,818
|
|
|
$
|
8,167
|
|
|
|
11.7
|
%
|
Margin (%)
|
|
|
8.5
|
%
|
|
|
11.0
|
%
|
|
|
(2.5
|
%)
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
4,239
|
|
|
$
|
5,811
|
|
|
$
|
(1,572
|
)
|
|
|
(27.1
|
%)
|
Operating profit (%)
|
|
|
5.0
|
%
|
|
|
7.4
|
%
|
|
|
(2.4
|
%)
|
|
|
*
|
|
Wheels & Parts revenue was $85.2 million and $78.4 million for the three
months ended May 31, 2017 and 2016, respectively. The $6.8 million or 8.7% increase in revenue was primarily a result of a change in product mix, an increase in scrap metal pricing and volume, and an increase in parts volume.
Wheels & Parts cost of revenue was $78.0 million and $69.8 million for the three months ended May 31, 2017 and 2016, respectively.
Cost of revenue increased $8.2 million or 11.7% primarily due to a change in product mix with a higher average cost and an increase in parts volume.
Wheels & Parts margin as a percentage of revenue for the three months ended May 31, 2017 was 8.5% compared to 11.0% for the three months ended
May 31, 2016. The 2.5% decrease in margin was primarily due to a change in wheel product mix. This was partially offset by an increase in scrap metal pricing and a more favorable parts product mix.
Wheels & Parts operating profit was $4.2 million or 5.0% of revenue for the three months ended May 31, 2017 and $5.8 million or 7.4%
of revenue for the three months ended May 31, 2016. The $1.6 million or 27.1% decrease in operating profit was primarily attributed to a decrease in margin due to a change in wheel product mix.
30
THE GREENBRIER COMPANIES, INC.
Leasing & Services Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
36,826
|
|
|
$
|
75,955
|
|
|
$
|
(39,129
|
)
|
|
|
(51.5
|
%)
|
Cost of revenue
|
|
$
|
26,247
|
|
|
$
|
63,175
|
|
|
$
|
(36,928
|
)
|
|
|
(58.5
|
%)
|
Margin (%)
|
|
|
28.7
|
%
|
|
|
16.8
|
%
|
|
|
11.9
|
%
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
7,084
|
|
|
$
|
8,298
|
|
|
$
|
(1,214
|
)
|
|
|
(14.6
|
%)
|
Operating profit (%)
|
|
|
19.2
|
%
|
|
|
10.9
|
%
|
|
|
8.3
|
%
|
|
|
*
|
|
The Leasing & Services segment primarily generates revenue
from leasing railcars from our lease fleet and providing various management services. 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 with leases
attached are recorded in revenue and the cost of purchasing these railcars are recorded in cost of revenue.
Leasing & Services revenue was
$36.8 million and $76.0 million for the three months ended May 31, 2017 and 2016, respectively. The $39.1 million or 51.5% decrease in revenue was primarily the result of a $38.8 million decrease in the sale of railcars
which we had purchased from third parties with the intent to resell them. The decrease in revenue was also due to lower average volume of rent-producing leased railcars for syndication, which are held short term and classified as Leased railcars for
syndication on our Consolidated Balance Sheet.
Leasing & Services cost of revenue was $26.2 million and $63.2 million for the three
months ended May 31, 2017 and 2016, respectively. Cost of revenue decreased $36.9 million or 58.5% primarily due to a decrease in costs associated with a decline in the volume of railcars sold that we purchased from third parties. This was
partially offset by higher transportation and storage costs.
Leasing & Services margin as a percentage of revenue for the three months ended
May 31, 2017 was 28.7% compared to 16.8% for the three months ended May 31, 2016. The 11.9% increase was primarily as a result of a decrease in railcars sold that we purchased from third parties which have lower margin percentages. This
was partially offset by higher transportation and storage costs.
Leasing & Services operating profit was $7.1 million or 19.2% of revenue
for the three months ended May 31, 2017 and $8.3 million or 10.9% of revenue for the three months ended May 31, 2016. The $1.2 million or 14.6% decrease in operating profit was primarily attributed to a decrease in margin.
The percentage of owned units on lease was 93.6% at May 31, 2017 compared to 94.9% at May 31, 2016. These exclude newly manufactured railcars not
yet on lease. The prior year also included a railcar portfolio acquisition that we purchased with the intent to sell.
31
THE GREENBRIER COMPANIES, INC.
GBW Joint Venture Segment
GBW, an unconsolidated 50/50 joint venture, generated total revenue of $62.7 million and $95.7 million for the three months ended May 31, 2017
and 2016, respectively. The decrease in revenue of $33.0 million and 34.5% was primarily due to a decrease in the volume of repair work.
GBW margin
as a percentage of revenue for the three months ended May 31, 2017 was negative 1.1% compared to 9.9% for the three months ended May 31, 2016. The decrease in margin percentage was primarily due to inefficiencies of operating at lower
volumes of repair work.
To reflect our 50% share of GBWs net results, we recorded a loss of $1.6 million and earnings of $1.2 million in
Earnings (loss) from unconsolidated affiliates for the three months ended May 31, 2017 and 2016, respectively.
Selling and Administrative Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Selling and administrative expense
|
|
$
|
42,810
|
|
|
$
|
43,280
|
|
|
$
|
(470
|
)
|
|
|
(1.1
|
%)
|
Selling and administrative expense was $42.8 million or 9.7% of revenue for the three months ended May 31, 2017
compared to $43.3 million or 7.1% of revenue for the prior comparable period. The $0.5 million decrease was primarily attributed to a $0.6 million decrease in short term and long term incentive compensation and a $0.5 million
decrease in the revenue-based fees paid to our joint venture partner in Mexico. This was partially offset by a $0.7 million net increase in legal, consulting and related costs primarily associated with litigation, strategic business development
and IT initiatives.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment was $1.6 million for the three months ended May 31, 2017 compared to $0.3 million for the prior comparable
period.
Net gain on disposition of equipment 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.
32
THE GREENBRIER COMPANIES, INC.
Other Costs
Interest and foreign exchange expense was composed of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Three Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
2017
|
|
|
2016
|
|
|
Interest and foreign exchange:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other expense
|
|
$
|
7,030
|
|
|
$
|
3,925
|
|
|
$
|
3,105
|
|
Foreign exchange (gain) loss
|
|
|
864
|
|
|
|
(213
|
)
|
|
|
1,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,894
|
|
|
$
|
3,712
|
|
|
$
|
4,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $4.2 million increase in interest and foreign exchange expense from the prior comparable period was primarily
attributed to interest expense associated with our $275 million convertible senior notes due 2024 which we issued in February 2017. In addition, the increase was attributed to a $0.9 million foreign exchange loss in the current year
compared to a $0.2 million foreign exchange gain in the prior comparable period. The $1.1 million change in foreign exchange (gain) loss was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.
Income Tax
The tax rate for the
three months ended May 31, 2017 was 21.3%, compared to 27.9% for the three months ended May 31, 2016. The decrease in the tax rate was primarily attributable to the impact of discrete items and the year to date
true-up
of the estimated annual effective tax rate resulting in a cumulative adjustment to the tax expense during the three months ended May 31, 2017. The projected annual rate is anticipated to be
approximately 29%.
The tax rate can fluctuate
period-to-period
due to
changes in the projected mix of foreign and domestic
pre-tax
earnings and due to discrete tax items booked within the interim period. It can also fluctuate with changes in the proportion of projected
pre-tax
earnings attributable to our Mexican railcar manufacturing joint venture because the joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnerships entire
pre-tax
earnings are included in Earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
Earnings (Loss) From Unconsolidated Affiliates
Earnings
(loss) from unconsolidated affiliates primarily included our share of
after-tax
results from our GBW joint venture including eliminations associated with GBW transactions with other Greenbrier entities, our
castings joint venture, our tank head joint venture and our Brazil operations which include a castings joint venture and a railcar manufacturing joint venture.
Loss from unconsolidated affiliates was $0.7 million for the three months ended May 31, 2017 compared to earnings from unconsolidated affiliates of
$1.6 million for the three months ended May 31, 2016. The $2.3 million decrease in Earnings (loss) from unconsolidated affiliates was primarily attributed to a loss from GBW due to lower repair volumes.
Noncontrolling Interest
Net loss attributable to
noncontrolling interest was $1.6 million for the three months ended May 31, 2017 compared to net earnings attributable to noncontrolling interest of $24.2 million in the prior comparable period. These amounts primarily represent our
joint venture partners share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The decrease of $25.8 million from the prior year is primarily a result of a decrease in the
volume of railcar deliveries.
33
THE GREENBRIER COMPANIES, INC.
Nine Months Ended May 31, 2017 Compared to Nine Months Ended May 31, 2016
Overview
Revenue, cost of revenue, margin and operating
profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
2017
|
|
|
2016
|
|
Revenue:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$
|
1,216,641
|
|
|
$
|
1,611,686
|
|
Wheels & Parts
|
|
|
237,580
|
|
|
|
247,604
|
|
Leasing & Services
|
|
|
103,536
|
|
|
|
225,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,557,757
|
|
|
|
2,084,334
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
948,436
|
|
|
|
1,247,635
|
|
Wheels & Parts
|
|
|
218,460
|
|
|
|
224,208
|
|
Leasing & Services
|
|
|
69,484
|
|
|
|
180,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,236,380
|
|
|
|
1,652,580
|
|
Margin:
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
268,205
|
|
|
|
364,051
|
|
Wheels & Parts
|
|
|
19,120
|
|
|
|
23,396
|
|
Leasing & Services
|
|
|
34,052
|
|
|
|
44,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
321,377
|
|
|
|
431,754
|
|
Selling and administrative
|
|
|
123,518
|
|
|
|
118,073
|
|
Net gain on disposition of equipment
|
|
|
(4,793
|
)
|
|
|
(11,326
|
)
|
|
|
|
|
|
|
|
|
|
Earnings from operations
|
|
|
202,652
|
|
|
|
325,007
|
|
Interest and foreign exchange
|
|
|
15,291
|
|
|
|
10,565
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes and earnings (loss) from unconsolidated affiliates
|
|
|
187,361
|
|
|
|
314,442
|
|
Income tax expense
|
|
|
(53,900
|
)
|
|
|
(92,902
|
)
|
|
|
|
|
|
|
|
|
|
Earnings before earnings (loss) from unconsolidated affiliates
|
|
|
133,461
|
|
|
|
221,540
|
|
Earnings (loss) from unconsolidated affiliates
|
|
|
(5,253
|
)
|
|
|
2,921
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
128,208
|
|
|
|
224,461
|
|
Net earnings attributable to noncontrolling interest
|
|
|
(35,887
|
)
|
|
|
(74,808
|
)
|
|
|
|
|
|
|
|
|
|
Net earnings attributable to Greenbrier
|
|
$
|
92,321
|
|
|
$
|
149,653
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
|
$
|
2.91
|
|
|
$
|
4.67
|
|
Performance for our segments is evaluated based on 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)
|
|
Nine Months Ended
May 31,
|
|
|
2017
|
|
|
2016
|
|
Operating profit (loss):
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$
|
226,611
|
|
|
$
|
325,215
|
|
Wheels & Parts
|
|
|
12,702
|
|
|
|
15,720
|
|
Leasing & Services
|
|
|
24,363
|
|
|
|
42,668
|
|
Corporate
|
|
|
(61,024
|
)
|
|
|
(58,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
202,652
|
|
|
$
|
325,007
|
|
|
|
|
|
|
|
|
|
|
34
THE GREENBRIER COMPANIES, INC.
Consolidated Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
1,557,757
|
|
|
$
|
2,084,334
|
|
|
$
|
(526,577
|
)
|
|
|
(25.3
|
%)
|
Cost of revenue
|
|
$
|
1,236,380
|
|
|
$
|
1,652,580
|
|
|
$
|
(416,200
|
)
|
|
|
(25.2
|
%)
|
Margin (%)
|
|
|
20.6
|
%
|
|
|
20.7
|
%
|
|
|
(0.1
|
%)
|
|
|
*
|
|
Net earnings attributable to Greenbrier
|
|
$
|
92,321
|
|
|
$
|
149,653
|
|
|
$
|
(57,332
|
)
|
|
|
(38.3
|
%)
|
Through our integrated business model, we provide a broad range of custom products and
services in each of our segments, which have various average selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.
The 25.3% decrease in revenue for the nine months ended May 31, 2017 as compared to the nine months ended May 31, 2016 was primarily due to a 24.5%
decrease in Manufacturing revenue. The decrease in Manufacturing revenue was primarily due to a 33.1% decrease in the volume of railcar deliveries which was partially offset by a higher average selling price. The decrease was also due to a 54.0%
decrease in Leasing & Services revenue, primarily the result of the decrease in the sale of railcars which we had purchased from third parties with the intent to resell them. The decrease was also due to a 4.0% decrease in Wheels &
Parts revenue, primarily a result of lower wheel set and component volumes due to a decrease in demand.
The 25.2% decrease in cost of revenue for the
nine months ended May 31, 2017 as compared to the nine months ended May 31, 2016 was due to a 24.0% decrease in Manufacturing cost of revenue. The decrease in Manufacturing cost of revenue was primarily due to a 33.1% decrease in the
volume of railcar deliveries which was partially offset by a product mix which had a higher average labor and material content. The decrease was also due to a 61.6% decrease in Leasing & Services cost of revenue primarily due to a decrease
in costs associated with a decline in the volume of railcars sold that we purchased from third parties. The decrease was also attributed to a 2.6% decrease in Wheels & Parts cost of revenue, primarily due to lower wheel set and component
costs associated with decreased volumes.
Margin as a percentage of revenue was 20.6% and 20.7% for the nine months ended May 31, 2017 and 2016,
respectively. The overall margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin to 22.0% from 22.6% primarily due to a change in product mix and a reduction in the volume of railcar deliveries. In addition,
the overall margin as a percentage of revenue was negatively impacted by a decrease in Wheels & Parts margin to 8.0% from 9.4%, primarily due to lower wheel set and component volumes. The overall margin as a percentage of revenue was
positively impacted by an increase in Leasing & Services margin to 32.9% from 19.7% which was primarily a result of a decrease in the sale of railcars that we purchased from third parties which have lower margin percentages.
Net earnings attributable to Greenbrier is impacted by our operating activities and noncontrolling interest due to a 50/50 joint venture at one of our Mexican
railcar manufacturing facilities that we consolidate for financial reporting purposes. The $57.3 million decrease in net earnings for the nine months ended May 31, 2017 as compared to the nine months ended May 31, 2016 was primarily
attributable to a decrease in margin, net of tax, due to lower railcar deliveries. This was partially offset by our Mexican railcar manufacturing 50/50 joint venture operating at lower volumes and margins in 2017 which resulted in lower Net earnings
attributable to noncontrolling interest in the current year.
35
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
1,216,641
|
|
|
$
|
1,611,686
|
|
|
$
|
(395,045
|
)
|
|
|
(24.5
|
%)
|
Cost of revenue
|
|
$
|
948,436
|
|
|
$
|
1,247,635
|
|
|
$
|
(299,199
|
)
|
|
|
(24.0
|
%)
|
Margin (%)
|
|
|
22.0
|
%
|
|
|
22.6
|
%
|
|
|
(0.6
|
%)
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
226,611
|
|
|
$
|
325,215
|
|
|
$
|
(98,604
|
)
|
|
|
(30.3
|
%)
|
Operating profit (%)
|
|
|
18.6
|
%
|
|
|
20.2
|
%
|
|
|
(1.6
|
%)
|
|
|
*
|
|
Deliveries
|
|
|
10,500
|
|
|
|
15,700
|
|
|
|
(5,200
|
)
|
|
|
(33.1
|
%)
|
Manufacturing revenue was $1.2 billion and $1.6 billion for the nine months ended
May 31, 2017 and 2016, respectively. Manufacturing revenue decreased $395.0 million or 24.5% in 2017 primarily due to a 33.1% decrease in the volume of railcar deliveries which was partially offset by a higher average selling price due to
a change in product mix.
Manufacturing cost of revenue was $0.9 billion and $1.2 billion for the nine months ended May 31, 2017 and 2016,
respectively. Cost of revenue decreased $299.2 million or 24.0% primarily due to a 33.1% decrease in the volume of railcar deliveries which was partially offset by a product mix that had a higher average labor and material content.
Manufacturing margin as a percentage of revenue for the nine months ended May 31, 2017 was 22.0% compared to 22.6% for the nine months ended May 31,
2016. The 0.6% decrease in margin was primarily due to a change in product mix and a reduction in the volume of railcar deliveries. These were partially offset by customer order renegotiation fees received during the nine months ended May 31,
2017.
Manufacturing operating profit was $226.6 million or 18.6% of revenue for the nine months ended May 31, 2017 and $325.2 million or
20.2% of revenue for the nine months ended May 31, 2016. The $98.6 million or 30.3% decrease in operating profit was primarily attributed to a decrease in margin due to lower railcar deliveries.
36
THE GREENBRIER COMPANIES, INC.
Wheels & Parts Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
237,580
|
|
|
$
|
247,604
|
|
|
$
|
(10,024
|
)
|
|
|
(4.0
|
%)
|
Cost of revenue
|
|
$
|
218,460
|
|
|
$
|
224,208
|
|
|
$
|
(5,748
|
)
|
|
|
(2.6
|
%)
|
Margin (%)
|
|
|
8.0
|
%
|
|
|
9.4
|
%
|
|
|
(1.4
|
%)
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
12,702
|
|
|
$
|
15,720
|
|
|
$
|
(3,018
|
)
|
|
|
(19.2
|
%)
|
Operating profit (%)
|
|
|
5.3
|
%
|
|
|
6.3
|
%
|
|
|
(1.0
|
%)
|
|
|
*
|
|
Wheels & Parts revenue was $237.6 million and $247.6 million for the nine
months ended May 31, 2017 and 2016, respectively. The $10.0 million or 4.0% decrease in revenue was primarily a result of lower wheel set and component volumes due to a decrease in demand partially offset by an increase in parts volume.
Wheels & Parts cost of revenue was $218.5 million and $224.2 million for the nine months ended May 31, 2017 and 2016,
respectively. Cost of revenue decreased $5.7 million or 2.6% primarily due to lower wheel set and component costs associated with decreased volumes.
Wheels & Parts margin as a percentage of revenue for the nine months ended May 31, 2017 was 8.0% compared to 9.4% for the nine months ended
May 31, 2016. The 1.4% decrease in margin was primarily due to lower wheel set and component volumes. This was partially offset by a more favorable parts product mix and an increase in scrap metal pricing.
Wheels & Parts operating profit was $12.7 million or 5.3% of revenue for the nine months ended May 31, 2017 and $15.7 million or 6.3%
of revenue for the nine months ended May 31, 2016. The $3.0 million or 19.2% decrease in operating profit was primarily attributed to a decrease in margin due to a decrease in wheel set and component volumes.
37
THE GREENBRIER COMPANIES, INC.
Leasing & Services Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Revenue
|
|
$
|
103,536
|
|
|
$
|
225,044
|
|
|
$
|
(121,508
|
)
|
|
|
(54.0
|
%)
|
Cost of revenue
|
|
$
|
69,484
|
|
|
$
|
180,737
|
|
|
$
|
(111,253
|
)
|
|
|
(61.6
|
%)
|
Margin (%)
|
|
|
32.9
|
%
|
|
|
19.7
|
%
|
|
|
13.2
|
%
|
|
|
*
|
|
Operating profit ($)
|
|
$
|
24,363
|
|
|
$
|
42,668
|
|
|
$
|
(18,305
|
)
|
|
|
(42.9
|
%)
|
Operating profit (%)
|
|
|
23.5
|
%
|
|
|
19.0
|
%
|
|
|
4.5
|
%
|
|
|
*
|
|
The Leasing & Services segment primarily generates revenue from leasing railcars from
our lease fleet and providing various management services. 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 with leases attached are recorded in revenue
and the cost of purchasing these railcars are recorded in cost of revenue.
Leasing & Services revenue was $103.5 million and
$225.0 million for the nine months ended May 31, 2017 and 2016, respectively. The $121.5 million or 54.0% decrease in revenue was primarily the result of a $115.8 million decrease in the sale of railcars which we had purchased
from third parties with the intent to resell them. The decrease in revenue was also due to lower average volume of rent-producing leased railcars for syndication, which are held short term and classified as Leased railcars for syndication on our
Consolidated Balance Sheet.
Leasing & Services cost of revenue was $69.5 million and $180.7 million for the nine months ended
May 31, 2017 and 2016, respectively. Cost of revenue decreased $111.3 million or 61.6% primarily due to a decrease in costs associated with a decline in the volume of railcars sold that we purchased from third parties. This was partially
offset by higher transportation and storage costs.
Leasing & Services margin as a percentage of revenue for the nine months ended May 31,
2017 was 32.9% compared to 19.7% for the nine months ended May 31, 2016. The 13.2% increase was primarily a result of a decrease in the sale of railcars that we purchased from third parties which have lower margin percentages. This was
partially offset by higher transportation and storage costs.
Leasing & Services operating profit was $24.4 million or 23.5% of revenue for
the nine months ended May 31, 2017 and $42.7 million or 19.0% of revenue for the nine months ended May 31, 2016. The $18.3 million or 42.9% decrease in operating profit was primarily attributed to a decrease in margin and a
decrease in net gain on disposition of equipment.
38
THE GREENBRIER COMPANIES, INC.
GBW Joint Venture Segment
GBW, an unconsolidated 50/50 joint venture, generated total revenue of $197.2 million and $289.4 million for the nine months ended May 31, 2017
and 2016, respectively. The decrease in revenue of $92.2 million and 31.9% was primarily due to a decrease in the volume of repair work.
GBW margin
as a percentage of revenue for the nine months ended May 31, 2017 was negative 1.9% compared to 9.8% for the nine months ended May 31, 2016. The decrease in margin percentage was primarily due to inefficiencies of operating at lower
volumes of repair work.
To reflect our 50% share of GBWs net results, we recorded a loss of $5.0 million and earnings of $3.3 million in
Earnings (loss) from unconsolidated affiliates for the nine months ended May 31, 2017 and 2016, respectively.
Selling and Administrative Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
|
|
Selling and administrative expense
|
|
$
|
123,518
|
|
|
$
|
118,073
|
|
|
$
|
5,445
|
|
|
|
4.6
|
%
|
Selling and administrative expense was $123.5 million or 7.9% of revenue for the nine months ended May 31, 2017
compared to $118.1 million or 5.7% of revenue for the prior comparable period. The $5.4 million increase was primarily attributed to a $9.0 million increase in legal and consulting costs primarily associated with litigation, strategic
business development and IT initiatives. This was partially offset by a $2.4 million decrease in short term and long term incentive compensation and a $1.4 million decrease in the revenue-based fees paid to our joint venture partner in
Mexico.
Net Gain on Disposition of Equipment
Net
gain on disposition of equipment was $4.8 million for the nine months ended May 31, 2017 compared to $11.3 million for the prior comparable period.
Net gain on disposition of equipment 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.
39
THE GREENBRIER COMPANIES, INC.
Other Costs
Interest and foreign exchange expense was composed of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Nine Months Ended
May 31,
|
|
|
Increase
(Decrease)
|
|
|
2017
|
|
|
2016
|
|
|
Interest and foreign exchange:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other expense
|
|
$
|
15,669
|
|
|
$
|
13,474
|
|
|
$
|
2,195
|
|
Foreign exchange gain
|
|
|
(378
|
)
|
|
|
(2,909
|
)
|
|
|
2,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,291
|
|
|
$
|
10,565
|
|
|
$
|
4,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The $4.7 million increase in interest and foreign exchange expense from the prior comparable period was attributed to
interest expense associated with our $275 million convertible senior notes due 2024 which we issued in February 2017. In addition, the increase was attributed to a $0.4 million foreign exchange gain in the current year compared to
$2.9 million in the prior comparable period. The $2.5 million decrease in foreign exchange gain was primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.
Income Tax
The tax rate for the nine months ended
May 31, 2017 was 28.8%, compared to 29.5% for the nine months ended May 31, 2016. The decrease in the tax rate was primarily attributable to the impact of discrete items. The projected annual rate is anticipated to be approximately 29%.
The tax rate can fluctuate
period-to-period
due to changes in the
projected mix of foreign and domestic
pre-tax
earnings and due to discrete tax items booked within the interim period. It can also fluctuate with changes in the proportion of projected
pre-tax
earnings attributable to our Mexican railcar manufacturing joint venture because the joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnerships entire
pre-tax
earnings are included in Earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
Earnings (Loss) From Unconsolidated Affiliates
Earnings
(loss) from unconsolidated affiliates primarily included our share of
after-tax
results from our GBW joint venture including eliminations associated with GBW transactions with other Greenbrier entities, our
castings joint venture, our tank head joint venture and our Brazil operations which include a castings joint venture and a railcar manufacturing joint venture.
Loss from unconsolidated affiliates was $5.3 million for the nine months ended May 31, 2017 compared to earnings from unconsolidated affiliates of
$2.9 million for the nine months ended May 31, 2016. The $8.2 million decrease in Earnings (loss) from unconsolidated affiliates was primarily attributed to a loss from GBW due to lower repair volumes.
Noncontrolling Interest
Net earnings attributable to
noncontrolling interest was $35.9 million for the nine months ended May 31, 2017 compared to $74.8 million in the prior comparable period. These amounts primarily represent our joint venture partners share in the results of
operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The decrease of $38.9 million from the prior year is primarily a result of a decrease in the volume of railcar deliveries.
40
THE GREENBRIER COMPANIES, INC.
Liquidity and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
May 31,
|
|
(In thousands)
|
|
2017
|
|
|
2016
|
|
Net cash provided by operating activities
|
|
$
|
72,723
|
|
|
$
|
194,678
|
|
Net cash provided by (used in) investing activities
|
|
|
(51,496
|
)
|
|
|
33,450
|
|
Net cash provided by (used in) financing activities
|
|
|
212,167
|
|
|
|
(179,900
|
)
|
Effect of exchange rate changes
|
|
|
9,340
|
|
|
|
(6,718
|
)
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
$
|
242,734
|
|
|
$
|
41,510
|
|
|
|
|
|
|
|
|
|
|
We have been financed through cash generated from operations and borrowings. At May 31, 2017, cash and cash equivalents
were $465.4 million, an increase of $242.7 million from $222.7 million at August 31, 2016.
Cash provided by operating activities was
$72.7 million for the nine months ended May 31, 2017 compared to $194.7 million for the nine months ended May 31, 2016. The decrease from the prior year was primarily due to lower earnings and a change in cash flows associated
with leased railcars for syndication and deferred revenue activities.
Cash provided by (used in) investing activities primarily related to capital
expenditures net of proceeds from the sale of assets. Cash used in investing activities for the nine months ended May 31, 2017 was $51.5 million compared to cash provided by investing activities $33.5 million for the nine months ended
May 31, 2016. The decrease compared to the prior year was primarily attributable to lower proceeds from the sale of assets and an increase in investment in and advances to unconsolidated affiliates, primarily related to our Brazil operations.
This was partially offset by a decrease in restricted cash compared to the prior year.
Capital expenditures totaled $53.8 million and
$51.7 million for the nine months ended May 31, 2017 and 2016, respectively. Proceeds from the sale of assets, which primarily related to sales of railcars from our lease fleet within Leasing & Services, were approximately
$20.3 million and $88.7 million for the nine months ended May 31, 2017 and 2016, respectively. These proceeds included approximately $7.7 million and $41.0 million of equipment sold pursuant to sale leaseback transactions
for the nine months ended May 31, 2017 and 2016, respectively. The gain resulting from the sale leaseback transactions was deferred and is being recognized over the lease term in Net gain on disposition of equipment. In addition, proceeds from
the sale of assets for the nine months ended May 31, 2017 included $3.7 million of insurance proceeds associated with our Manufacturing segment.
Approximately $26.7 million and $35.6 million of capital expenditures for the nine months ended May 31, 2017 and 2016, respectively were
attributable to Manufacturing operations. Capital expenditures for Manufacturing are expected to be approximately $45 million in 2017 and primarily relate to enhancements of our existing manufacturing facilities.
Approximately $24.6 million and $10.3 million of capital expenditures for the nine months ended May 31, 2017 and 2016, respectively were
attributable to Leasing & Services operations and corporate. Leasing & Services and corporate capital expenditures for 2017 are expected to be approximately $30 million. Proceeds from sales of leased railcar equipment and
insurance proceeds are expected to be $75 million for 2017. 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.
Approximately $2.5 million and $5.8 million of capital expenditures for the nine months ended May 31, 2017 and 2016, respectively were
attributable to Wheels & Parts operations. Capital expenditures for Wheels & Parts are expected to be approximately $5 million in 2017 for maintenance and enhancements of our existing facilities.
Cash provided by financing activities was $212.2 million for the nine months ended May 31, 2017 compared to cash used in financing activities of
$179.9 million for the nine months ended May 31, 2016. The increase from the prior year was primarily attributed to proceeds from the issuance of notes payable, a reduction in cash distribution to our joint venture partner and reduced
share repurchases.
41
THE GREENBRIER COMPANIES, INC.
A quarterly dividend of $0.22 per share was declared on June 28, 2017.
In February 2017, we issued $275 million of convertible senior notes due 2024. The notes are senior unsecured obligations and rank equally with other
senior unsecured debt. The notes bear interest at an annual rate of 2.875% payable semiannually in arrears on February 1 and August 1 of each year, commencing August 1, 2017. The notes will mature on February 1, 2024, unless
earlier repurchased or converted in accordance with their terms prior to such date.
The Board of Directors has authorized our company to repurchase in
aggregate up to $225 million of our common stock. We did not repurchase any shares during the nine months ended May 31, 2017. As of May 31, 2017, we 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 with an expiration date of January 1, 2018.
Senior
secured credit facilities, consisting of three components, aggregated to $616.3 million as of May 31, 2017. We had an aggregate of $419.6 million available to draw down under committed credit facilities as of May 31, 2017. This
amount consists of $353.3 million available on the North American credit facility, $16.3 million on the European credit facilities and $50.0 million on the Mexican railcar manufacturing joint venture credit facilities.
As of May 31, 2017, a $550.0 million revolving line of credit, maturing October 2020, 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 1.75% or Prime
plus 0.75% 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.
As of May 31, 2017, lines of credit totaling $16.3 million secured by certain of
our European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3%, were available for working capital needs of the European manufacturing operation. European credit facilities are
continually being renewed. Currently these European credit facilities have maturities that range from February 2018 through June 2019.
As of May 31,
2017, 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. Advances under this
facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility through January 2019. The second line of credit provides up to $20.0 million, of which we and our joint
venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through August 2017.
As of May 31, 2017, we had no borrowings outstanding under our senior secured credit facilities and outstanding commitments consisted of
$79.2 million in letters of credit under the North American credit facility.
The revolving and operating lines of credit, along with notes payable,
contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases;
create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of
substantially all our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of May 31, 2017, we were
in compliance with all such restrictive covenants.
We may from time to time seek to repurchase or otherwise retire or exchange securities,
including outstanding notes, borrowings and equity securities, and take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include open market repurchases, unsolicited or solicited privately
negotiated transactions
42
THE GREENBRIER COMPANIES, INC.
or other retirements, repurchases or exchanges. Such retirements, repurchases or exchanges, if any, will depend on a number of factors, including, but not limited to, prevailing market
conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable. The amounts involved in any such transactions may, individually or in the aggregate, be material and may involve all or a portion of
a particular series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other indebtedness which remain outstanding.
We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in
currencies other than the functional currency, we enter into foreign currency forward exchange contracts with established financial institutions to protect the margin on a portion of foreign currency sales in firm backlog. Given the strong credit
standing of the counterparties, no provision has been made for credit loss due to counterparty
non-performance.
As of May 31, 2017, the Mexican railcar manufacturing joint venture had $0.4 million of third party debt, of which we and our joint venture partner
have each guaranteed approximately $0.2 million.
In accordance with customary business practices in Europe, we have $1.2 million in third party
performance and warranty guarantee facilities as of May 31, 2017. To date no amounts have been drawn under these guarantee facilities.
We made
$0.6 million in cash contributions to GBW, an unconsolidated 50/50 joint venture, for the nine months ended May 31, 2017 which represented a reinvestment of a distribution received from GBW during the year. We are likely to make additional
capital contributions or loans to GBW in the future. As of May 31, 2017, we had a $36.5 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net.
We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit
facilities and long-term financings, to be sufficient to fund expected debt repayments, working capital needs, planned capital expenditures, a 30 million payment in June 2017 and an additional 30 million payment in June 2018 as
consideration for the Greenbrier-Astra Rail transaction and dividends during the next twelve months.
Off Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are likely to have a material current or future effect on our Consolidated Financial
Statements.
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THE GREENBRIER COMPANIES, INC.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgment on the part of management to
arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent
assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.
Income taxes
-
For financial reporting purposes, 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. Valuation allowances reduce deferred tax assets to amounts more likely than not that will be realized
based on information available when the financial statements are prepared. This information may include estimates of future income and other assumptions that are inherently uncertain.
Maintenance obligations
- We are responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance
obligations defined in the underlying lease or management agreement. The estimated maintenance liability is based on maintenance histories for each type and age of railcar. These estimates involve judgment as to the future costs of repairs and the
types and timing of repairs required over the lease term. As we cannot predict with certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could be materially
different from maintenance requirements. The liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. These adjustments could be material due to the inherent uncertainty in
predicting future maintenance requirements.
Warranty accruals
- Warranty costs to cover a defined warranty period are estimated and charged
to operations. The estimated warranty cost is based on historical warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product
types. These estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products. If warranty claims are made in the current period for issues that have not historically been the subject of
warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may exceed the accrual for that particular product.
Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we cannot predict future claims, the potential exists for the difference in
any one reporting period to be material.
Environmental costs
- At times we may be involved in various proceedings related to environmental
matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information.
If further developments in or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially
understated or overstated. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are
established are made. Due to the uncertain nature of environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or
proceeding, that such costs would not be material to us.
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THE GREENBRIER COMPANIES, INC.
Revenue recognition
- Revenue is recognized when persuasive evidence of an arrangement exists,
delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Railcars are generally
manufactured, repaired or refurbished and wheels and parts produced under firm orders from third parties. Revenue is recognized when these products or services are completed, accepted by an unaffiliated customer and contractual contingencies
removed. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears;
however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported. These estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar.
Adjustments to actual have historically not been significant. Revenues from construction of marine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the
terms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition. Under the percentage of
completion method, revenue is recognized based on the progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. Under the completed contract method, revenue is not recognized
until the project has been fully completed.
We will periodically sell railcars with leases attached to financial investors. Revenue and cost of revenue
associated with railcars that the Company has manufactured are recognized in Manufacturing once sold. Revenue and cost of revenue associated with railcars which were obtained from a third party with the intent to resell them and subsequently sold
are recognized in Leasing & Services. In addition we will often perform management or maintenance services at market rates for these railcars. Pursuant to the guidance in Accounting Standards Codification (ASC)
840-20-40,
we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those
provisions. We determine whether the level of retained risk exceeds 10% of the individual fair value of the railcars with leases attached that are delivered. For any contracts with multiple elements (i.e. railcars, maintenance, management services,
etc.) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we
will use the elements estimated selling price for purposes of allocating the total arrangement consideration among the elements.
Impairment of
long-lived assets
- When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assets are evaluated for impairment. If the forecast undiscounted future cash flows are less than the
carrying amount of the assets, an impairment charge to reduce the carrying value of the assets to fair value is recognized in the current period. These estimates are based on the best information available at the time of the impairment and could be
materially different if circumstances change. If the forecast undiscounted future cash flows exceeded the carrying amount of the assets it would indicate that the assets were not impaired.
Goodwill and acquired intangible assets
- We periodically acquire businesses in purchase transactions in which the allocation of the purchase price may
result in the recognition of goodwill and other intangible assets. The determination of the value of such intangible assets requires management to make estimates and assumptions. These estimates affect the amount of future period amortization and
possible impairment charges.
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill and
indefinite-lived intangible assets are also tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in the market price of our
common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be
recoverable, the assets are evaluated for impairment. Among other things, our assumptions used in the valuation of goodwill include growth of revenue and margins, market multiples, discount rates and increased cash flows over time. If actual
operating results were to differ from these assumptions, it may result in an impairment of our goodwill.
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THE GREENBRIER COMPANIES, INC.
The provisions of ASC 350, Intangibles - Goodwill and Other, require that we perform an impairment test on
goodwill. We compare the fair value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value
of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we estimate the fair value based on observed market multiples for comparable businesses. An impairment loss is recorded to the extent that the
reporting units carrying amount exceeds the reporting units fair value. An impairment loss cannot exceed the total amount of goodwill allocated to the reporting unit. The goodwill balance relates to the Wheels & Parts segment.
Goodwill was tested during the third quarter of 2017 and we concluded that goodwill was not impaired.
GBW, an unconsolidated 50/50 joint venture, also
tests goodwill and indefinite-lived intangible assets for impairment consistent with the methodology described above. During the third quarter of 2017, GBW performed its annual impairment test and concluded that no impairment existed. However, the
estimated fair value of goodwill exceeded its carrying value by approximately 4%. Since the estimated fair value was not substantially in excess of its carrying value, GBW may be at risk for an impairment loss in the future if sales or profitability
trends or market multiples decline from those that were expected or assumed in the fair value calculation. As we account for GBW under the equity method of accounting, an impairment loss recognized by GBW would be included as part of Earnings (loss)
from unconsolidated affiliates on our Consolidated Statement of Income. As of May 31, 2017 GBW had $52.7 million of goodwill.
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THE GREENBRIER COMPANIES, INC.