GREENBRIER COMPANIES INC
10-Ks and 10-Qs
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Table of Contents
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
Washington, D.C. 20549-1004
Form 10-K
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þ
Annual
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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For the fiscal year ended August 31,
2010
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or
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o
Transition
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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for the transition period from
to
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Commission File
No. 1-13146
THE
GREENBRIER COMPANIES, INC.
(Exact name of Registrant as
specified in its charter)
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Oregon
(State of Incorporation) |
93-0816972
(I.R.S. Employer Identification No.) |
One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices)
(Address of principal executive offices)
(503) 684-7000
(Registrant’s telephone number, including area code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to
Section 12(b) of the Act:
|
(Title of Each Class)
|
(Name of Each Exchange on Which Registered) | |
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Common Stock without par value
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New York Stock Exchange |
Securities registered pursuant to
Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
X
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15 (d) of the
Act. Yes
No
X
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
X
No
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes
No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
x
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2
of the
Exchange Act. (Check one):
|
Large accelerated filer
|
Accelerated filer X | Non-accelerated filer | Smaller reporting company | |||
| (Do not check if a smaller reporting company) | ||||||
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
No
X
Aggregate market value of the Registrant’s Common Stock
held by non-affiliates as of February 28, 2010 (based on
the closing price of such shares on such date) was $157,475,796.
The number of shares outstanding of the Registrant’s Common
Stock on October 31, 2010 was 21,880,820, without par value.
DOCUMENTS
INCORPORATED BY REFERENCE
Parts of Registrant’s Proxy Statement dated
November 22, 2010 prepared in connection with the Annual
Meeting of Stockholders to be held on January 7, 2011 are
incorporated by reference into Parts II and III of
this Report.
The Greenbrier
Companies, Inc.
Form 10-K
TABLE OF
CONTENTS
| 2 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Forward-Looking
Statements
From time to time, The Greenbrier Companies, Inc. and its
subsidiaries (Greenbrier or the Company) or their
representatives have made or may make forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including, without limitation,
statements as to expectations, beliefs and strategies regarding
the future. Such forward-looking statements may be included in,
but not limited to, press releases, oral statements made with
the approval of an authorized executive officer or in various
filings made by us with the Securities and Exchange Commission,
including this filing on
Form 10-K
and in the Company’s President’s letter to
stockholders that is typically distributed to the stockholders
in conjunction with this
Form 10-K
and the Company’s Proxy Statement. These statements involve
known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements. These forward-looking statements
rely on a number of assumptions concerning future events and
include statements relating to:
| • | availability of financing sources and borrowing base for working capital, other business development activities, capital spending and railcar and marine warehousing activities; |
| • | ability to renew, maintain or obtain sufficient lines of credit and performance guarantees on acceptable terms; |
| • | ability to utilize beneficial tax strategies; |
| • | ability to grow our wheel services, refurbishment and parts, and lease fleet and management services businesses; |
| • | ability to obtain sales contracts which provide adequate protection against increased costs of materials and components; |
| • | ability to obtain adequate insurance coverage at acceptable rates; |
| • | ability to obtain adequate certification and licensing of products; and |
| • | short- and long-term revenue and earnings effects of the above items. |
The following factors, among others, could cause actual results
or outcomes to differ materially from the forward-looking
statements:
| • | fluctuations in demand for newly manufactured railcars or marine barges; |
| • | fluctuations in demand for wheel services, refurbishment and parts; |
| • | delays in receipt of orders, risks that contracts may be canceled during their term or not renewed and that customers may not purchase the amount of products or services under the contracts as anticipated; |
| • | ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements; |
| • | domestic and global economic conditions including such matters as embargoes or quotas; |
| • | U.S., Mexican and other global political or security conditions including such matters as terrorism, war, civil disruption and crime; |
| • | growth or reduction in the surface transportation industry; |
| • | ability to maintain good relationships with our workforce, including third party labor providers and collective bargaining units; |
| • | steel and specialty component price fluctuations, scrap surcharges, steel scrap prices and other commodity price fluctuations and their impact on product demand and margin; |
| • | a delay or failure of acquired businesses, start-up operations, or new products or services to compete successfully; |
| • | changes in product mix and the mix of revenue levels among reporting segments; |
| • | labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo; |
| • | production difficulties and product delivery delays as a result of, among other matters, changing technologies or non-performance of alliance partners, subcontractors or suppliers; |
| • | ability to renew or replace expiring customer contracts on satisfactory terms; |
| • | ability to obtain and execute suitable contracts for railcars held for sale; |
| • | lower than anticipated lease renewal rates, earnings on utilization based leases or residual values for leased equipment; |
| • | discovery of defects in railcars resulting in increased warranty costs or litigation; |
| The Greenbrier Companies 2010 Annual Report | 3 |
Table of Contents
| • | resolution or outcome of pending or future litigation and investigations; |
| • | loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues; |
| • | competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base and competitiveness of our manufacturing facilities and products; |
| • | industry overcapacity and our manufacturing capacity utilization; |
| • | decreases in carrying value of inventory, goodwill or other assets due to impairment; |
| • | severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations; |
| • | changes in future maintenance or warranty requirements; |
| • | ability to adjust to the cyclical nature of the industries in which we operate; |
| • | changes in interest rates and financial impacts from interest rates; |
| • | ability and cost to maintain and renew operating permits; |
| • | actions by various regulatory agencies; |
| • | changes in fuel and/or energy prices; |
| • | risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continued use of such rights; |
| • | expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry; |
| • | availability of a trained work force and availability and/or price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order; |
| • | failure to successfully integrate acquired businesses; |
| • | discovery of previously unknown liabilities associated with acquired businesses; |
| • | failure of or delay in implementing and using new software or other technologies; |
| • | ability to replace maturing lease and management services revenue and earnings with revenue and earnings from new commercial transactions, including new railcar leases, additions to the lease fleet and new management services contracts; |
| • | credit limitations upon our ability to maintain effective hedging programs; and |
| • | financial impacts from currency fluctuations and currency hedging activities in our worldwide operations. |
Any forward-looking statements should be considered in light of
these factors. Words such as “anticipates,”
“believes,” “forecast,”
“potential,” “contemplates,”
“expects,” “intends,” “plans,”
“seeks,” “estimates,” “could,”
“would,” “will,” “may,”
“can,” and similar expressions identify
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to risks
and uncertainties that could cause actual results to differ
materially from the results contemplated by the forward-looking
statements. Many of the important factors that will determine
these results and values are beyond our ability to control or
predict. You are cautioned not to put undue reliance on any
forward-looking statements. Except as otherwise required by law,
we do not assume any obligation to update any forward-looking
statements.
All references to years refer to the fiscal years ended
August 31
st
unless
otherwise noted.
The Greenbrier Companies is a registered trademark of The
Greenbrier Companies, Inc. Gunderson, Maxi-Stack, Auto-Max and
YSD are registered trademarks of Gunderson LLC.
| 4 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Item 1. | BUSINESS |
Introduction
We are one of the leading designers, manufacturers and marketers
of railroad freight car equipment in North America and
Europe, a manufacturer and marketer of ocean-going marine barges
in North America and a leading provider of wheel services,
railcar refurbishment and parts, leasing and other services to
the railroad and related transportation industries in North
America.
We operate an integrated business model in North America that
combines wheel services, repair and refurbishment, component
parts reconditioning, freight car manufacturing, leasing and
fleet management services. Our model is designed to provide
customers with a comprehensive set of freight car solutions
utilizing our substantial engineering, mechanical and technical
capabilities as well as our experienced commercial personnel.
This model allows us to develop cross-selling opportunities and
synergies among our various business segments and to enhance our
margins. We believe our integrated model is difficult to
duplicate and provides greater value for our customers.
We operate in three primary business segments: Manufacturing;
Wheel Services, Refurbishment & Parts and
Leasing & Services. Financial information about our
business segments for the years ended August 31, 2010, 2009
and 2008 is located in Note 23 Segment Information to our
Consolidated Financial Statements.
We are a corporation formed in 1981. Our principal executive
offices are located at One Centerpointe Drive, Suite 200,
Lake Oswego, Oregon 97035, our telephone number is
(503) 684-7000
and our Internet web site is located at
http://www.gbrx.com
.
Products and
Services
Manufacturing
North American Railcar Manufacturing
-
We
manufacture a broad array of railcar types in North America and
have demonstrated an ability to capture high market shares in
many of the car types we produce. We are the leading North
American manufacturer of intermodal railcars with an average
market share of approximately 60% over the last five years. In
addition to our strength in intermodal railcars, we have
commanded an average market share of approximately 60% in
boxcars, 35% in flat cars and 10% in covered hoppers over the
last five years and we have recently entered the tank car
market. The primary products we produce for the North American
market are:
Intermodal Railcars -
We manufacture a comprehensive
range of intermodal railcars. Our most important intermodal
product is our articulated double-stack railcar. The
double-stack railcar is designed to transport containers stacked
two-high on a single platform. An articulated double-stack
railcar is comprised of up to five platforms each of which is
linked by a common set of wheels and axles. Our comprehensive
line of articulated and non-articulated double-stack intermodal
railcars offers varying load capacities and configurations. The
double-stack railcar provides significant operating and capital
savings over other types of intermodal railcars.
Conventional Railcars -
We produce a wide range of
boxcars, which are used in forest products, automotive,
perishables, general merchandise applications and the transport
of commodities. We also produce a variety of covered hopper cars
for the grain and cement industries as well as gondolas for the
steel and metals markets and various other conventional railcar
types, including our proprietary Auto-Max car. Our flat car
products include center partition cars for the forest products
industry, bulkhead flat cars, flat cars for automotive
transportation and solid waste service flat cars.
Tank Cars -
We produce a line of tank car products
for the North American market. We produce 30,000-gallon
non-coiled, non-insulated tank cars, which are used to transport
ethanol, methanol and more than 60 other commodities. We also
produce 16,500 gallon coiled, insulated tank cars for use in
caustic soda service, and 25,500 gallon
and/or
23,500 gallon coiled, insulated tank cars for use to transport a
variety of commodities such as vegetable oils and bio-diesel.
| The Greenbrier Companies 2010 Annual Report | 5 |
Table of Contents
European Railcar Manufacturing -
Our European
manufacturing operation produces a variety of railcar (wagon)
types, including a comprehensive line of pressurized tank cars
for liquid petroleum gas and ammonia and non-pressurized tank
cars for light oil, chemicals and other products. In addition,
we produce flat cars, coil cars for the steel and metals market,
coal cars for both the continental European and United Kingdom
markets, gondolas, sliding wall cars and automobile transporter
cars. Although no formal statistics are available for the
European market, we believe we are one of the largest new
freight car manufacturers with an estimated market share of
10-15%.
Marine Vessel Fabrication -
Our Portland,
Oregon manufacturing facility, located on a deep-water port on
the Willamette River, includes marine vessel fabrication
capabilities. The marine facilities also increase utilization of
steel plate burning and fabrication capacity providing
flexibility for railcar production. We manufacture a broad range
of ocean-going barges including conventional deck barges,
double-hull tank barges, railcar/deck barges, barges for
aggregates and other heavy industrial products and dump barges.
Our primary focus is on the larger ocean-going vessels although
the facility has the capability to compete in other marine
related products.
Wheel Services,
Refurbishment & Parts
Wheel Services, Railcar Repair, Refurbishment and
Component Parts Manufacturing
-
We believe we operate
the largest independent wheel services, repair, refurbishment
and component parts networks in North America, operating in 38
locations. Our wheel shops, operating in 12 locations, provide
complete wheel services including reconditioning of wheels,
axles and roller bearings in addition to new axle machining and
finishing and axle downsizing. Our network of railcar repair and
refurbishment shops, operating in 22 locations, performs heavy
railcar repair and refurbishment, as well as routine railcar
maintenance. We are actively engaged in the repair and
refurbishment of railcars for third parties, as well as of our
own leased and managed fleet. Our component parts facilities,
operating in 4 locations, recondition railcar cushioning units,
couplers, yokes, side frames, bolsters and various other parts.
We also produce roofs, doors and associated parts for boxcars.
Leasing &
Services
Leasing
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Our relationships with financial
institutions, combined with our ownership of a lease fleet of
approximately 8,000 railcars, enables us to offer flexible
financing programs including traditional direct finance leases,
operating leases and “by the mile” leases to our
customers. As an equipment owner, we participate principally in
the operating lease segment of the market. The majority of our
leases are “full service” leases whereby we are
responsible for maintenance and administration. Maintenance of
the fleet is provided, in part, through our own facilities and
engineering and technical staff. Assets from our owned lease
fleet are periodically sold to take advantage of market
conditions, manage risk and maintain liquidity.
| 6 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Management Services
-
Our management services
business offers a broad array of software and services that
include railcar maintenance management, railcar accounting
services such as billing and revenue collection, car hire
receivable and payable administration, total fleet management
including railcar tracking using proprietary software,
administration and railcar remarketing. Frequently, we originate
leases of railcars with railroads or shippers, and sell the
railcars and attached leases to financial institutions and
subsequently provide management services under multi-year
agreements. We currently own or provide management services for
a fleet of approximately 233,000 railcars in North America for
railroads, shippers, carriers, institutional investors and other
leasing and transportation companies.
|
Fleet
Profile
(1)
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||||||||||||
| As of August 31, 2010 | ||||||||||||
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Owned
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Managed
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Total
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| Units (2) | Units | Units | ||||||||||
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Customer Profile:
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Class I Railroads
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3,053 | 100,505 | 103,558 | |||||||||
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Leasing Companies
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50 | 97,393 | 97,443 | |||||||||
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Non-Class I Railroads
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1,326 | 17,330 | 18,656 | |||||||||
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Shipping Companies
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3,171 | 9,969 | 13,140 | |||||||||
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Off-lease
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458 | — | 458 | |||||||||
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En route to Customer Location
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98 | 26 | 124 | |||||||||
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Total Units
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8,156 | 225,223 | 233,379 | |||||||||
| (1) | Each platform of a railcar is treated as a separate unit. | |
| (2) | Percent of owned units on lease is 94.4% with an average remaining lease term of 2.5 years. The average age of owned units is 17 years. |
Backlog
The following table depicts our reported railcar backlog in
number of railcars and estimated future revenue value
attributable to such backlog, at the dates shown:
| August 31, | ||||||||||||
| 2010 | 2009 | 2008 | ||||||||||
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New railcar backlog
units
(1)
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5,300 | 13,400 | 16,200 | |||||||||
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Estimated future revenue value (in
millions)
(2)
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$ | 420 | $ | 1,160 | $ | 1,440 | ||||||
| (1) | Each platform of a railcar is treated as a separate unit. | |
| (2) | Subject to change based on finalization of product mix. |
The rail and marine industries are cyclical in nature. Customer
orders may be subject to cancellations and contain terms and
conditions customary in the industry. Until recently, little
variation has been experienced between the quantity ordered and
the quantity actually delivered. Economic conditions have caused
some customers to seek to renegotiate, delay or cancel orders.
Our railcar and marine backlogs are not necessarily indicative
of future results of operations.
Multi-year supply agreements are a part of rail industry
practice. Our total manufacturing backlog of railcars as of
August 31, 2010 was approximately 5,300 units with an
estimated value of $420 million, compared to
13,400 units valued at $1.16 billion as of
August 31, 2009. The August 31, 2010 backlog did not
include approximately 300 units valued at $20 million
scheduled for production in 2011. These 300 units are
contractually committed to third party lessees and are expected
to be placed into our lease fleet. Based on current production
plans, approximately 4,100 units in the August 31,
2010 backlog are scheduled for delivery in fiscal year 2011. The
balance of the production is scheduled for delivery through
fiscal year 2013. A portion of the orders included in backlog
reflects an assumed product mix. Under terms of the orders, the
exact mix will be determined in the future which may impact the
dollar amount of backlog. Subsequent to year end we received new
railcar orders for 3,200 units with an aggregate value of
approximately $200 million. These units are scheduled for
delivery in fiscal year 2011.
| The Greenbrier Companies 2010 Annual Report | 7 |
Table of Contents
Marine backlog was approximately $10 million as of
August 31, 2010 with production scheduled into 2011. During
the quarter ended August 31, 2010, we removed approximately
$60 million of marine vessels from backlog due to the
current likelihood that these vessels will not be produced and
sold as a result of current economic conditions. Marine backlog
was approximately $126 million as of August 31, 2009.
Customers
Our railcar customers in North America include Class I
railroads, regional and short-line railroads, leasing companies,
shippers, carriers and transportation companies. We have strong,
long-term relationships with many of our customers. We believe
that our customers’ preference for high quality products,
our technological leadership in developing innovative products
and competitive pricing of our railcars have helped us maintain
our long-standing relationships with our customers.
In 2010, revenue from three customers together, BNSF Railway
Company (BNSF), Union Pacific Railroad (UP) and General Electric
Railcar Services Corporation (GE) accounted for approximately
42% of total revenue, 28% of Leasing & Services
revenue, 40% of Wheel Services, Refurbishment & Parts
revenue and 48% of Manufacturing revenue. No other customers
accounted for more than 10% of total revenue.
Raw Materials and
Components
Our products require a supply of materials including steel and
specialty components such as brakes, wheels and axles. Specialty
components purchased from third parties represent a significant
amount of the cost of most freight cars. Our customers often
specify particular components and suppliers of such components.
Although the number of alternative suppliers of certain
specialty components has declined in recent years, there are at
least two suppliers for most such components and we are not
reliant on any one supplier for any component.
Certain materials and components are periodically in short
supply which could potentially impact production at our new
railcar and refurbishment facilities. In an effort to mitigate
shortages and reduce supply chain costs, we have entered into
strategic alliances for the global sourcing of certain
components, increased our replacement parts business and
continue to pursue strategic opportunities to protect and
enhance our supply chain.
We periodically make advance purchases to avoid possible
shortages of material due to capacity limitations of component
suppliers and possible price increases. We do not typically
enter into binding long-term contracts with suppliers because we
rely on established relationships with major suppliers to ensure
the availability of raw materials and specialty items.
Competition
There are currently six major railcar manufacturers competing in
North America. One of these builds railcars principally for its
own fleet and the others compete with us principally in the
general railcar market. We compete on the basis of quality,
price, reliability of delivery, reputation and customer service
and support.
Competition in the marine industry is dependent on the type of
product produced. There are two principal competitors, located
in the Gulf States, which build product types similar to ours.
We compete on the basis of experienced labor, launch ways
capacity, quality, price and reliability of delivery. United
States (U.S.) coastwise law, commonly referred to as the Jones
Act, requires all commercial vessels transporting merchandise
between ports in the U.S. to be built, owned, operated and
manned by U.S. citizens and to be registered under the
U.S. flag.
We believe that we are among the top five European railcar
manufacturers, which maintain a combined market share of over
80%. European freight car manufacturers are largely located in
central and eastern Europe where labor rates are lower and work
rules are more flexible.
Competition in the wheel services, refurbishment and parts
business is dependent on the type of product or service
provided. There are many competitors in the railcar repair and
refurbishment business and fewer competitors in the wheel
services and other parts businesses; recently there have been
new entrants in this business segment. We are
| 8 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
one of the largest competitors in each business. We compete
primarily on the basis of quality, timeliness of delivery,
customer service, single source solutions and engineering
expertise.
There are at least twenty institutions that provide railcar
leasing and services similar to ours. Many of them are also
customers that buy new railcars from our manufacturing
facilities and used cars from our lease fleet, as well as
utilize our management services. More than half of these
institutions have greater resources than we do. We compete
primarily on the basis of quality, price, delivery, reputation,
service offerings and deal structuring ability. We believe our
strong servicing capability, integrated with our manufacturing,
repair shops, railcar specialization and expertise in particular
lease structures provide a strong competitive position.
Marketing and
Product Development
In North America, we utilize an integrated marketing and sales
effort to coordinate relationships in our various segments. We
provide our customers with a diverse range of equipment and
financing alternatives designed to satisfy each customer’s
unique needs, whether the customer is buying new equipment,
refurbishing existing equipment or seeking to outsource the
maintenance or management of equipment. These custom programs
may involve a combination of railcar products, leasing,
refurbishing and remarketing services. In addition, we provide
customized maintenance management, equipment management,
accounting services and proprietary software solutions.
In Europe, we maintain relationships with customers through a
network of country-specific sales representatives. Our
engineering and technical staff works closely with their
customer counterparts on the design and certification of
railcars. Many European railroads are state-owned and are
subject to European Union regulations covering the tender of
government contracts.
Through our customer relationships, insights are derived into
the potential need for new products and services. Marketing and
engineering personnel collaborate to evaluate opportunities and
identify and develop new products. Research and development
costs incurred for new product development during the years
ended August 31, 2010, 2009 and 2008 were
$2.6 million, $1.7 million and $2.9 million.
Patents and
Trademarks
We have a number of U.S. and
non-U.S. patents
of varying duration, and pending patent applications, registered
trademarks, copyrights and trade names that are important to our
products and product development efforts. The protection of our
intellectual property is important to our business and we have a
proactive program aimed at protecting our intellectual property
and the results from our research and development.
Environmental
Matters
We are subject to national, state and local environmental laws
and regulations concerning, among other matters, air emissions,
wastewater discharge, solid and hazardous waste disposal and
employee health and safety. Prior to acquiring facilities, we
usually conduct investigations to evaluate the environmental
condition of subject properties and may negotiate contractual
terms for allocation of environmental exposure arising from
prior uses. We operate our facilities in a manner designed to
maintain compliance with applicable environmental laws and
regulations.
Environmental studies have been conducted of the Company’s
owned and leased properties that indicate additional
investigation and some remediation on certain properties may be
necessary. The Company’s Portland, Oregon manufacturing
facility is located adjacent to the Willamette River. The United
States Environmental Protection Agency (EPA) has classified
portions of the river bed, including the portion fronting
Greenbrier’s facility, as a federal “National Priority
List” or “Superfund” site due to sediment
contamination (the Portland Harbor Site). Greenbrier and more
than 130 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, 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
| The Greenbrier Companies 2010 Annual Report | 9 |
Table of Contents
several additional entities have not signed such consent, but
are nevertheless contributing money to the effort. A draft of
the RI study was submitted on October 27, 2009. The
Feasibility Study is being developed and is expected to be
submitted in the third calendar quarter of 2011. Eighty-two
parties 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,
US 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,
pending completion of the RI/FS. In addition, the Company has
entered into a Voluntary
Clean-Up
Agreement with the Oregon Department of Environmental Quality 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 to the
environment. The Company is also conducting groundwater
remediation relating to a historical spill on the property which
antedates its ownership.
Because these environmental investigations are still underway,
the Company is unable to determine the amount of ultimate
liability relating to these matters. Based on the results of the
pending investigations and future assessments of natural
resource damages, Greenbrier 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 on the Willamette River, in Portland, Oregon,
and the river’s classification as a Superfund site could
result in some limitations on future dredging and launch
activities. Any of these matters could adversely affect the
Company’s business and results of operations, or the value
of its Portland property.
Regulation
The Federal Railroad Administration in the United States and
Transport Canada in Canada administer and enforce laws and
regulations relating to railroad safety. These regulations
govern equipment and safety appliance standards for freight cars
and other rail equipment used in interstate commerce. The
Association of American Railroads (AAR) promulgates a wide
variety of rules and regulations governing the safety and design
of equipment, relationships among railroads and other railcar
owners with respect to railcars in interchange, and other
matters. The AAR also certifies railcar builders and component
manufacturers that provide equipment for use on North American
railroads. These regulations require us to maintain our
certifications with the AAR as a railcar builder and component
manufacturer, and products sold and leased by us in North
America must meet AAR, Transport Canada, and Federal Railroad
Administration standards.
The primary regulatory and industry authorities involved in the
regulation of the ocean-going barge industry are the
U.S. Coast Guard, the Maritime Administration of the
U.S. Department of Transportation, and private industry
organizations such as the American Bureau of Shipping.
The regulatory environment in Europe consists of a combination
of European Union (EU) regulations and country specific
regulations, including a harmonized set of Technical Standards
for Interoperability of freight wagons throughout the EU.
Employees
As of August 31, 2010, we had 4,194 full-time
employees, consisting of 2,665 employees in Manufacturing,
1,358 in Wheel Services, Refurbishment & Parts and
171 employees in Leasing & Services and
corporate. At the manufacturing facility in Swidnica, Poland,
312 employees are represented by unions. At our Frontera,
Mexico joint venture manufacturing facility, 587 employees
are represented by a union. At our Sahagun, Mexico facility,
206 employees are represented by a union. In addition to
our own employees, 244 union employees work at our Sahagun,
Mexico railcar manufacturing facility under our services
agreement with Bombardier Transportation. At our Wheel Services,
Refurbishment & Parts locations, 59 employees, in
Mexico, are represented by unions. We believe that our relations
with our employees are generally good.
| 10 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Additional
Information
We are a reporting company and file annual, quarterly, and
special reports, proxy statements and other information with the
Securities and Exchange Committee (SEC). You may read and copy
these materials at the Public Reference Room maintained by the
SEC at Room 1580, 100 F Street N.E.,
Washington, D.C. 20549. You may call the SEC at
1-800-SEC-0330
for more information on the operation of the public reference
room. The SEC maintains an Internet site at
http://www.sec.gov
that contains reports, proxy and information statements and
other information regarding issuers that file electronically
with the SEC. Copies of our annual, quarterly and special
reports, Audit Committee Charter, Compensation Committee
Charter, Nominating/Corporate Governance Committee Charter and
the Company’s Corporate Governance Guidelines are available
on our web site at
http://www.gbrx.com
or free of charge by contacting our Investor Relations
Department at The Greenbrier Companies, Inc., One Centerpointe
Drive, Suite 200, Lake Oswego, Oregon 97035.
| The Greenbrier Companies 2010 Annual Report | 11 |
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During
economic downturns or a rising interest rate environment, the
cyclical nature of our business results in lower demand for our
products and reduced revenue.
Our business is cyclical. Overall economic conditions and the
purchasing practices of buyers have a significant effect upon
our railcar repair, refurbishment and component parts, marine
manufacturing, railcar manufacturing and leasing and fleet
management services businesses due to the impact on demand for
new, refurbished, used and leased products. As a result, during
downturns, we could operate with a lower level of backlog and
may temporarily slow down or halt production at some or all of
our facilities. Economic conditions that result in higher
interest rates increase the cost of new leasing arrangements,
which could cause some of our leasing customers to lease fewer
of our railcars or demand shorter lease terms. An economic
downturn or increase in interest rates may reduce demand for our
products, resulting in lower sales volumes, lower prices, lower
lease utilization rates and decreased profits.
A
prolonged decline in performance of the rail freight industry
would have an adverse effect on our financial condition and
results of operations.
Our future success depends in part upon the performance of the
rail freight industry, which in turn depends on the health of
the economy. If railcar loadings, railcar and railcar components
replacement rates or refurbishment rates or industry demand for
our railcar products remain weak or otherwise do not
materialize, our financial condition and results of operations
would be adversely affected.
A
prolonged decline in demand for our barge products would have an
adverse effect on our financial condition and results of
operations.
The April 2010 catastrophic explosion of the Deepwater Horizon
oil drilling platform and the related oil spill in the
U.S. Gulf of Mexico coupled with currently weak economic
conditions may continue to have an adverse effect on our results
of operations by reducing demand for our marine barges. These
could reduce our revenues and margins, limit our ability to
grow, increase pricing pressure on our products, and otherwise
adversely affect our financial results.
Our
level of indebtedness and terms of our indebtedness could
adversely affect our business, financial condition and
liquidity.
We have a high level of indebtedness, a portion of which has
variable interest rates. Although we intend to refinance our
debt on or before maturity, there can be no assurance that we
will be successful, or if refinanced, that it will be at
favorable rates and terms. If we are unable to successfully
refinance our debt, we could have inadequate liquidity to fund
our ongoing cash needs. In addition, our high level of
indebtedness and our financial covenants limit our ability to
borrow additional amounts of money for working capital, capital
expenditures or other purposes. We must dedicate a substantial
portion of these funds to service debt, limiting our ability to
use operating cash flow in other areas of our business. The
limitations of our financial covenants, among other things,
limit our ability to incur additional indebtedness or
guarantees, pay dividends or repurchase stock, enter into sale
leaseback transactions, create liens, sell assets, engage in
transactions with affiliates, joint ventures and foreign
subsidiaries, and engage in other transactions, including but
not limited to loans, advances, equity investments and
guarantees, enter into mergers, consolidations or sales of
substantially all of our assets, and enter into new lines of
business. The high amount of debt increases our vulnerability to
general adverse economic and industry conditions and could limit
our ability to take advantage of business opportunities and to
react to competitive pressures.
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We
compete in a highly competitive and concentrated industry which
may adversely impact our financial results.
We face aggressive competition by a concentrated group of
competitors in all geographic markets and each industry sector
in which we operate. Some of these companies have significantly
greater resources or may operate more efficiently than we do.
The effect of this competition could reduce our revenues and
margins, limit our ability to grow, increase pricing pressure on
our products, and otherwise affect our financial results. In
addition, because of the concentrated nature of our competitors,
customers and suppliers, we face a heightened risk that further
consolidation of our competitors, customers and suppliers could
adversely affect our revenues, cost of revenues and
profitability.
Changes
in the credit markets and the financial services industry could
negatively impact our business, results of operations, financial
condition or liquidity.
During 2008 and 2009, the credit markets and the financial
services industry experienced a period of unprecedented turmoil,
resulting in tighter availability of credit on more restrictive
terms. Such factors could have a negative impact on our
liquidity and financial condition if our ability to borrow money
to finance operations, obtain credit from trade creditors, offer
leasing products to our customers or sell railcar assets to
other lessors were to be impaired. In addition, if economic
conditions remain depressed it could also adversely impact our
customers’ ability to purchase or pay for products from us
or our suppliers’ ability to provide us with product,
either of which could negatively impact our business and results
of operations.
We
derive a significant amount of our revenue from a limited number
of customers, the loss of or reduction of business from one or
more of which could have an adverse effect on our
business.
A significant portion of our revenue and backlog is generated
from a few major customers such as BNSF Railway Company, General
Electric Railcar Services Corporation and Union Pacific
Railroad. Although we have some long-term contractual
relationships with our major customers, we cannot be assured
that our customers will continue to use our products or services
or that they will continue to do so at historical levels. A
reduction in the purchase or leasing of our products or a
termination of our services by one or more of our major
customers could have an adverse effect on our business and
operating results.
Fluctuations
in the availability and price of steel and other raw materials
could have an adverse effect on our ability to manufacture and
sell our products on a cost-effective basis and could adversely
affect our margins and revenue of our wheel services,
refurbishment and parts business.
A significant portion of our business depends upon the adequate
supply of steel at competitive prices and a small number of
suppliers provide a substantial amount of our requirements. The
cost of steel and all other materials used in the production of
our railcars represents more than half of our direct
manufacturing costs per railcar and in the production of our
marine barges represents more than 30% of our direct
manufacturing costs per marine barge.
Our businesses depend upon the adequate supply of other
materials, including castings and specialty components, at
competitive prices. We cannot be assured that we will continue
to have access to supplies of necessary components for
manufacturing railcars and marine barges. Our ability to meet
demand for our products could be adversely affected by the loss
of access to any of these supplies, the inability to arrange
alternative access to any materials, or suppliers limiting
allocation of materials to us.
If the price of steel or other raw materials were to fluctuate
and we were unable to adjust our selling prices or have adequate
protection in our contracts against changes in material prices
or reduce operating costs to offset any price increases, our
margins would be adversely affected. The loss of suppliers or
their inability to meet our price, quality, quantity and
delivery requirements could have an adverse effect on our
ability to manufacture and sell our products on a cost-effective
basis.
| The Greenbrier Companies 2010 Annual Report | 13 |
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When the price of scrap steel decreases it adversely impacts our
Wheel Services, Refurbishment & Parts margin and
revenue. Part of our Wheel Services, Refurbishment &
Parts business involves scrapping steel parts and the resulting
revenue from such scrap steel increases our margins and
revenues. When the price of scrap steel declines, our margins
and revenues in such business therefore decrease.
Our
backlog is not necessarily indicative of the level of our future
revenues.
Our manufacturing backlog is future production for which we have
written orders from our customers in various periods, and
estimated potential revenue attributable to those orders. Some
of this backlog is subject to our fulfillment of certain
competitive conditions. Our reported backlog may not be
converted to revenue in any particular period and some of our
contracts permit cancellations without financial penalties or
with limited compensation that would not replace lost revenue or
margins. Actual revenue from such contracts may not equal our
backlog revenues, and therefore, our backlog is not necessarily
indicative of the level of our future revenues.
Our
financial performance and market value could cause future
write-downs of goodwill in future periods.
We are required to perform an annual impairment review which
could result in impairment write-downs to goodwill. If the
carrying value of the asset is in excess of the fair value, the
carrying value will be adjusted to fair value through an
impairment charge. As of August 31, 2010, we had
$137.1 million of goodwill in our Wheel Services,
Refurbishment & Parts segment. Our stock price can
impact the results of the impairment review of goodwill. Future
write-downs of goodwill could affect certain of the financial
covenants under our credit agreements and could restrict our
financial flexibility. In the event of goodwill impairment, we
may have to test other intangible assets for impairment.
The
timing of our asset sales and related revenue recognition could
cause significant differences in our quarterly results and
liquidity.
We may build railcars or marine barges in anticipation of a
customer order, or that are leased to a customer and ultimately
planned to be sold to a third-party. The difference in timing of
production and the ultimate sale is subject to risk and could
cause a fluctuation in our quarterly results and liquidity. In
addition, we periodically sell railcars from our own lease fleet
and the timing and volume of such sales is difficult to predict.
As a result, comparisons of our quarterly revenues, income and
liquidity between quarterly periods within one year and between
comparable periods in different years may not be meaningful and
should not be relied upon as indicators of our future
performance.
We
could be unable to remarket leased railcars on favorable terms
upon lease termination or realize the expected residual values,
which could reduce our revenue and decrease our overall
return.
We re-lease or sell railcars we own upon the expiration of
existing lease terms. The total rental payments we receive under
our operating leases do not fully amortize the acquisition costs
of the leased equipment, which exposes us to risks associated
with remarketing the railcars. Our ability to remarket leased
railcars profitably is dependent upon several factors,
including, but not limited to, market and industry conditions,
cost of and demand for newer models, costs associated with the
refurbishment of the railcars and interest rates. Our inability
to re-lease or sell leased railcars on favorable terms could
result in reduced revenues and margins and decrease our overall
returns.
Risks
related to our operations outside of the United States could
adversely impact our operating results.
Our operations outside of the United States are subject to the
risks associated with cross-border business transactions and
activities. Political, legal, trade or economic changes or
instability could limit or curtail our foreign business
activities and operations. Some foreign countries in which we
operate have regulatory authorities that regulate railroad
safety, railcar design and railcar component part design,
performance and manufacturing. If
| 14 | The Greenbrier Companies 2010 Annual Report |
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we fail to obtain and maintain certifications of our railcars
and railcar parts within the various foreign countries where we
operate, we may be unable to market and sell our railcars in
those countries. In addition, unexpected changes in regulatory
requirements, tariffs and other trade barriers, more stringent
rules relating to labor or the environment, adverse tax
consequences, currency and price exchange controls could limit
operations and make the manufacture and distribution of our
products difficult. The uncertainty of the legal environment or
geo-political risks in these and other areas could limit our
ability to enforce our rights effectively. Any international
expansion or acquisition that we undertake could amplify these
risks related to operating outside of the United States.
Some
of our employees belong to labor unions and strikes or work
stoppages could adversely affect our operations.
We are a party to collective bargaining agreements with various
labor unions at some of our operations. Disputes with regard to
the terms of these agreements or our potential inability to
negotiate acceptable contracts with these unions in the future
could result in, among other things, strikes, work stoppages or
other slowdowns by the affected workers. We cannot be assured
that our relations with our workforce will remain positive or
that union organizers will not be successful in future attempts
to organize at some of our other facilities. If our workers were
to engage in a strike, work stoppage or other slowdown, or other
employees were to become unionized or the terms and conditions
in future labor agreements were renegotiated, we could
experience a significant disruption of our operations and higher
ongoing labor costs. In addition, we could face higher labor
costs in the future as a result of severance or other charges
associated with lay-offs, shutdowns or reductions in the size
and scope of our operations or due to the difficulties of
restarting our operations that have been temporarily shuttered.
Shortages
of skilled labor could adversely impact our
operations.
We depend on skilled labor in the manufacture of railcars and
marine barges, and repair and refurbishment of railcars. Some of
our facilities are located in areas where demand for skilled
laborers often exceeds supply. Shortages of some types of
skilled laborers such as welders could restrict our ability to
maintain or increase production rates and could increase our
labor costs.
We
depend on our senior management team and other key employees,
and significant attrition within our management team could
adversely affect our business.
Our success depends in part on our ability to attract, retain
and motivate senior management and other key employees.
Achieving this objective may be difficult due to many factors,
including fluctuations in global economic and industry
conditions, competitors’ hiring practices, cost reduction
activities, and the effectiveness of our compensation programs.
Competition for qualified personnel can be very intense. We must
continue to recruit, retain and motivate senior management and
other key employees sufficient to maintain our current business
and support our future projects. Cost-cutting measures that have
reduced compensation make us vulnerable to attrition among our
current senior management team and other key employees, and may
make it difficult for us to hire additional senior managers and
other key employees. A loss of any such personnel, or the
inability to recruit and retain qualified personnel in the
future, could have an adverse effect on our business, financial
condition and results of operations.
We
depend on a third party to provide most of the labor services
for our operations in Sahagun, Mexico and if such third party
fails to provide the labor, it could adversely affect our
operations.
In Sahagun, Mexico, we depend on a third party to provide us
with most of the labor services for our operations under a
services agreement. This agreement has a term of three years
expiring on November 30, 2011, with one three-year option
to renew. All of the labor provided by the third party is
subject to collective bargaining agreements, over which we have
no control. If the third party fails to provide us with the
services required by
| The Greenbrier Companies 2010 Annual Report | 15 |
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our agreement for any reason, including labor stoppages or
strikes or a sale of facilities owned by the third party, our
operations could be adversely effected.
We
could experience interruption of our manufacturing operations in
Mexico which would adversely affect our results of
operations.
In Sahagun, Mexico, we lease our manufacturing facility from a
third party. The lease agreement has a term of three years
expiring on November 30, 2011, with one three-year option
to renew. We could incur substantial expense and interruption of
our manufacturing production if we were to relocate to a
different location.
Fluctuations
in foreign currency exchange rates could lead to increased costs
and lower profitability.
Outside of the United States, we operate in Mexico, Germany and
Poland, and our
non-U.S. businesses
conduct their operations in local currencies and other regional
currencies. We also source materials worldwide. Fluctuations in
exchange rates may affect demand for our products in foreign
markets or our cost competitiveness and may adversely affect our
profitability. Although we attempt to mitigate a portion of our
exposure to changes in currency rates through currency rate
hedge contracts and other activities, these efforts cannot fully
eliminate the risks associated with the foreign currencies. In
addition, some of our borrowings are in foreign currency, giving
rise to risk from fluctuations in exchange rates. A material or
adverse change in exchange rates could result in significant
deterioration of profits or in losses for us.
We
have potential exposure to environmental liabilities, which
could increase costs or have an adverse effect on results of
operations.
We are subject to extensive national, state, provincial and
local environmental laws and regulations concerning, among other
things, air emissions, water discharge, solid waste and
hazardous substances handling and disposal and employee health
and safety. These laws and regulations are complex and
frequently change. We could incur unexpected costs, penalties
and other civil and criminal liability if we fail to comply with
environmental laws. We also could incur costs or liabilities
related to off-site waste disposal or remediating soil or
groundwater contamination at our properties. In addition, future
environmental laws and regulations may require significant
capital expenditures or changes to our operations.
Environmental studies have been conducted on our owned and
leased properties that indicate additional investigation and
some remediation on certain properties may be necessary. Our
Portland, Oregon manufacturing facility is located adjacent to
the Willamette River. The United States Environmental Protection
Agency (EPA) has classified portions of the river bed, including
the portion fronting our Portland, Oregon facility, as a federal
“National Priority List” or “Superfund” site
due to sediment contamination (the Portland Harbor Site). We and
more than 130 other parties have received a “General
Notice” of potential liability from the EPA relating to the
Portland Harbor Site. The letter advised that we 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 us, 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. A draft of the RI
study was submitted on October 27, 2009. The Feasibility
Study is being developed and is expected to be submitted in the
third calendar quarter of 2011. Eighty-two parties 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, we 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,
US 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, pending
completion of the RI/FS. In addition, we have entered into a
Voluntary
Clean-Up
Agreement with the Oregon Department of Environmental Quality in
which we agreed to conduct an investigation of whether, and to
what extent, past or present operations at
| 16 | The Greenbrier Companies 2010 Annual Report |
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the Portland property may have released hazardous substances to
the environment. We are also conducting groundwater remediation
relating to a historical spill on the property which antedates
its ownership.
Because these environmental investigations are still underway,
we are unable to determine the amount of ultimate liability
relating to these matters. Based on the results of the pending
investigations and future assessments of natural resource
damages, we 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, we may
be required to perform periodic maintenance dredging in order to
continue to launch vessels from our launch ways on the
Willamette River, in Portland, Oregon, and the river’s
classification as a Superfund site could result in some
limitations on future dredging and launch activities. Any of
these matters could adversely affect our business and results of
operations, or the value of our Portland property.
Our
implementation of new enterprise resource planning (ERP) systems
could result in problems that could negatively impact our
business.
We continue to work on the design and implementation of ERP and
related systems that support substantially all of our operating
and financial functions. We could experience problems in
connection with such implementations, including compatibility
issues, training requirements, higher than expected
implementation costs and other integration challenges and
delays. A significant implementation problem, if encountered,
could negatively impact our business by disrupting our
operations. Additionally, a significant problem with the
implementation, integration with other systems or ongoing
management of ERP and related systems could have an adverse
effect on our ability to generate and interpret accurate
management and financial reports and other information on a
timely basis, which could have a material adverse effect on our
financial reporting system and internal controls and adversely
affect our ability to manage our business.
A
change in our product mix, a failure to design or manufacture
products or technologies or achieve certification or market
acceptance of new products or technologies or introduction of
products by our competitors could have an adverse effect on our
profitability and competitive position.
We manufacture and repair a variety of railcars. The demand for
specific types of these railcars and mix of refurbishment work
varies from time to time. These shifts in demand could affect
our margins and could have an adverse effect on our
profitability.
We continue to introduce new railcar products and technologies
and periodically accept orders prior to receipt of railcar
certification or proof of ability to manufacture a quality
product that meets customer standards. We could be unable to
successfully design or manufacture these new railcar products
and technologies. Our inability to develop and manufacture such
new products and technologies in a timely and profitable manner,
to obtain certification, and achieve market acceptance or the
existence of quality problems in our new products could have a
material adverse effect on our revenue and results of operations
and subject us to penalties, cancellation of orders
and/or
other
damages.
In addition, new technologies, changes in product mix or the
introduction of new railcars and product offerings by our
competitors could render our products obsolete or less
competitive. As a result, our ability to compete effectively
could be harmed.
Our
relationships with our joint venture and alliance partners could
be unsuccessful, which could adversely affect our
business.
In recent years, we have entered into several joint venture
agreements and other alliances with other companies to increase
our sourcing alternatives, reduce costs, and to produce new
railcars for the North American marketplace. We may seek to
expand our relationships or enter into new agreements with other
companies. If our joint venture alliance partners are unable to
fulfill their contractual obligations or if these relationships
are otherwise not successful in the future, our manufacturing
costs could increase, we could encounter production disruptions,
growth
| The Greenbrier Companies 2010 Annual Report | 17 |
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opportunities could fail to materialize, or we could be required
to fund such joint venture alliances in amounts significantly
greater than initially anticipated, any of which could adversely
affect our business.
We
could have difficulty integrating the operations of any
companies that we acquire, which could adversely affect our
results of operations.
The success of our acquisition strategy depends upon our ability
to successfully complete acquisitions and integrate any
businesses that we acquire into our existing business. The
integration of acquired business operations could disrupt our
business by causing unforeseen operating difficulties, diverting
management’s attention from
day-to-day
operations and requiring significant financial resources that
would otherwise be used for the ongoing development of our
business. The difficulties of integration could be increased by
the necessity of coordinating geographically dispersed
organizations, integrating personnel with disparate business
backgrounds and combining different corporate cultures. In
addition, we could be unable to retain key employees or
customers of the combined businesses. We could face integration
issues pertaining to the internal controls and operational
functions of the acquired companies and we also could fail to
realize cost efficiencies or synergies that we anticipated when
selecting our acquisition candidates. Any of these items could
adversely affect our results of operations.
If we
are not successful in succession planning for our senior
management team our business could be adversely
impacted.
Several key members of our senior management team are at or
nearing retirement age. If we are unsuccessful in our succession
planning efforts, the continuity of our business and results of
operations could be adversely impacted.
An
adverse outcome in any pending or future litigation could
negatively impact our business and results of
operations.
We are a defendant in several pending cases in various
jurisdictions. If we are unsuccessful in resolving these claims,
our business and results of operations could be adversely
affected. In addition, future claims that may arise relating to
any pending or new matters, whether brought against us or
initiated by us against third parties, could distract
management’s attention from business operations and
increase our legal and related costs, which could also
negatively impact our business and results of operations.
We
could be liable for physical damage or product liability claims
that exceed our insurance coverage.
The nature of our business subjects us to physical damage and
product liability claims, especially in connection with the
repair and manufacture of products that carry hazardous or
volatile materials. We maintain liability insurance coverage at
commercially reasonable levels compared to similarly-sized heavy
equipment manufacturers. However, an unusually large physical
damage or product liability claim or a series of claims based on
a failure repeated throughout our production process could
exceed our insurance coverage or result in damage to our
reputation.
We
could be unable to procure adequate insurance on a
cost-effective basis in the future.
The ability to insure our businesses, facilities and rail assets
is an important aspect of our ability to manage risk. As there
are only limited providers of this insurance to the railcar
industry, there is no guarantee that such insurance will be
available on a cost-effective basis in the future. In addition,
due to recent extraordinary economic events that have
significantly weakened many major insurance underwriters, we
cannot assure that our insurance carriers will be able to pay
current or future claims.
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Any
failure by us to comply with regulations imposed by federal and
foreign agencies could negatively affect our financial
results.
Our manufacturing operations are subject to extensive regulation
by governmental, regulatory and industry authorities and by
federal and foreign agencies. These organizations establish
rules and regulations for the railcar industry, including
construction specifications and standards for the design and
manufacture of railcars; mechanical, maintenance and related
standards; and railroad safety. New regulatory rulings and
regulations from these entities could impact our financial
results and the economic value of our assets. In addition, if we
fail to comply with the requirements and regulations of these
entities, we could face sanctions and penalties that could
negatively affect our financial results.
Our
product and repair service warranties could expose us to
potentially significant claims.
We offer our customers limited warranties for many of our
products and services. Accordingly, we may be subject to
significant warranty claims in the future, such as multiple
claims based on one defect repeated throughout our production or
servicing process or claims for which the cost of repairing the
defective part is highly disproportionate to the original cost
of the part. These types of warranty claims could result in
costly product recalls, customers seeking monetary damages,
significant repair costs and damage to our reputation.
If warranty claims attributable to actions of third party
component manufacturers are not recoverable from such parties
due to their poor financial condition or other reasons, we could
be liable for warranty claims and other risks for using these
materials on our products.
From
time to time we may take tax positions that the Internal Revenue
Service may contest.
We have in the past and may in the future take tax positions
that the Internal Revenue Service (IRS) may contest. Effective
with fiscal year 2011, we are required by a new IRS regulation
to disclose particular tax positions, taken after the effective
date, to the IRS as part of our tax returns for that year and
future years.
None.
| The Greenbrier Companies 2010 Annual Report | 19 |
Table of Contents
We operate at the following primary facilities as of
October 31, 2010:
| Description | Location | Status | ||
| Manufacturing Segment | ||||
| Railcar manufacturing: | Portland, Oregon | Owned | ||
| 2 locations in Sahagun, Mexico |
Leased — 1 location
Owned — 1 location |
|||
| Frontera, Mexico | Leased | |||
| Swidnica, Poland | Owned | |||
| Marine manufacturing: | Portland, Oregon | Owned | ||
| Wheel Services, Refurbishment & Parts Segment | ||||
| Railcar repair: |
19 locations in the United States,
2 locations in Mexico and 1 location in Canada |
Leased — 10 locations
Owned — 6 locations Customer premises — 6 locations |
||
| Wheel reconditioning: | 10 locations in the United States and 2 locations in Mexico |
Leased — 7 locations
Owned — 5 locations |
||
| Parts fabrication and reconditioning: | 4 locations in the United States |
Leased — 2 locations
Owned — 2 locations |
||
| Administrative offices: | 2 locations in the United States | Leased | ||
| Leasing & Services Segment | ||||
| Corporate offices, railcar marketing and leasing activities: | Lake Oswego, Oregon | Leased | ||
We believe that our facilities are in good condition and that
the facilities, together with anticipated capital improvements
and additions, are adequate to meet our operating needs for the
foreseeable future. We continually evaluate the need for
expansion and upgrading of our Manufacturing and Wheel Services,
Refurbishment & Parts facilities in order to remain
competitive and to take advantage of market opportunities.
From time to time, Greenbrier is involved as a defendant in
litigation in the ordinary course of business, the outcome of
which cannot be predicted with certainty. The most significant
litigation is as follows:
Greenbrier’s customer, SEB Finans AB (SEB), has raised
performance concerns related to a component that the Company
installed on 372 railcar units with an aggregate sales value of
approximately $20.0 million produced under a contract with
SEB. On December 9, 2005, SEB filed a Statement of Claim in
an arbitration proceeding in Stockholm, Sweden, against
Greenbrier alleging that the cars were defective and could not
be used for their intended purpose. A settlement agreement was
entered into effective February 28, 2007 pursuant to which
the railcar units previously delivered were to be repaired and
the remaining units completed and delivered to SEB. Greenbrier
is proceeding with repairs of the railcars in accordance with
terms of the settlement agreement, though SEB has recently made
additional warranty claims, including claims with respect to
cars that have been repaired pursuant to the agreement.
Greenbrier is evaluating SEB’s new warranty claim. Current
estimates of potential costs of such repairs do not exceed
amounts accrued.
When the Company acquired the assets of the Freight Wagon
Division of DaimlerChrysler in January 2000, it acquired a
contract to build 201 freight cars for Okombi GmbH, a subsidiary
of Rail Cargo Austria AG. Subsequently, Okombi made breach of
warranty and late delivery claims against the Company which grew
out of design and certification problems. All of these issues
were settled as of March 2004. Additional allegations have been
made, the most serious of which involve cracks to the structure
of the cars. Okombi has been required to
| 20 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
remove all 201 freight cars from service, and a formal claim has
been made against the Company. Legal, technical and commercial
evaluations are on-going to determine what obligations the
Company might have, if any, to remedy the alleged defects.
Management intends to vigorously defend its position in each of
the open foregoing cases and believes that any ultimate
liability resulting from the above litigation will not
materially affect the Company’s Consolidated Financial
Statements.
The Company is involved as a defendant in other litigation
initiated in the ordinary course of business. While the ultimate
outcome of such legal proceedings cannot be determined at this
time, management believes that the resolution of these actions
will not have a material adverse effect on the Company’s
Consolidated Financial Statements.
| Item 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Our common stock has been traded on the New York Stock Exchange
under the symbol GBX since July 14, 1994. There were
approximately 489 holders of record of common stock as of
October 31, 2010. The following table shows the reported
high and low sales prices of our common stock on the New York
Stock Exchange for the fiscal periods indicated.
| High | Low | |||||||
|
2010
|
||||||||
|
Fourth quarter
|
$ | 15.45 | $ | 9.10 | ||||
|
Third quarter
|
$ | 18.00 | $ | 9.23 | ||||
|
Second quarter
|
$ | 12.32 | $ | 7.42 | ||||
|
First quarter
|
$ | 14.05 | $ | 8.51 | ||||
|
2009
|
||||||||
|
Fourth quarter
|
$ | 14.67 | $ | 5.40 | ||||
|
Third quarter
|
$ | 9.54 | $ | 1.86 | ||||
|
Second quarter
|
$ | 8.55 | $ | 3.76 | ||||
|
First quarter
|
$ | 22.45 | $ | 4.58 | ||||
Quarterly dividends were suspended as of the third quarter 2009.
A quarterly dividend of $.04 per share was declared during the
second quarter of 2009. Quarterly dividends of $.08 per share
were declared each quarter from the fourth quarter of 2005
through the first quarter of 2009. There is no assurance as to
the payment of future dividends as they are dependent upon
future earnings, capital requirements and our financial
condition.
| The Greenbrier Companies 2010 Annual Report | 21 |
Table of Contents
Performance
Graph
The following graph demonstrates a comparison of cumulative
total returns for the Company’s Common Stock, the Dow Jones
US Industrial Transportation Index and the Standard &
Poor’s (S&P) 500 Index. The graph assumes an
investment of $100 on August 31, 2005 in each of the
Company’s Common Stock and the stocks comprising the
indices. Each of the indices assumes that all dividends were
reinvested and that the investment was maintained to and
including August 31, 2010, the end of the Company’s
2010 year.
COMPARISON OF 5
YEAR CUMULATIVE TOTAL RETURN*
Among The Greenbrier Companies, Inc., The S&P 500 Index
And The Dow Jones US Industrial Transportation Index
Among The Greenbrier Companies, Inc., The S&P 500 Index
And The Dow Jones US Industrial Transportation Index
* $100 invested on
8/31/05 in stock or index, including reinvestment of dividends.
Fiscal year ending August 31.
Copyright
©
2010 S&P, a division of The McGraw-Hill Companies Inc. All
rights reserved.
Copyright
©
2010 Dow Jones & Co. All rights reserved.
Equity Compensation Plan Information is hereby incorporated by
reference to the “Equity Compensation Plan
Information” table in Registrant’s definitive Proxy
Statement to be filed pursuant to Regulation 14A, which
Proxy Statement is anticipated to be filed with the Securities
and Exchange Commission within 120 days after the end of
the Registrant’s year ended August 31, 2010.
| 22 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Item 6. | SELECTED FINANCIAL DATA (1) |
|
YEARS ENDED AUGUST 31,
|
||||||||||||||||||||
| (In thousands, except per share data) | 2010 | 2009 | 2008 | 2007 | 2006 | |||||||||||||||
|
Statement of
Operations Data
|
||||||||||||||||||||
|
Revenue:
|
||||||||||||||||||||
|
Manufacturing
|
$ | 295,566 | $ | 462,496 | $ | 665,093 | $ | 738,424 | $ | 748,818 | ||||||||||
|
Wheel Services, Refurbishment & Parts
|
390,061 | 476,164 | 527,466 | 381,670 | 102,471 | |||||||||||||||
|
Leasing & Services
|
78,823 | 79,465 | 97,520 | 103,734 | 102,534 | |||||||||||||||
| $ | 764,450 | $ | 1,018,125 | $ | 1,290,079 | $ | 1,223,828 | $ | 953,823 | |||||||||||
|
Earnings (loss) from continuing operations
|
$ | 4,277 | $ | (56,391 | ) | $ | 17,383 | $ | 20,007 | $ | 38,976 | |||||||||
|
Earnings from discontinued operations
|
— | — | — | — | 62 | (3) | ||||||||||||||
|
Net earnings (loss) attributable to Greenbrier
|
$ | 4,277 | (2) | $ | (56,391 | ) (2) | $ | 17,383 | (2) | $ | 20,007 | (2) | $ | 39,038 | ||||||
|
Basic earnings (loss) per common share attributable to
Greenbrier:
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.23 | $ | (3.35 | ) | $ | 1.06 | $ | 1.25 | $ | 2.48 | |||||||||
|
Net earnings (loss)
|
$ | 0.23 | $ | (3.35 | ) | $ | 1.06 | $ | 1.25 | $ | 2.48 | |||||||||
|
Diluted earnings (loss) per common share attributable to
Greenbrier:
|
||||||||||||||||||||
|
Continuing operations
|
$ | 0.21 | $ | (3.35 | ) | $ | 1.06 | $ | 1.24 | $ | 2.45 | |||||||||
|
Net earnings (loss)
|
$ | 0.21 | $ | (3.35 | ) | $ | 1.06 | $ | 1.24 | $ | 2.45 | |||||||||
|
Weighted average common shares outstanding:
|
||||||||||||||||||||
|
Basic
|
18,585 | 16,815 | 16,395 | 16,056 | 15,751 | |||||||||||||||
|
Diluted
|
20,213 | 16,815 | 16,417 | 16,094 | 15,937 | |||||||||||||||
|
Cash dividends paid per share
|
$ | .00 | $ | .12 | $ | .32 | $ | .32 | $ | .32 | ||||||||||
|
Balance Sheet
Data
|
||||||||||||||||||||
|
Total assets
|
$ | 1,072,888 | $ | 1,048,291 | $ | 1,256,960 | $ | 1,072,749 | $ | 877,314 | ||||||||||
|
Revolving notes and notes payable
|
$ | 501,330 | $ | 541,190 | $ | 580,954 | $ | 476,071 | $ | 357,040 | ||||||||||
|
Total equity
|
$ | 297,407 | $ | 232,450 | $ | 281,838 | $ | 263,588 | $ | 236,136 | ||||||||||
|
Other Operating
Data
|
||||||||||||||||||||
|
New railcar units delivered
|
2,500 | 3,700 | 7,300 | 8,600 | 11,400 | |||||||||||||||
|
New railcar units backlog
|
5,300 | 13,400 | (4) | 16,200 | (4) | 12,100 | (4) | 14,700 | (4) | |||||||||||
|
Lease fleet:
|
||||||||||||||||||||
|
Units managed
|
225,223 | 217,403 | 137,697 | 136,558 | 135,320 | |||||||||||||||
|
Units owned
|
8,156 | 8,713 | 8,631 | 8,663 | 9,311 | |||||||||||||||
|
Cash Flow
Data
|
||||||||||||||||||||
|
Capital expenditures:
|
||||||||||||||||||||
|
Manufacturing
|
$ | 8,715 | $ | 9,109 | $ | 24,113 | $ | 20,361 | $ | 15,121 | ||||||||||
|
Wheel Services, Refurbishment & Parts
|
12,215 | 6,599 | 7,651 | 5,009 | 2,906 | |||||||||||||||
|
Leasing & Services
|
18,059 | 23,139 | 45,880 | 111,924 | 122,542 | |||||||||||||||
| $ | 38,989 | $ | 38,847 | $ | 77,644 | $ | 137,294 | $ | 140,569 | |||||||||||
|
Proceeds from sale of equipment
|
$ | 22,978 | $ | 15,555 | $ | 14,598 | $ | 119,695 | $ | 28,863 | ||||||||||
|
Depreciation and amortization:
|
||||||||||||||||||||
|
Manufacturing
|
$ | 11,061 | $ | 11,471 | $ | 11,267 | $ | 10,762 | $ | 10,258 | ||||||||||
|
Wheel Services, Refurbishment & Parts
|
11,435 | 11,885 | 10,338 | 9,042 | 2,360 | |||||||||||||||
|
Leasing & Services
|
15,015 | 14,313 | 13,481 | 13,022 | 12,635 | |||||||||||||||
| $ | 37,511 | $ | 37,669 | $ | 35,086 | $ | 32,826 | $ | 25,253 | |||||||||||
| (1) | All years retrospectively adjusted for the effects of Accounting Standards Codification (ASC) 470 — 20 Debt — Debt with Conversion and Other Options. See Note 2 in the Consolidated Financial Statements. |
| (2) | 2010 includes income of $11.9 million net of tax for a special item related to the release of the liability associated with the 2008 de-consolidation of our former Canadian subsidiary. 2009 includes special charges net of tax of $51.0 million in goodwill impairment. 2008 includes special charges net of tax of $2.3 million related to the closure of our Canadian subsidiary. 2007 includes special charges net of tax of $13.7 million related to the impairment and closure of our Canadian subsidiary. |
| (3) | Consists of a reduction in loss contingency associated with the settlement of litigation relating to the logistics business that was discontinued in 1998. |
| (4) | 2009, 2008, 2007 and 2006 backlog include 8,500 units, 8,500 units, 3,500 units and 7,250 units subject to fulfillment of certain competitive and contractual conditions. 2006 through 2009 backlog all include 400 units subject to certain cancellation provisions. |
| The Greenbrier Companies 2010 Annual Report | 23 |
Table of Contents
| Item 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Executive
Summary
We currently operate in three primary business segments:
Manufacturing; Wheel Services, Refurbishment & Parts
and Leasing & Services. These three business segments
are operationally integrated. The Manufacturing segment,
operating from four facilities in the United States, Mexico and
Poland, produces double-stack intermodal railcars, conventional
railcars, tank cars and marine vessels. The Wheel Services,
Refurbishment & Parts segment performs railcar repair,
refurbishment and maintenance activities in the United States
and Mexico as well as wheel, axle and bearing servicing, and
production and reconditioning of a variety of parts for the
railroad industry. The Leasing & Services segment owns
approximately 8,000 railcars and provides management services
for approximately 225,000 railcars for railroads, shippers,
carriers, institutional investors and other leasing and
transportation companies in North America. Management evaluates
segment performance based on margins. We also produce rail
castings through an unconsolidated joint venture.
The rail and marine industries are cyclical in nature. We are
starting to see signs of a recovery in the freight car markets
in which we operate. Demand for our marine barge products
remains soft. Customer orders may be subject to cancellations
and contain terms and conditions customary in the industry.
Until recently, little variation has been experienced between
the quantity ordered and the quantity actually delivered.
Economic conditions have caused some customers to seek to
renegotiate, delay or cancel orders. Our railcar and marine
backlogs are not necessarily indicative of future results of
operations.
In December 2009 we modified our long-term new railcar contract
with General Electric Railcar Services Corporation (GE). Under
the terms of the modified contract, we will deliver up to 6,000
railcars with the first 3,800 tank cars and hopper cars expected
to be built by July 2013. The purchase price is subject to
adjustments for changes in the material costs. The remaining
2,200 tank and hopper cars are subject to fulfillment of certain
contractual conditions by both parties in their sole discretion
and would occur over the five-year period following the
completion of the 3,800 units. In addition, we have
retained the right of first refusal, subject to certain
qualifications, to manufacture all new railcar builds for GE
through December 2018. We have agreed to share in an equitable
manner with Greenbrier-GIMSA LLC, of which we own 50%, the
benefits (net of any expenses) received from GE as a result of
the amended agreement.
Multi-year supply agreements are a part of rail industry
practice. Our total manufacturing backlog of railcars as of
August 31, 2010 was approximately 5,300 units with an
estimated value of $420 million compared to
13,400 units valued at $1.16 billion as of
August 31, 2009. The August 31, 2010 backlog did not
include approximately 300 units valued at $20 million
scheduled for production in 2011. These 300 units are
contractually committed to third party lessees and are expected
to be placed into our lease fleet. Based on current production
plans, approximately 4,100 units in the August 31,
2010 backlog are scheduled for delivery in fiscal year 2011. The
balance of the production is scheduled for delivery through
fiscal year 2013. The August 31, 2010 backlog does not
include the contingent production of 2,200 units for GE. A
portion of the orders included in backlog reflects an assumed
product mix. Under terms of the orders, the exact mix will be
determined in the future which may impact the dollar amount of
backlog. Subsequent to year end we received new railcar orders
for 3,200 units with an aggregate value of approximately
$200 million. These units are scheduled for delivery in
fiscal year 2011.
Marine backlog was approximately $10 million as of
August 31, 2010 with production scheduled through fiscal
year 2011. During the quarter ended August 31, 2010, we
removed approximately $60 million of marine vessels from
backlog, due to the current likelihood that these vessels will
not be produced and sold as a result of current economic
conditions. Marine backlog was approximately $126 million
as of August 31, 2009.
Prices for steel, a primary component of railcars and barges,
and related surcharges have fluctuated significantly and remain
volatile. In addition, the price of certain railcar components,
which are a product of steel, are affected by steel price
fluctuations. New railcar and marine backlog generally either
includes fixed price contracts which anticipate material price
increases and surcharges, or contracts that contain actual or
formulaic pass through of material price increases and
surcharges. We are aggressively working to mitigate these
exposures. The Company’s integrated business model has
helped offset some of the effects of fluctuating steel and scrap
steel prices, as a
| 24 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
portion of our business segments benefit from rising steel scrap
prices while other segments benefit from lower steel and scrap
steel prices through enhanced margins.
In April 2010, we filed a registration statement on
Form S-3
with the SEC, using a “shelf” registration process.
The registration statement was declared effective on
April 14, 2010 and pursuant to the prospectus filed as part
of the registration statement, we may sell from time to time any
combination of securities in one or more offerings up to an
aggregate amount of $300.0 million. The securities
described in the prospectus include common stock, preferred
stock, debt securities, guarantees, rights, and units. We may
also offer common stock or preferred stock upon conversion of
debt securities, common stock upon conversion of preferred
stock, or common stock, preferred stock or debt securities upon
the exercise of warrants or rights. Each time we sell securities
under the “shelf,” we will provide a prospectus
supplement that will contain specific information about the
terms of the securities being offered and of the offering.
Proceeds from the sale of these securities may be used for
general corporate purposes including, among other things,
working capital, financings, possible acquisitions, the
repayment of obligations that have matured, and reducing or
refinancing indebtedness that may be outstanding at the time of
any offering.
On May 12, 2010, we issued 4,000,000 shares of our
common stock under the “shelf” registration statement
at a price of $12.50 per share, less underwriting commissions,
discounts and expenses. On May 19, 2010, an additional
500,000 shares were issued under the “shelf”
registration statement pursuant to the
30-day
over-allotment option exercised by the underwriters. Management
has broad discretion to allocate the net proceeds of
$52.7 million from the offering for such purposes as
working capital, capital expenditures, repayment or repurchase
of a portion of our indebtedness or acquisitions of, or
investment in, complementary businesses and products.
On March 13, 2008, our then subsidiary TrentonWorks Ltd.
(TrentonWorks) filed for bankruptcy with the Office of the
Superintendent of Bankruptcy Canada whereby the assets of
TrentonWorks were administered and liquidated by an appointed
trustee. In the fourth quarter of fiscal 2010, the bankruptcy
was resolved upon liquidation of substantially all remaining
assets of TrentonWorks by the bankruptcy trustee. The resolution
of the bankruptcy and associated release of obligations resulted
in the recognition of $11.9 million in income in 2010,
consisting of the reversal of the $15.3 million liability,
net of a $3.4 million other comprehensive loss. This income
was recorded in Special items on the Consolidated Statement of
Operations.
In April 2010, WLR — Greenbrier Rail Inc. (WLR-GBX)
was formed and acquired a lease fleet of nearly 4,000 railcars
valued at approximately $230.0 million. WLR-GBX is wholly
owned by affiliates of WL Ross & Co., LLC. We paid a
$6.1 million contract placement fee to WLR-GBX for the
right to perform certain management and advisory services and in
exchange will receive management and other fee income and
incentive compensation tied to the performance of WLR-GBX. The
contract placement fee is accounted for under the equity method
and is recorded in Intangibles and other assets on the
Consolidated Balance Sheet.
A $3.2 million gain on extinguishment of debt was recorded
on the early retirement of $32.3 million of convertible
senior notes in fiscal 2010. This gain was partially offset by
$0.5 million for the proportionate write-off of associated
loan fees.
We delivered 500 railcar units during fiscal year 2009 for which
we have an obligation to guarantee the purchaser minimum
earnings. The obligation expires December 31, 2011. The
maximum potential obligation totals $13.1 million and in
certain defined instances the obligation may be reduced due to
early termination. The purchaser has agreed to utilize the
railcars on a preferential basis, and we are entitled to
re-market the railcar units when they are not being utilized by
the purchaser during the obligation period. Any earnings
generated from the railcar units will offset the obligation and
be recognized as revenue and margin in future periods. As a
result of re-marketing the railcars, we recorded revenue of
$2.8 million for the year ended August 31, 2010. Upon
delivery of the railcar units, the entire purchase price was
recorded as revenue and paid in full. The minimum earnings due
to the purchaser are considered a reduction of revenue and were
recorded as deferred revenue. As of August 31, 2010,
$9.1 million of the potential obligation remained in
deferred revenue.
| The Greenbrier Companies 2010 Annual Report | 25 |
Table of Contents
Results of
Operations
Overview
Total revenue was $0.8 billion, $1.0 billion and
$1.3 billion for the years ended August 31, 2010, 2009
and 2008. Net earnings attributable to Greenbrier for the year
ended August 31, 2010 were $4.3 million or $0.21 per
diluted common share which included income of $11.9 million
in special items net of tax or $0.59 per diluted common share.
Net loss attributable to Greenbrier for the year ended
August 31, 2009 was $56.4 million or $3.35 per diluted
common share which included $51.0 million of special
charges net of tax or $3.03 per diluted common share. Net
earnings attributable to Greenbrier for the year ended
August 31, 2008 were $17.4 million or $1.06 per
diluted common share which included $2.3 million of special
charges net of tax or $.14 per diluted common share.
Manufacturing
Segment
Manufacturing revenue includes new railcar and marine
production. New railcar delivery and backlog information
disclosed herein includes all facilities.
Manufacturing revenue was $295.6 million,
$462.5 million and $665.1 million for the years ended
August 31, 2010, 2009 and 2008. Railcar deliveries, which
are the primary source of manufacturing revenue, were
approximately 2,500 units in 2010 compared to
3,700 units in 2009 and 7,300 units in 2008.
Manufacturing revenue decreased $166.9 million, or 36.1%,
from 2009 to 2010 primarily due to a decline in marine barge
production, lower railcar deliveries and a change in railcar
product mix with lower per unit sales prices. 2009 revenue was
reduced by an $11.6 million obligation of guaranteed
minimum earnings under a certain contract. Manufacturing revenue
decreased $202.6 million, or 30.0%, from 2008 to 2009
primarily due to lower railcar deliveries and the
$11.6 million obligation of guaranteed minimum earnings
under a certain contract. The decrease was somewhat offset by a
change in product mix with higher per unit sales prices and
higher marine revenues.
Manufacturing margin as a percentage of revenue was 9.2% in 2010
compared to 0.8% in 2009. The increase was primarily the result
of a more favorable product mix and improved production
efficiencies at our Mexican joint venture. The current year was
positively impacted by the re-marketing of railcars that were
subject to guaranteed minimum earnings under a certain contract
in the prior year. Manufacturing margin as a percentage of
revenue was 0.8% in 2009 compared to 1.7% in 2008. The decrease
was primarily the result of the $11.6 million obligation of
guaranteed minimum earnings under a certain contract, higher
material costs and scrap surcharge expense, severance expense of
$2.4 million and less absorption of overhead due to lower
production levels and plant utilization. These were partially
offset by improved marine margins as a result of labor
efficiencies and a continuous run of similar barge types.
Wheel Services,
Refurbishment & Parts Segment
Wheel Services, Refurbishment & Parts revenue was
$390.1 million, $476.2 million and $527.5 million
for the years ended August 31, 2010, 2009 and 2008. The
$86.1 million decrease in revenue from 2009 to 2010 was
primarily due to lower sales volumes of wheels and reduced
volumes of railcar repair and refurbishment work. This was
offset slightly by improvement in the price for scrap metal. The
$51.3 million decrease in revenue from 2008 to 2009 was
primarily due to lower wheel and parts volumes, reduced volumes
of railcar repair and refurbishment work, a sharp decrease in
scrap metal pricing and lower wheelset pricing.
Wheel Services, Refurbishment & Parts margin as a
percentage of revenue was 11.7% for both 2010 and 2009, and
19.2% for 2008. The decrease in fiscal 2009 margins was
primarily due to lower net scrap pricing and less favorable mix
of repair and refurbishment work.
Leasing &
Services Segment
Leasing & Services revenue was $78.8 million,
$79.5 million and $97.5 million for the years ended
August 31, 2010, 2009 and 2008. The $0.7 million
decrease in revenue from 2009 to 2010 was primarily the result
of lower rent generated from the lease fleet principally offset
by higher gains on sale of assets from the lease fleet. The
$18.0 million decrease in revenue from 2008 to 2009 was
primarily the result of a $6.8 million decrease in gains
on
| 26 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
disposition of assets from the lease fleet, lower lease fleet
utilization, downward pressures on lease renewal rates, lower
earnings on certain car hire utilization leases and lower
maintenance revenues.
During 2010, we realized $6.5 million in gains on sale for
the disposition of leased equipment compared to
$1.2 million in 2009 and $8.0 million in 2008. Assets
from our lease fleet are periodically sold in the normal course
of business in order to take advantage of market conditions,
manage risk and maintain liquidity.
Leasing & Services margin as a percentage of revenue
was 47.5% in 2010 compared to 42.2% in 2009 and 51.0% in 2008.
The increase in 2010 was primarily the result of increased gains
on sale of assets from the lease fleet which has no associated
cost of revenue. The decrease from 2008 to 2009 was primarily
the result of decreases in gains on disposition of assets from
the fleet, which have no associated cost of revenue, lower lease
fleet utilization, downward pressure on lease renewal rates and
lower earnings on certain car hire utilization leases.
The percentage of owned units on lease as of August 31,
2010 was 94.4% compared to 88.3% at August 31, 2009.
Other
costs
Selling and administrative expense was $69.9 million,
$65.7 million and $85.1 million for the years ended
August 31, 2010, 2009 and 2008. The $4.2 million
increase from 2009 to 2010 is primarily due to higher
depreciation expense associated with our on-going ERP
improvement projects, higher consulting and travel expenses and
increased costs at our Mexican joint venture due to higher
activity levels. These were partially offset by lower employee
costs. The $19.4 million decrease from 2008 to 2009 is
primarily due to lower employee related costs, including cost
reduction efforts and reversal of $2.3 million of certain
accruals. The decrease was partially offset by severance costs
of $1.3 million related to reductions in work force.
Interest and foreign exchange expense was $43.1 million and
$45.9 million for the years ended August 31, 2010 and
2009.
| Years Ended August 31, |
Increase
|
|||||||||||
| (In thousands) | 2010 | 2009 | (Decrease) | |||||||||
|
Interest and foreign exchange:
|
||||||||||||
|
Interest and other expense
|
$ | 36,214 | $ | 35,669 | $ | 545 | ||||||
|
Accretion of term loan debt discount
|
4,377 | 1,117 | 3,260 | |||||||||
|
Accretion of convertible debt discount
|
3,771 | 3,831 | (60 | ) | ||||||||
|
Gain on debt extinguishment
|
(3,218 | ) | – | (3,218 | ) | |||||||
|
Write-off of fees and debt discount on debt prepayment
|
1,148 | 1,300 | (152 | ) | ||||||||
|
Foreign exchange loss
|
842 | 3,995 | (3,153 | ) | ||||||||
| $ | 43,134 | $ | 45,912 | $ | (2,778 | ) | ||||||
The increase in term loan debt discount accretion, associated
with the term loan issued in June 2009, was due to a full year
of accretion in 2010 compared to only a partial year in 2009.
| The Greenbrier Companies 2010 Annual Report | 27 |
Table of Contents
Interest and foreign exchange expense was $45.9 million and
$44.3 million for the years ended August 31, 2009 and
2008.
| Years Ended August 31, |
Increase
|
|||||||||||
| (In thousands) | 2009 | 2008 | (Decrease) | |||||||||
|
Interest and foreign exchange:
|
||||||||||||
|
Interest and other expense
|
$ | 35,669 | $ | 38,612 | $ | (2,943 | ) | |||||
|
Accretion of term loan debt discount
|
1,117 | – | 1,117 | |||||||||
|
Accretion of convertible debt discount
|
3,831 | 3,550 | 281 | |||||||||
|
Write-off of fees and debt discount on debt prepayment
|
1,300 | – | 1,300 | |||||||||
|
Foreign exchange loss
|
3,995 | 2,158 | 1,837 | |||||||||
| $ | 45,912 | $ | 44,320 | $ | 1,592 | |||||||
Interest and other expense decreased primarily due to favorable
interest rates on our variable rate debt and lower debt levels.
The debt discount accretion expense was $1.1 million
associated with the term loan issued in June 2009.
In April 2007, the Company’s board of directors approved
the permanent closure of the Company’s then Canadian
railcar manufacturing subsidiary, TrentonWorks. As a result of
the facility closure decision charges of $2.3 million were
recorded as special items during 2008. In March 2008,
TrentonWorks filed for bankruptcy. In the fourth quarter of
2010, the bankruptcy was resolved upon liquidation of
substantially all remaining assets. The resolution of the
bankruptcy resulted in income of $11.9 million which was
recorded in Special items.
Charges of $55.7 million were recorded to Special items in
May 2009 associated with the impairment of goodwill. These
charges consist of $1.3 million related to the
Manufacturing segment, $3.1 million related to the
Leasing & Services segment and $51.3 million
related to the Wheel Services, Refurbishment & Parts
segment.
Income
Tax
In 2010 we recorded a tax benefit of $1.0 million on
$9.0 million of earnings for the year. The current year
included income of $11.9 million from a Special item
associated with the resolution of the bankruptcy of our then
Canadian railcar manufacturing subsidiary, TrentonWorks which
was not taxable. In addition, an income tax liability was not
recorded on the noncontrolling interest earnings of
$4.1 million from a consolidated subsidiary that is a flow
through entity for tax purposes. Earnings from flow through
entities are only taxed at the owner’s level. Excluding
these items the effective tax rate would have been 13.8%. Our
effective tax rate was 22.8% and 56.3% for the years ended
August 31, 2009 and 2008. In 2009 a goodwill impairment
charge for which a tax benefit was recorded at 8%, as a portion
of the impairment charge was not deductible for tax purposes. In
addition, 2009 included a reversal of $1.4 million of
liabilities for uncertain tax positions for which we are no
longer subject to examination by the tax authorities, a tax
benefit of $2.5 million related to the deemed liquidation
of our German operation for U.S. tax purposes and a tax
benefit of $4.3 million related to the reversal of a
deferred tax liability associated with a foreign subsidiary.
Excluding these items the effective tax rate would have been
21.5%. Tax expense for 2008 included a $3.9 million charge
associated with deferred tax assets and operating losses without
tax benefit incurred by our then Canadian subsidiary during its
closure process. 2008 also included a $1.3 million increase
in valuation allowances related to net operating losses
generated in Poland and Mexico. In addition, a $1.9 million
tax benefit resulted from reversing income tax reserves
associated with certain tax positions taken in prior years.
Excluding these items the effective tax rate would have been
54.3%.
The fluctuations in the effective tax rate are also due to the
geographical mix of pre-tax earnings and losses, minimum tax
requirements in certain local jurisdictions and operating losses
for certain operations with no related accrual of tax benefit.
| 28 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Earnings (Loss)
from Unconsolidated Affiliates
Earnings (loss) from unconsolidated affiliates were a loss of
$1.6 million in 2010, a loss of $0.6 million in 2009
and earnings of $0.9 million in 2008. 2010 includes losses
from our castings joint venture and from WLR-GBX. The WLR-GBX
loss was primarily the result of a mark to market on an interest
rate swap, which should no longer have a significant impact on
future results. 2009 and 2008 consist entirely of results from
our castings joint venture.
Noncontrolling
Interest
Noncontrolling interest includes earnings of $4.1 million,
loss of $1.5 million and loss of $3.2 million for the
years ended August 31, 2010, 2009 and 2008 and primarily
represents our joint venture partner’s share in the
earnings (losses) of our Mexican railcar manufacturing joint
venture that began production in 2007.
Liquidity and
Capital Resources
We have been financed through cash generated from operations,
borrowings and stock issuance. At August 31, 2010 cash and
cash equivalents was $98.9 million, an increase of
$22.7 million from $76.2 million at the prior year end.
Cash provided by operating activities for the years ended
August 31, 2010, 2009 and 2008 was $42.6 million,
$120.5 million and $32.1 million. The decrease in 2010
was primarily due to change in working capital needs based on
current activity levels. The change from 2008 to 2009 was
primarily due to lower working capital needs as a result of
decreased levels of operation.
Cash used in investing activities for the year ended
August 31, 2010 was $24.2 million compared to
$23.0 million in 2009 and $152.2 million in 2008. 2010
and 2009 cash utilization was primarily due to capital
expenditures during the year. Cash utilization in 2008 was
primarily due to acquisitions in the Wheel Services,
Refurbishment & Parts segment and capital expenditures
for the year.
Capital expenditures totaled $39.0 million,
$38.8 million and $77.6 million for the years ended
August 31, 2010, 2009 and 2008. Of these capital
expenditures, approximately $18.1 million,
$23.1 million and $45.9 million for the years ended
August 31, 2010, 2009 and 2008 were attributable to
Leasing & Services operations. Leasing &
Services capital expenditures for 2011, net of proceeds from
sales of equipment, are expected to be approximately
$40.0 million. We regularly sell assets from our lease
fleet, some of which may have been purchased within the current
year and included in capital expenditures. Proceeds from the
sale of equipment were approximately $23.0 million,
$15.6 million and $14.6 million for the years ended
August 31, 2010, 2009 and 2008.
Approximately $8.7 million, $9.1 million and
$24.1 million of capital expenditures for the years ended
August 31, 2010, 2009 and 2008 were attributable to
Manufacturing operations. Capital expenditures for Manufacturing
are expected to be approximately $16.0 million in 2011 and
primarily relate to enhancements to existing manufacturing
facilities and ERP implementation.
Wheel Services, Refurbishment & Parts capital
expenditures for the years ended August 31, 2010, 2009 and
2008 were $12.2 million, $6.6 million and
$7.6 million and are expected to be approximately
$28.0 million in 2011 for the opening of a new wheel
services facility to replace one previously destroyed by fire,
maintenance and improvement of existing facilities and ERP
implementation.
Cash provided by financing activities was $4.6 million for
the year ended August 31, 2010 compared to cash used in
financing activities of $24.5 million for the year ended
August 31 2009 and cash provided by financing activities of
$103.5 million in 2008. During 2010, we received
$52.7 million in net proceeds from an equity offering and
$2.0 million in net proceeds from term loan borrowings. We
repaid $11.9 million in net revolving credit lines and
$38.3 million in term loans and convertible notes. During
2009, we repaid $81.3 million in net revolving credit lines
and $16.4 million in term debt and paid dividends of
$2.0 million. We received $69.8 million in net
proceeds from term loan borrowings. During 2008, we received
$49.6 million in net proceeds from term loan borrowings and
$55.5 million in net proceeds under revolving credit lines.
In 2008, we repaid $6.9 million in term debt and paid
dividends of $5.3 million.
| The Greenbrier Companies 2010 Annual Report | 29 |
Table of Contents
All amounts originating in foreign currency have been translated
at the August 31, 2010 exchange rate for the following
discussion. As of August 31, 2010 senior secured credit
facilities, consisting of two components, aggregated
$111.1 million. A $100.0 million revolving line of
credit, maturing November 2011, is secured by substantially all
of our assets in the United States not otherwise pledged as
security for term loans. The facility is available to provide
working capital and interim financing of equipment, principally
for the United States and Mexican operations. Advances under
this revolving credit facility bear interest at variable rates
that depend on the type of borrowing and the defined ratio of
debt to total capitalization. In addition, current lines of
credit totaling $11.1 million secured by substantially all
of our European assets, with various variable rates, are
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 April 2011 through
June 2011. In September 2010, our Mexican joint venture renewed
its line of credit for up to $10.0 million secured by
certain of the joint venture’s accounts receivable and
inventory. Advances under this facility bear interest at LIBOR
plus 2.5% and are due 180 days after the date of borrowing.
Currently the Mexican joint venture can borrow on this facility
through August 2011. As of August 31, 2010 outstanding
borrowings under our facilities consists of $3.6 million in
letters of credit outstanding under the North American credit
facility and $2.6 million in revolving notes outstanding
under the European credit facilities.
The revolving and operating lines of credit, along with notes
payable, contain covenants with respect to the Company and
various subsidiaries, the most restrictive of which, among other
things, limit the ability to: incur additional indebtedness or
guarantees; pay dividends or repurchase stock; enter into sale
leaseback transactions; 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 the Company’s
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.
Available borrowings under our credit facilities 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 interest coverage ratios
which, as of August 31, 2010 would allow for maximum
additional borrowing of $106.2 million. The Company has an
aggregate of $104.9 million available to draw down under
the committed credit facilities as of August 31, 2010. This
amount consists of $96.4 million available on the North
American credit facility and $8.5 million on the European
credit facilities.
We may from time to time seek to repurchase or otherwise retire
or exchange securities, including outstanding 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 or other retirements, repurchases or
exchanges. Such 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.
We have operations in Mexico and Poland that conduct business in
their local currencies as well as other regional currencies. To
mitigate the exposure to transactions denominated in currencies
other than the functional currency of each entity, we enter into
foreign currency forward exchange contracts to protect the
margin on a portion of forecast foreign currency sales.
Foreign operations give rise to risks from changes in foreign
currency exchange rates. We utilize foreign currency forward
exchange contracts with established financial institutions to
hedge a portion of that risk. No provision has been made for
credit loss due to counterparty non-performance.
In addition to the third party financing, Greenbrier has
provided financing for a portion of the working capital needs of
our Mexican joint venture through a secured, interest bearing
loan. The balance of the loan was $19.0 million as of
August 31, 2010.
In accordance with customary business practices in Europe, we
have $9.1 million in bank and third party performance and
warranty guarantee facilities, all of which have been utilized
as of August 31, 2010. To date no amounts have been drawn
under these performance and warranty guarantees.
| 30 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Quarterly dividends were suspended as of the third quarter 2009.
A quarterly dividend of $.04 per share was declared during the
second quarter of 2009. Quarterly dividends of $.08 per share
were declared each quarter from the fourth quarter of 2005
through the first quarter of 2009.
We have $0.5 million in long-term advances to an
unconsolidated affiliate which are secured by accounts
receivable and inventory. As of August 31, 2010, this same
unconsolidated affiliate had $0.7 million in third party
debt for which we have guaranteed 33% or approximately
$0.2 million. The facility has been idled and expects to
restart production when demand returns. We, along with our
partners, have made additional equity investments during fiscal
year 2010, our share of which was $0.9 million. We made an
additional investment of $0.2 million during the first
quarter of 2011. Additional investments may be required.
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 working capital needs,
planned capital expenditures and expected debt repayments for
the foreseeable future.
The following table shows our estimated future contractual cash
obligations as of August 31, 2010:
| Years Ending August 31, | ||||||||||||||||||||||||||||
| (In thousands) | Total | 2011 | 2012 | 2013 | 2014 | 2015 | Thereafter | |||||||||||||||||||||
|
Notes payable
|
$ | 514,919 | $ | 4,565 | $ | 76,320 | $ | 72,219 | $ | 84,710 | $ | 276,933 | $ | 172 | ||||||||||||||
|
Interest
|
122,017 | 27,840 | 27,606 | 24,732 | 21,835 | 20,004 | – | |||||||||||||||||||||
|
Revolving notes
|
2,630 | 2,630 | – | – | – | – | – | |||||||||||||||||||||
|
Purchase commitments
|
106,030 | 20,745 | 20,745 | 16,135 | 16,135 | 16,135 | 16,135 | |||||||||||||||||||||
|
Operating leases
|
17,062 | 6,781 | 3,679 | 2,205 | 1,488 | 1,318 | 1,591 | |||||||||||||||||||||
|
Railcar leases
|
10,419 | 6,711 | 3,708 | – | – | – | – | |||||||||||||||||||||
|
Other
|
1,402 | 574 | 276 | 343 | 203 | 2 | 4 | |||||||||||||||||||||
| $ | 774,479 | $ | 69,846 | $ | 132,334 | $ | 115,634 | $ | 124,371 | $ | 314,392 | $ | 17,902 | |||||||||||||||
Due to uncertainty with respect to the timing of future cash
flows associated with our unrecognized tax benefits at
August 31, 2010, we are unable to estimate the period of
cash settlement with the respective taxing authority. Therefore,
approximately $3.5 million in uncertain tax positions have
been excluded from the contractual table above. See Note 22
to the Consolidated Financial Statements for a discussion on
income taxes.
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.
Critical
Accounting Policies and Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the
United States 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 planned tax return
filings. The amounts anticipated to be reported in those filings
may change between the time the financial statements are
prepared and the time the tax returns are filed. Further,
because tax filings are subject to review by taxing authorities,
there is also the risk that a position taken in preparation of a
tax return may be challenged by a taxing authority. If the
taxing authority is successful in asserting a position different
than that taken by us, differences in tax expense or between
current and deferred tax items may arise in future periods. Such
differences, which could have a material impact on our financial
statements, would be reflected in the financial statements when
| The Greenbrier Companies 2010 Annual Report | 31 |
Table of Contents
management considers them probable of occurring and the amount
reasonably estimable. Valuation allowances reduce deferred tax
assets to an amount that will more likely than not be realized.
Our estimates of the realization of deferred tax assets is based
on the information available at the time the financial
statements are prepared and 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.
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 collectibility is reasonably assured.
Railcars are generally manufactured, repaired or refurbished
under firm orders from third parties. Revenue is recognized when
railcars are completed, accepted by an unaffiliated customer and
contractual contingencies removed. Direct finance lease revenue
is recognized over the lease term in a manner that produces a
constant rate of return on the net investment in the lease.
Operating lease revenue is recognized as earned under the lease
terms. 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.
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.
Certain long lived assets were tested for impairment during the
quarter ended May 31, 2010. Forecasted undiscounted future
cash flows exceeded the carrying amount of the assets indicating
that the assets were not impaired.
Goodwill and acquired intangible assets -
The
Company periodically acquires businesses in purchase
transactions in which the allocation of the purchase price may
result in the recognition of goodwill and other intangible
assets.
| 32 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
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.
We perform a goodwill impairment test annually during the third
quarter. Goodwill is also tested more frequently if changes in
circumstances or the occurrence of events indicates that a
potential impairment exists. The provisions of ASC 350,
Intangibles — Goodwill and Other
, require that
we perform a two-step impairment test on goodwill. In the first
step, 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. The second step of the goodwill impairment test is
required only in situations where the carrying value of the
reporting unit exceeds its fair value as determined in the first
step. In the second step we would compare the implied fair value
of goodwill to its carrying value. The implied fair value of
goodwill is determined by allocating the fair value of a
reporting unit to all of the assets and liabilities of that unit
as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the
price paid to acquire the reporting unit. The excess of the fair
value of a reporting unit over the amounts assigned to its
assets and liabilities is the implied fair value of goodwill. An
impairment loss is recorded to the extent that the carrying
amount of the reporting unit goodwill exceeds the implied fair
value of that goodwill.
Loss contingencies -
On certain railcar contracts
the total cost to produce the railcar may exceed the actual
fixed or determinable contractual sale price of the railcar.
When the anticipated loss on production of railcars in backlog
is both probable and estimable the Company will accrue a loss
contingency. These estimates are based on the best information
available at the time of the accrual and may be adjusted at a
later date to reflect actual costs.
New Accounting
Pronouncements
See Note 2 of Notes to Consolidated Financial Statements
included in Part II, Item 8 of this Annual Report on
Form 10-K.
| Item 7a. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Foreign Currency
Exchange Risk
We have operations in Mexico, Germany and Poland that conduct
business in their local currencies as well as other regional
currencies. To mitigate the exposure to transactions denominated
in currencies other than the functional currency of each entity,
we enter into foreign currency forward exchange contracts to
protect the margin on a portion of forecast foreign currency
sales. At August 31, 2010, $37.8 million of forecast
sales in Europe were hedged by foreign exchange contracts.
Because of the variety of currencies in which purchases and
sales are transacted and the interaction between currency rates,
it is not possible to predict the impact a movement in a single
foreign currency exchange rate would have on future operating
results. We believe the exposure to foreign exchange risk is not
material.
In addition to exposure to transaction gains or losses, we are
also exposed to foreign currency exchange risk related to the
net asset position of our foreign subsidiaries. At
August 31, 2010, net assets of foreign subsidiaries
aggregated $25.1 million and a 10% strengthening of the
United States dollar relative to the foreign currencies would
result in a decrease in equity of $2.5 million, 0.9% of
total equity Greenbrier. This calculation assumes that each
exchange rate would change in the same direction relative to the
United States dollar.
Interest Rate
Risk
We have managed a portion of our variable rate debt with
interest rate swap agreements, effectively converting
$45.6 million of variable rate debt to fixed rate debt. As
a result, we are exposed to interest rate risk relating to our
revolving debt and a portion of term debt, which are at variable
rates. At August 31, 2010, 66% of our outstanding debt has
fixed rates and 34% has variable rates. At August 31, 2010,
a uniform 10% increase in interest rates would result in
approximately $0.5 million of additional annual interest
expense.
| The Greenbrier Companies 2010 Annual Report | 33 |
Table of Contents
| Item 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|
YEARS ENDED AUGUST 31,
|
||||||||
| (In thousands) | 2010 | 2009 (1) | ||||||
|
Assets
|
||||||||
|
Cash and cash equivalents
|
$ | 98,864 | $ | 76,187 | ||||
|
Restricted cash
|
2,525 | 1,083 | ||||||
|
Accounts receivable
|
89,252 | 113,371 | ||||||
|
Inventories
|
185,604 | 142,824 | ||||||
|
Assets held for sale
|
31,826 | 31,711 | ||||||
|
Equipment on operating leases, net
|
302,663 | 313,183 | ||||||
|
Investment in direct finance leases
|
1,795 | 7,990 | ||||||
|
Property, plant and equipment, net
|
132,614 | 127,974 | ||||||
|
Goodwill
|
137,066 | 137,066 | ||||||
|
Intangibles and other assets
|
90,679 | 96,902 | ||||||
| $ | 1,072,888 | $ | 1,048,291 | |||||
|
Liabilities and
Equity
|
||||||||
|
Revolving notes
|
$ | 2,630 | $ | 16,041 | ||||
|
Accounts payable and accrued liabilities
|
181,638 | 170,889 | ||||||
|
Losses in excess of investment in de-consolidated subsidiary
|
– | 15,313 | ||||||
|
Deferred income taxes
|
81,136 | 69,199 | ||||||
|
Deferred revenue
|
11,377 | 19,250 | ||||||
|
Notes payable
|
498,700 | 525,149 | ||||||
|
Commitments and contingencies (Notes 25 & 26)
|
||||||||
|
Equity:
|
||||||||
|
Greenbrier
|
||||||||
|
Preferred stock
-
without par value; 25,000 shares
authorized; none outstanding
|
– | – | ||||||
|
Common stock
-
without par value; 50,000 shares
authorized; 21,875 and 17,094 outstanding at August 31,
2010 and 2009
|
22 | 17 | ||||||
|
Additional paid-in capital
|
172,404 | 117,060 | ||||||
|
Retained earnings
|
120,716 | 116,439 | ||||||
|
Accumulated other comprehensive loss
|
(7,204 | ) | (9,790 | ) | ||||
|
Total equity Greenbrier
|
285,938 | 223,726 | ||||||
|
Noncontrolling interest
|
11,469 | 8,724 | ||||||
|
Total equity
|
297,407 | 232,450 | ||||||
| $ | 1,072,888 | $ | 1,048,291 | |||||
| (1) | 2009 was adjusted for the effects of Accounting Standards Codification (ASC) 470 — 20 Debt — Debt with Conversion and Other Options. See Note 2 to the Consolidated Financial Statements. An adjustment to the presentation was also made to conform to the adoption of ASC 810-10-65 Consolidation — Transition related to SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. |
The
accompanying notes are an integral part of these financial
statements.
| 34 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
|
YEARS ENDED AUGUST 31,
|
||||||||||||
| (In thousands, except per share amounts) | 2010 | 2009 (1) | 2008 (1) | |||||||||
|
Revenue
|
||||||||||||
|
Manufacturing
|
$ | 295,566 | $ | 462,496 | $ | 665,093 | ||||||
|
Wheel Services, Refurbishment & Parts
|
390,061 | 476,164 | 527,466 | |||||||||
|
Leasing & Services
|
78,823 | 79,465 | 97,520 | |||||||||
| 764,450 | 1,018,125 | 1,290,079 | ||||||||||
|
Cost of
revenue
|
||||||||||||
|
Manufacturing
|
268,395 | 458,733 | 653,879 | |||||||||
|
Wheel Services, Refurbishment & Parts
|
344,522 | 420,294 | 426,183 | |||||||||
|
Leasing & Services
|
41,365 | 45,991 | 47,774 | |||||||||
| 654,282 | 925,018 | 1,127,836 | ||||||||||
|
Margin
|
110,168 | 93,107 | 162,243 | |||||||||
|
Other
costs
|
||||||||||||
|
Selling and administrative
|
69,931 | 65,743 | 85,133 | |||||||||
|
Interest and foreign exchange
|
43,134 | 45,912 | 44,320 | |||||||||
|
Special items
|
(11,870 | ) | 55,667 | 2,302 | ||||||||
| 101,195 | 167,322 | 131,755 | ||||||||||
|
Earnings (loss) before income tax and earnings (loss) from
unconsolidated affiliates
|
8,973 | (74,215 | ) | 30,488 | ||||||||
|
Income tax benefit (expense)
|
959 | 16,917 | (17,159 | ) | ||||||||
|
Earnings (loss) before earnings (loss) from unconsolidated
affiliates
|
9,932 | (57,298 | ) | 13,329 | ||||||||
|
Earnings (loss) from unconsolidated affiliates
|
(1,601 | ) | (565 | ) | 872 | |||||||
|
Net earnings (loss)
|
8,331 | (57,863 | ) | 14,201 | ||||||||
|
Net (earnings) loss attributable to noncontrolling interest
|
(4,054 | ) | 1,472 | 3,182 | ||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | 4,277 | $ | (56,391 | ) | $ | 17,383 | |||||
|
Basic earnings
(loss) per common share:
|
$ | 0.23 | $ | (3.35 | ) | $ | 1.06 | |||||
|
Diluted earnings
(loss) per common share:
|
$ | 0.21 | $ | (3.35 | ) | $ | 1.06 | |||||
|
Weighted average
common
shares
:
|
||||||||||||
|
Basic
|
18,585 | 16,815 | 16,395 | |||||||||
|
Diluted
|
20,213 | 16,815 | 16,417 | |||||||||
| (1) | 2009 and 2008 were adjusted for the effects of Accounting Standards Codification (ASC) 470 — 20 Debt — Debt with Conversion and Other Options. See Note 2 to the Consolidated Financial Statements. An adjustment to the presentation was also made to conform to the adoption of ASC 810-10-65 Consolidation — Transition related to SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. |
The
accompanying notes are an integral part of these financial
statements.
| The Greenbrier Companies 2010 Annual Report | 35 |
Table of Contents
Consolidated
Statements of Equity
and Comprehensive Income (Loss)
and Comprehensive Income (Loss)
| Attributable to Greenbrier | ||||||||||||||||||||||||||||
|
Accumulated
|
||||||||||||||||||||||||||||
|
Additional
|
Other
|
Attributable
to
|
||||||||||||||||||||||||||
|
(In thousands, except for per share
|
Common Stock |
Paid-in
|
Retained
|
Comprehensive
|
Noncontrolling
|
Total
|
||||||||||||||||||||||
| amounts) | Shares | Amount | Capital | Earnings | Income (Loss) | Interest | Equity | |||||||||||||||||||||
|
Balance
September 1,
2007
(1)
|
16,169 | $ | 16 | $ | 95,747 | $ | 162,845 | $ | (166 | ) | $ | 5,146 | 263,588 | |||||||||||||||
|
Net earnings (loss)
|
– | – | – | 17,383 | – | (3,182 | ) | 14,201 | ||||||||||||||||||||
|
Translation adjustment (net of tax effect)
|
– | – | – | – | 4,852 | – | 4,852 | |||||||||||||||||||||
|
Pension plan adjustment
|
– | – | – | – | (6,873 | ) | – | (6,873 | ) | |||||||||||||||||||
|
Reclassification of derivative financial instruments recognized
in net earnings (net of tax effect)
|
– | – | – | – | (94 | ) | – | (94 | ) | |||||||||||||||||||
|
Unrealized gain on derivative financial instruments (net of tax
effect)
|
– | – | – | – | 905 | – | 905 | |||||||||||||||||||||
|
Comprehensive income
|
12,991 | |||||||||||||||||||||||||||
|
Investment by joint venture partner
|
– | – | – | – | – | 6,600 | 6,600 | |||||||||||||||||||||
|
Noncontrolling interest adjustments
|
– | – | – | – | – | 54 | 54 | |||||||||||||||||||||
|
Pension adjustment (net of tax effect)
|
– | – | – | – | 71 | – | 71 | |||||||||||||||||||||
|
Cash dividends ($0.32 per share)
|
– | – | – | (5,261 | ) | – | – | (5,261 | ) | |||||||||||||||||||
|
Uncertain tax position adjustment
|
– | – | – | (136 | ) | – | – | (136 | ) | |||||||||||||||||||
|
Restricted stock awards (net of cancellations)
|
432 | 1 | 9,473 | – | – | – | 9,474 | |||||||||||||||||||||
|
Unamortized restricted stock
|
– | – | (9,442 | ) | – | – | – | (9,442 | ) | |||||||||||||||||||
|
Restricted stock amortization
|
– | – | 3,932 | – | – | – | 3,932 | |||||||||||||||||||||
|
Stock options exercised
|
5 | – | 43 | – | – | – | 43 | |||||||||||||||||||||
|
Excess tax expense of stock options exercised
|
– | – | (76 | ) | – | – | – | (76 | ) | |||||||||||||||||||
|
Balance
August 31,
2008
(1)
|
16,606 | 17 | 99,677 | 174,831 | (1,305 | ) | 8,618 | 281,838 | ||||||||||||||||||||
|
Net loss
|
– | – | – | (56,391 | ) | – | (1,472 | ) | (57,863 | ) | ||||||||||||||||||
|
Translation adjustment (net of tax effect)
|
– | – | – | – | (5,527 | ) | – | (5,527 | ) | |||||||||||||||||||
|
Reclassification of derivative financial instruments recognized
in net loss (net of tax effect)
|
– | – | – | – | (612 | ) | – | (612 | ) | |||||||||||||||||||
|
Unrealized loss on derivative financial instruments (net of tax
effect)
|
– | – | – | – | (2,465 | ) | – | (2,465 | ) | |||||||||||||||||||
|
Comprehensive loss
|
(66,467 | ) | ||||||||||||||||||||||||||
|
Investment by joint venture partner
|
– | – | – | – | – | 1,400 | 1,400 | |||||||||||||||||||||
|
Noncontrolling interest adjustments
|
– | – | – | – | – | 178 | 178 | |||||||||||||||||||||
|
Pension adjustment (net of tax effect)
|
– | – | 119 | – | 119 | |||||||||||||||||||||||
|
Cash dividends ($0.12 per share)
|
– | – | – | (2,001 | ) | – | – | (2,001 | ) | |||||||||||||||||||
|
Warrants
|
– | – | 13,410 | – | – | – | 13,410 | |||||||||||||||||||||
|
Restricted stock awards (net of cancellations)
|
485 | – | 1,252 | – | – | – | 1,252 | |||||||||||||||||||||
|
Unamortized restricted stock
|
– | – | (1,252 | ) | – | – | – | (1,252 | ) | |||||||||||||||||||
|
Restricted stock amortization
|
– | – | 5,062 | – | – | – | 5,062 | |||||||||||||||||||||
|
Stock options exercised
|
3 | – | 23 | – | – | – | 23 | |||||||||||||||||||||
|
Excess tax expense of stock options exercised
|
– | – | (1,112 | ) | – | – | – | (1,112 | ) | |||||||||||||||||||
|
Balance
August 31,
2009
(1)
|
17,094 | 17 | 117,060 | 116,439 | (9,790 | ) | 8,724 | 232,450 | ||||||||||||||||||||
|
Net earnings
|
– | – | – | 4,277 | – | 4,054 | 8,331 | |||||||||||||||||||||
|
Translation adjustment (net of tax effect)
|
– | – | – | – | (3,831 | ) | – | (3,831 | ) | |||||||||||||||||||
|
Pension adjustment (net of tax effect)
|
– | – | 6,810 | – | 6,810 | |||||||||||||||||||||||
|
Reclassification of derivative financial instruments recognized
in net earnings (net of tax effect)
|
– | – | – | – | (878 | ) | – | (878 | ) | |||||||||||||||||||
|
Unrealized gain on derivative financial instruments (net of tax
effect)
|
– | – | – | – | 485 | – | 485 | |||||||||||||||||||||
|
Comprehensive income
|
10,917 | |||||||||||||||||||||||||||
|
Noncontrolling interest adjustments
|
– | – | – | – | – | (1,309 | ) | (1,309 | ) | |||||||||||||||||||
|
ASC
470-20
adjustment for partial convertible note retirement (net of tax)
|
– | – | (2,535 | ) | – | – | – | (2,535 | ) | |||||||||||||||||||
|
Net proceeds from equity offering
|
4,500 | 5 | 52,703 | – | – | – | 52,708 | |||||||||||||||||||||
|
Restricted stock awards (net of cancellations)
|
274 | – | 3,210 | – | – | – | 3,210 | |||||||||||||||||||||
|
Unamortized restricted stock
|
– | – | (3,210 | ) | – | – | – | (3,210 | ) | |||||||||||||||||||
|
Restricted stock amortization
|
– | – | 5,825 | – | – | – | 5,825 | |||||||||||||||||||||
|
Stock options exercised
|
7 | – | 29 | – | – | – | 29 | |||||||||||||||||||||
|
Excess tax expense of stock options exercised
|
– | – | (678 | ) | – | – | – | (678 | ) | |||||||||||||||||||
|
Balance
August 31, 2010
|
21,875 | $ | 22 | $ | 172,404 | $ | 120,716 | $ | (7,204 | ) | $ | 11,469 | $ | 297,407 | ||||||||||||||
| (1) | 2009 and 2008 were adjusted for the effects of Accounting Standards Codification (ASC) 470 — 20 Debt — Debt with Conversion and Other Options. See Note 2 to the Consolidated Financial Statements. An adjustment to the presentation was also made to conform to the adoption of ASC 810-10-65 Consolidation — Transition related to SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. |
The
accompanying notes are an integral part of these financial
statements.
| 36 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
YEARS ENDED AUGUST 31,
| (In thousands) | 2010 | 2009 (1) | 2008 (1) | |||||||||
|
Cash flows from
operating activities:
|
||||||||||||
|
Net earnings (loss)
|
$ | 8,331 | $ | (57,863 | ) | $ | 14,201 | |||||
|
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
|
||||||||||||
|
Deferred income taxes
|
15,052 | (13,299 | ) | 11,528 | ||||||||
|
Depreciation and amortization
|
37,511 | 37,669 | 35,086 | |||||||||
|
Gain on sales of equipment
|
(6,543 | ) | (1,167 | ) | (8,010 | ) | ||||||
|
Special items
|
(11,870 | ) | 55,667 | 2,302 | ||||||||
|
Accretion of debt discount
|
8,581 | 4,948 | 3,550 | |||||||||
|
Gain on extinguishment of debt
|
(3,218 | ) | – | – | ||||||||
|
Other
|
4,237 | 3,583 | 390 | |||||||||
|
Decrease (increase) in assets excluding acquisitions:
|
||||||||||||
|
Accounts receivable
|
22,430 | 58,521 | (7,621 | ) | ||||||||
|
Inventories
|
(44,276 | ) | 98,751 | (29,692 | ) | |||||||
|
Assets held for sale
|
(177 | ) | 21,841 | (10,621 | ) | |||||||
|
Other
|
7,171 | 1,157 | (2,700 | ) | ||||||||
|
Increase (decrease) in liabilities excluding acquisitions:
|
||||||||||||
|
Accounts payable and accrued liabilities
|
12,777 | (86,514 | ) | 21,801 | ||||||||
|
Deferred revenue
|
(7,445 | ) | (2,829 | ) | 1,904 | |||||||
|
Net cash provided by operating activities
|
42,561 | 120,465 | 32,118 | |||||||||
|
Cash flows from
investing activities:
|
||||||||||||
|
Principal payments received under direct finance leases
|
390 | 429 | 375 | |||||||||
|
Proceeds from sales of equipment
|
22,978 | 15,555 | 14,598 | |||||||||
|
Investment in and advances (to) from unconsolidated affiliates
|
(927 | ) | – | 858 | ||||||||
|
Contract placement fee
|
(6,050 | ) | – | – | ||||||||
|
Acquisitions, net of cash acquired
|
– | – | (91,166 | ) | ||||||||
|
De-consolidation of subsidiary
|
– | – | (1,217 | ) | ||||||||
|
Decrease (increase) in restricted cash
|
(1,442 | ) | (109 | ) | 2,046 | |||||||
|
Capital expenditures
|
(38,989 | ) | (38,847 | ) | (77,644 | ) | ||||||
|
Other
|
(130 | ) | – | – | ||||||||
|
Net cash used in investing activities
|
(24,170 | ) | (22,972 | ) | (152,150 | ) | ||||||
|
Cash flows from
financing activities:
|
||||||||||||
|
Net changes in revolving notes with maturities of 90 days
or less
|
(11,934 | ) | (81,251 | ) | 55,514 | |||||||
|
Proceeds from revolving notes with maturities longer than
90 days
|
5,698 | – | – | |||||||||
|
Repayments of revolving notes with maturities longer than
90 days
|
(5,698 | ) | – | – | ||||||||
|
Net proceeds from issuance of notes payable
|
2,040 | 69,768 | 49,613 | |||||||||
|
Repayments of notes payable
|
(38,267 | ) | (16,436 | ) | (6,919 | ) | ||||||
|
Net proceeds from equity offering
|
52,708 | – | – | |||||||||
|
Investment by joint venture partner
|
– | 1,400 | 6,600 | |||||||||
|
Dividends paid
|
– | (2,001 | ) | (5,261 | ) | |||||||
|
Other
|
29 | 3,973 | 3,931 | |||||||||
|
Net cash provided by (used in) financing activities
|
4,576 | (24,547 | ) | 103,478 | ||||||||
|
Effect of exchange rate changes
|
(290 | ) | (2,716 | ) | 1,703 | |||||||
|
Increase (decrease) in cash and cash equivalents
|
22,677 | 70,230 | (14,851 | ) | ||||||||
|
Cash and cash
equivalents
|
||||||||||||
|
Beginning of period
|
76,187 | 5,957 | 20,808 | |||||||||
|
End of period
|
$ | 98,864 | $ | 76,187 | $ | 5,957 | ||||||
|
Cash paid during
the period for:
|
||||||||||||
|
Interest
|
$ | 29,409 | $ | 31,967 | $ | 35,274 | ||||||
|
Income taxes paid (refunded)
|
$ | (14,953 | ) | $ | 592 | $ | 4,246 | |||||
|
Non-cash
activity
|
||||||||||||
|
Transfer of assets held for sale to equipment on operating leases
|
$ | – | $ | 4,830 | $ | 6,441 | ||||||
|
Transfer of other assets to property, plant and equipment
|
708 | – | – | |||||||||
|
Adjustment to tax reserve
|
– | 7,415 | – | |||||||||
|
Warrant valuation
|
– | 13,410 | – | |||||||||
|
Supplemental
disclosure of non-cash activity:
|
||||||||||||
|
Assumption of acquisition capital lease obligation
|
$ | – | $ | – | $ | 498 | ||||||
|
Seller receivable netted against acquisition note
|
– | – | 503 | |||||||||
|
De-consolidation of subsidiary (see note 4)
|
– | – | 15,313 | |||||||||
|
Supplemental
disclosure of subsidiary acquired
|
||||||||||||
|
Assets acquired
|
$ | – | $ | – | $ | (96,782 | ) | |||||
|
Liabilities assumed
|
– | – | 5,616 | |||||||||
|
Acquisitions, net of cash acquired
|
$ | – | $ | – | $ | (91,166 | ) | |||||
| (1) | 2009 and 2008 were adjusted for the effects of Accounting Standards Codification (ASC) 470 — 20 Debt — Debt with Conversion and Other Options. See Note 2 to the Consolidated Financial Statements. An adjustment to the presentation was also made to conform to the adoption of ASC 810-10-65 Consolidation — Transition related to SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51. |
The
accompanying notes are an integral part of these financial
statements.
| The Greenbrier Companies 2010 Annual Report | 37 |
Table of Contents
Notes to
Consolidated Financial Statements
The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier
or the Company) currently operate in three primary business
segments: Manufacturing, Wheel Services,
Refurbishment & Parts and Leasing &
Services. The three business segments are operationally
integrated. With operations in the United States, Mexico and
Poland, the Manufacturing segment produces double-stack
intermodal railcars, conventional railcars, tank cars and marine
vessels. The Wheel Services, Refurbishment & Parts
segment performs railcar repair, refurbishment and maintenance
activities in the United States and Mexico as well as wheel and
axle servicing and production of a variety of parts for the
railroad industry. The Leasing & Services segment owns
approximately 8,000 railcars and provides management services
for approximately 225,000 railcars for railroads, shippers,
carriers, institutional investors and other leasing and
transportation companies in North America. Greenbrier also
produces railcar castings through an unconsolidated joint
venture.
Principles of consolidation
-
The financial
statements include the accounts of the Company and its
subsidiaries in which it has a controlling interest. All
intercompany transactions and balances are eliminated upon
consolidation.
Unclassified Balance Sheet
-
The balance sheets of
the Company are presented in an unclassified format as a result
of significant leasing activities for which the current or
non-current distinction is not relevant. In addition, the
activities of the Manufacturing; Wheel Services,
Refurbishment & Parts and Leasing & Services
segments are so intertwined that in the opinion of management,
any attempt to separate the respective balance sheet categories
would not be meaningful and may lead to the development of
misleading conclusions by the reader.
Foreign currency translation
-
Operations outside
the United States prepare financial statements in currencies
other than the United States dollar. Revenues and expenses are
translated at average exchange rates for the year, while assets
and liabilities are translated at year-end exchange rates.
Translation adjustments are accumulated as a separate component
of equity in other comprehensive income (loss).
Cash and cash equivalents
-
Cash is temporarily
invested primarily in money market funds. All highly-liquid
investments with a maturity of three months or less at the date
of acquisition are considered cash equivalents.
Restricted cash
-
Restricted cash is a pass
through account for activity related to car hire auditing and
processing for certain third party customers.
Accounts receivable
-
Accounts receivable are
stated net of allowance for doubtful accounts of
$3.9 million and $5.6 million as of August 31,
2010 and 2009.
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Allowance for
doubtful accounts
|
||||||||||||
|
Balance at beginning of period
|
$ | 5,612 | $ | 5,557 | $ | 3,916 | ||||||
|
Additions, net of reversals
|
(385 | ) | 641 | 3,184 | ||||||||
|
Usage
|
(991 | ) | (560 | ) | (1,598 | ) | ||||||
|
Currency translation effect
|
(305 | ) | (26 | ) | 55 | |||||||
|
Balance at end of period
|
$ | 3,931 | $ | 5,612 | $ | 5,557 | ||||||
Inventories
-
Inventories are valued at the lower
of cost
(first-in,
first-out) or market.
Work-in-process
includes material, labor and overhead.
| 38 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Assets held for sale
-
Assets held for sale
consist of new railcars in transit to delivery point, railcars
on lease with the intent to sell, used railcars that will either
be sold or refurbished or placed on lease and then sold,
finished goods and completed wheel sets.
Equipment on operating leases, net
-
Equipment on
operating leases is stated net of accumulated depreciation.
Depreciation to estimated salvage value is provided on the
straight-line method over the estimated useful lives of up to
thirty-five years.
Property, plant and equipment
-
Property, plant
and equipment is stated net of accumulated depreciation.
Depreciation is provided on the straight-line method over
estimated useful lives which are as follows:
| Depreciable Life | ||||
|
Buildings and improvements
|
10-25 years | |||
|
Machinery and equipment
|
3-15 years | |||
|
Other
|
3-7 years | |||
Goodwill
-
Goodwill is recorded when the purchase
price of an acquisition exceeds the fair market value of the net
assets acquired. Goodwill is not amortized and is tested for
impairment at least annually and more frequently if material
changes in events or circumstances arise. This testing compares
carrying values to fair values and if the carrying value of
these assets is in excess of fair value, the carrying value is
reduced to fair value. The Company performs a goodwill
impairment test annually during the third quarter.
Intangible and other assets
-
Intangible assets
are recorded when a portion of the purchase price of an
acquisition is allocated to assets such as customer contracts
and relationships, trade names, certifications and backlog.
Intangible assets with finite lives are amortized using the
straight line method over their estimated useful lives and
include the following: proprietary technology, 10 years;
trade names, 5 years; patents, 11 years; and long-term
customer agreements, 5 to 20 years. Other assets include
loan fees and debt acquisition costs which are capitalized and
amortized as interest expense over the life of the related
borrowings.
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 estimated
realizable value is recognized in the current period. No
impairment was recorded in the current fiscal year.
Maintenance obligations
-
The Company is
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 liability is based on maintenance histories for each
type and age of railcar. The liability, included in accounts
payable and accrued liabilities, is reviewed periodically and
updated based on maintenance trends and known future repair or
refurbishment requirements.
Warranty accruals
-
Warranty costs are estimated
and charged to operations to cover a defined warranty period.
The estimated warranty cost is based on 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,
are reviewed periodically and updated based on warranty trends.
Contingent rental assistance
-
The Company has
entered into contingent rental assistance agreements on certain
railcars, subject to leases, that have been sold to third
parties. These agreements guarantee the purchasers a minimum
lease rental, subject to a maximum defined rental assistance
amount, over remaining periods of up to five years. A liability
is established when management believes that it is probable that
a rental shortfall will occur and the amount can be estimated.
Income taxes
-
The liability method is used to
account for income taxes. Deferred income taxes are provided for
the temporary effects of differences between assets and
liabilities recognized for financial statement and income tax
reporting purposes. Valuation allowances reduce deferred tax
assets to an amount that will more likely than not be
| The Greenbrier Companies 2010 Annual Report | 39 |
Table of Contents
realized. As a result, we recognize liabilities for uncertain
tax positions based on whether evidence indicates that it is
more likely than not that the position will be sustained on
audit. It is inherently difficult and subjective to estimate
such amounts, as this requires us to determine the probability
of various possible outcomes. The Company reevaluates these
uncertain tax positions on a quarterly basis. Changes in
assumptions may result in the recognition of a tax benefit or an
additional charge to the tax provision.
Noncontrolling interest
-
In October 2006, the
Company formed a joint venture with Grupo Industrial Monclova,
S.A. (GIMSA) to manufacture new railroad freight cars for the
North American marketplace at GIMSA’s existing
manufacturing facility located in Frontera, Mexico. Each party
owns a 50% interest in the joint venture. Production began late
in the Company’s third quarter of 2007. The financial
results of this operation are consolidated for financial
reporting purposes as the Company maintains a controlling
interest as evidenced by the right to appoint the majority of
the board of directors, control over accounting, financing,
marketing and engineering, and approval and design of products.
The noncontrolling interest reflected in the Company’s
consolidated financial statements represents the joint venture
partner’s equity in this venture.
Accumulated other comprehensive income (loss)
-
Accumulated other comprehensive income (loss) represents net
earnings (loss) plus all other changes in net assets from
non-owner sources.
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 collectibility is reasonably assured.
Railcars are generally manufactured, repaired or refurbished
under firm orders from third parties. Revenue is recognized when
new or refurbished railcars are completed, accepted by an
unaffiliated customer and contractual contingencies removed.
Marine revenues 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.
Cash payments received in advance prior to meeting revenue
recognition criteria are accounted for in deferred revenue.
Direct finance lease revenue is recognized over the lease term
in a manner that produces a constant rate of return on the net
investment in the lease. Operating lease revenue is recognized
as earned under the lease terms. 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. Such adjustments
historically have not differed significantly from the estimate.
Interest and foreign exchange -
Includes foreign
exchange gains and losses, amortization of loan fee expense,
accretion of debt discounts, gains from extinguishment of debt
and external interest expense.
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Interest and foreign exchange:
|
||||||||||||
|
Interest and other expense
|
$ | 36,214 | $ | 35,669 | $ | 38,612 | ||||||
|
Accretion of term loan debt discount
|
4,377 | 1,117 | – | |||||||||
|
Accretion of convertible debt discount
|
3,771 | 3,831 | 3,550 | |||||||||
|
Gain on debt extinguishment
|
(3,218 | ) | – | – | ||||||||
|
Write-off of fees and debt discount on debt prepayment
|
1,148 | 1,300 | – | |||||||||
|
Foreign exchange loss
|
842 | 3,995 | 2,158 | |||||||||
| $ | 43,134 | $ | 45,912 | $ | 44,320 | |||||||
Research and development
-
Research and
development costs are expensed as incurred. Research and
development costs incurred for new product development during
the years ended August 31, 2010, 2009 and 2008 were
$2.6 million, $1.7 million and $2.9 million.
Forward exchange contracts
-
Foreign operations
give rise to risks from changes in foreign currency exchange
rates. Forward exchange contracts with established financial
institutions are utilized to hedge a portion of such risk.
Realized and unrealized gains and losses are deferred in other
comprehensive income (loss) and recognized in
| 40 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
earnings concurrent with the hedged transaction or when the
occurrence of the hedged transaction is no longer considered
probable. Ineffectiveness is measured and any gain or loss is
recognized in foreign exchange gain or loss. Even though forward
exchange contracts are entered into to mitigate the impact of
currency fluctuations, certain exposure remains, which may
affect operating results. In addition, there is risk for
counterparty non-performance.
Interest rate instruments
-
Interest rate swap
agreements are utilized to reduce the impact of changes in
interest rates on certain debt. The net cash amounts paid or
received under the agreements are accrued and recognized as an
adjustment to interest expense.
Net earnings per share
-
Basic earnings per common
share (EPS) excludes the potential dilution that would occur if
additional shares were issued upon exercise of outstanding stock
options and warrants, while diluted EPS takes this potential
dilution into account using the treasury stock method.
Stock-based compensation
-
All stock options were
vested prior to September 1, 2005 and accordingly no
compensation expense was recognized for stock options for the
years ended August 31, 2010, 2009 and 2008. The value, at
the date of grant, of stock awarded under restricted stock
grants is amortized as compensation expense over the vesting
period of three to five years. Compensation expense recognized
related to restricted stock grants for the years ended
August 31, 2010, 2009 and 2008 was $5.8 million,
$5.1 million and $3.9 million.
Management estimates
-
The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States 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
December 2007, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS)
No. 141R,
Business Combinations
. This statement,
which has been codified within Accounting Standards Codification
(ASC) 805,
Business Combinations
, establishes the
principles and requirements for how an acquirer recognizes and
measures the assets acquired, liabilities assumed, and
noncontrolling interest; recognizes and measures goodwill; and
identifies disclosures. This statement was effective for the
Company for business combinations entered into on or after
September 1, 2009.
In December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in Consolidated Financial
Statements — an amendment of ARB No. 51
. This
statement, which has been codified within ASC 810,
Consolidations
, establishes reporting standards for
noncontrolling interests in subsidiaries. This statement changed
the presentation of noncontrolling interests in subsidiaries in
the financial statements for the Company beginning
September 1, 2009 and the presentation and disclosure has
been retrospectively applied for all periods presented.
In May 2008, the FASB issued FSP APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement).
This guidance specifies that issuers of such
instruments should separately account for the liability and
equity components in a manner that will reflect the
entity’s nonconvertible debt borrowing rate when interest
cost is recognized in subsequent periods. This guidance, which
has been codified within ASC 470
, Debt
, was
effective for the Company beginning September 1, 2009 with
respect to its outstanding convertible debt. This guidance
required retrospective adjustments for all periods the Company
had the convertible debt outstanding.
| The Greenbrier Companies 2010 Annual Report | 41 |
Table of Contents
The retrospective application of this guidance adjusted Interest
and foreign exchange and Net earnings (loss) attributable to
Greenbrier and earnings (loss) per share for 2009 and 2008 as
indicated in the following tables (in thousands, except per
share amounts):
| Year Ended August 31, 2009 | ||||||||||||||||
|
Net loss
|
||||||||||||||||
|
Interest and
Foreign
|
Attributable
to
|
Basic Loss per
|
Diluted Loss
per
|
|||||||||||||
| Exchange | Greenbrier | Common Share | Common Share | |||||||||||||
|
Previously reported
|
$ | 42,081 | $ | (54,060 | ) | $ | (3.21 | ) | $ | (3.21 | ) | |||||
|
Adjustment
|
3,831 | (2,331 | ) | (0.14 | ) | (0.14 | ) | |||||||||
|
Revised
|
$ | 45,912 | $ | (56,391 | ) | $ | (3.35 | ) | $ | (3.35 | ) | |||||
| Year Ended August 31, 2008 | ||||||||||||||||
|
Net Earnings
|
Basic Earnings
|
Diluted
Earnings
|
||||||||||||||
|
Interest and
Foreign
|
Attributable
to
|
per Common
|
per Common
|
|||||||||||||
| Exchange | Greenbrier | Share | Share | |||||||||||||
|
Previously reported
|
$ | 40,770 | $ | 19,542 | $ | 1.19 | $ | 1.19 | ||||||||
|
Adjustment
|
3,550 | (2,159 | ) | (0.13 | ) | (0.13 | ) | |||||||||
|
Revised
|
$ | 44,320 | $ | 17,383 | $ | 1.06 | $ | 1.06 | ||||||||
The retrospective application of this guidance adjusted the
Consolidated Balance Sheet as of August 31, 2009 as follows
(in thousands):
| August 31, 2009 | ||||||||||||||||
|
Deferred
Income
|
Additional
Paid-
|
Retained
|
||||||||||||||
| Taxes | Notes Payable | in Capital | Earnings | |||||||||||||
|
Previously reported
|
$ | 62,530 | $ | 542,180 | $ | 99,645 | $ | 123,492 | ||||||||
|
Adjustment
|
6,669 | (17,031 | ) | 17,415 | (7,053 | ) | ||||||||||
|
Revised
|
$ | 69,199 | $ | 525,149 | $ | 117,060 | $ | 116,439 | ||||||||
Prospective Accounting Changes
-
In June 2009, the
FASB issued SFAS No. 167,
Amendments to FASB
Interpretation No. 46(R)
which provides guidance with
respect to consolidation of variable interest entities. This
statement retains the scope of Interpretation 46(R) with the
addition of entities previously considered qualifying
special-purpose entities, as the concept of these entities was
eliminated in SFAS No. 166,
Accounting for
Transfers of Financial Assets
. This statement replaces the
quantitative-based risks and rewards calculation for determining
the primary beneficiary of a variable interest entity. The
approach focuses on identifying which enterprise has the power
to direct activities that most significantly impact the
entity’s economic performance and the obligation to absorb
the losses or receive the benefits from the entity. It is
possible that application of this revised guidance will change
an enterprise’s assessment of involvement with variable
interest entities. This statement, which has been codified
within ASC 810,
Consolidations,
was effective for
the Company as of September 1, 2010. The initial adoption
did not have an effect on the Company’s Consolidated
Financial Statements.
| Note 3 - | Special Items |
In April 2007, the Company’s board of directors approved
the permanent closure of the Company’s then Canadian
railcar manufacturing subsidiary, TrentonWorks Ltd.
(TrentonWorks). As a result of the facility closure decision,
charges of $2.3 million were recorded in Special items
during 2008 consisting of severance costs and professional and
other expenses. In March 2008, Trenton Works filed for
bankruptcy. During the fourth quarter of 2010, the bankruptcy
was resolved and the Company recorded income of
$11.9 million in Special items. See Note 4 —
De-consolidation of Subsidiary.
| 42 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
In May 2009, the Company recorded charges of $55.7 million
in Special items associated with the impairment of goodwill.
These charges consist of $1.3 million in the Manufacturing
segment, $3.1 million in the Leasing & Services
segment and $51.3 million in the Wheel Services,
Refurbishment & Parts segment.
| Note 4 - | De-consolidation of Subsidiary |
On March 13, 2008 TrentonWorks filed for bankruptcy with
the Office of the Superintendent of Bankruptcy Canada whereby
the assets of TrentonWorks were administered and liquidated by
an appointed trustee. Under generally accepted accounting
principles, consolidation is generally required for investments
of more than 50% ownership, except when control is not held by
the majority owner. Under these principles, bankruptcy
represents a condition which may preclude consolidation in
instances where control rests with the bankruptcy court and
trustee, rather than the majority owner. As a result, the
Company discontinued consolidating TrentonWorks’ financial
statements beginning on March 13, 2008 and reported its
investment in TrentonWorks using the cost method. Under the cost
method, the investment was reflected as a single amount on the
Company’s Consolidated Balance Sheet.
De-consolidation
resulted in a negative investment in the subsidiary of
$15.3 million which was included as a liability on the
Company’s Consolidated Balance Sheet titled Losses in
excess of investment in de-consolidated subsidiary. In addition,
a $3.4 million loss was included in Accumulated other
comprehensive loss. In the fourth quarter of fiscal 2010, the
bankruptcy was resolved upon liquidation of substantially all
remaining assets of TrentonWorks by the bankruptcy trustee. The
resolution of the bankruptcy and associated release of
obligations resulted in the recognition of $11.9 million of
income in 2010, consisting of the reversal of the
$15.3 million liability, net of the $3.4 million other
comprehensive loss. This income was recorded in Special items on
the Consolidated Statement of Operations.
| Note 5 - | Inventories |
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Manufacturing supplies and raw materials
|
$ | 119,306 | $ | 113,935 | ||||
|
Work-in-process
|
70,394 | 33,771 | ||||||
|
Lower of cost or market adjustment
|
(4,096 | ) | (4,882 | ) | ||||
| $ | 185,604 | $ | 142,824 | |||||
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Lower of cost or
market adjustment
|
||||||||||||
|
Balance at beginning of period
|
$ | 4,882 | $ | 4,999 | $ | 3,807 | ||||||
|
Charge to cost of revenue
|
1,698 | 2,340 | 4,567 | |||||||||
|
Disposition of inventory
|
(2,249 | ) | (1,896 | ) | (3,636 | ) | ||||||
|
Currency translation effect
|
(235 | ) | (561 | ) | 261 | |||||||
|
Balance at end of
period
|
$ | 4,096 | $ | 4,882 | $ | 4,999 | ||||||
| Note 6 - | Assets Held for Sale |
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Railcars held for sale
|
$ | 12,804 | $ | 13,625 | ||||
|
Railcars in transit to customer
|
2,451 | 192 | ||||||
|
Finished goods – parts
|
16,571 | 17,894 | ||||||
| $ | 31,826 | $ | 31,711 | |||||
| The Greenbrier Companies 2010 Annual Report | 43 |
Table of Contents
| Note 7 - | Investment in Direct Finance Leases |
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Future minimum receipts on lease contracts
|
$ | 2,647 | $ | 13,913 | ||||
|
Maintenance, insurance, and taxes
|
(4 | ) | (319 | ) | ||||
|
Net minimum lease receipts
|
2,643 | 13,594 | ||||||
|
Estimated residual values
|
234 | 1,399 | ||||||
|
Unearned finance charges
|
(1,082 | ) | (7,003 | ) | ||||
| $ | 1,795 | $ | 7,990 | |||||
Future minimum receipts on the direct finance lease contracts
are as follows:
| (In thousands) | ||||
|
Year ending August 31,
|
||||
|
2011
|
$ | 397 | ||
|
2012
|
396 | |||
|
2013
|
309 | |||
|
2014
|
309 | |||
|
2015
|
309 | |||
|
Thereafter
|
927 | |||
| $ | 2,647 | |||
Equipment on operating leases is reported net of accumulated
depreciation of $85.0 million and $79.8 million as of
August 31, 2010 and 2009. In addition, certain railcar
equipment leased-in by the Company (see Note 25 Lease
Commitments) is subleased to customers under non-cancelable
operating leases. Aggregate minimum future amounts receivable
under all non-cancelable operating leases and subleases are as
follows:
| (In thousands) | ||||
|
Year ending August 31,
|
||||
|
2011
|
$ | 27,145 | ||
|
2012
|
19,686 | |||
|
2013
|
11,035 | |||
|
2014
|
9,305 | |||
|
2015
|
6,634 | |||
|
Thereafter
|
17,037 | |||
| $ | 90,842 | |||
Certain equipment is also operated under daily, monthly or car
hire arrangements. Associated revenue amounted to
$18.4 million, $22.8 million and $28.4 million
for the years ended August 31, 2010, 2009 and 2008.
| 44 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Land and improvements
|
$ | 25,539 | $ | 20,324 | ||||
|
Machinery and equipment
|
163,351 | 163,444 | ||||||
|
Buildings and improvements
|
72,727 | 76,970 | ||||||
|
Other
|
42,893 | 23,927 | ||||||
| 304,510 | 284,665 | |||||||
|
Accumulated depreciation
|
(171,896 | ) | (156,691 | ) | ||||
| $ | 132,614 | $ | 127,974 | |||||
The Company performs a goodwill impairment test annually during
the third quarter. Goodwill is also tested more frequently if
changes in circumstances or the occurrence of events indicates
that a potential impairment exists. The provisions of
ASC 350,
Intangibles — Goodwill and Other
,
require the Company to perform a two-step impairment test on
goodwill. In the first step, the Company compares the fair value
of each reporting unit with its carrying value. The Company
determines the fair value of our reporting units based on a
weighting of income and market approaches. Under the income
approach, the Company calculates the fair value of a reporting
unit based on the present value of estimated future cash flows.
Under the market approach, the Company estimates the fair value
based on observed market multiples for comparable businesses.
The second step of the goodwill impairment test is required only
in situations where the carrying value of the reporting unit
exceeds its fair value as determined in the first step. In the
second step the Company would compare the implied fair value of
goodwill to its carrying value. The implied fair value of
goodwill is determined by allocating the fair value of a
reporting unit to all of the assets and liabilities of that unit
as if the reporting unit had been acquired in a business
combination and the fair value of the reporting unit was the
price paid to acquire the reporting unit. The excess of the fair
value of a reporting unit over the amounts assigned to its
assets and liabilities is the implied fair value of goodwill. An
impairment loss is recorded to the extent that the carrying
amount of the reporting unit goodwill exceeds the implied fair
value of that goodwill. The goodwill balance, net of cumulative
write-downs of $55.7 million, as of August 31, 2010
and 2009 was $137.1 million. The remaining balance relates
to the Wheel Services, Refurbishment & Parts segment.
Goodwill was tested as of February 28, 2010 and the Company
concluded that goodwill was not impaired.
Intangible assets that are determined to have finite lives are
amortized over their useful lives. Intangible assets with
indefinite useful lives are not amortized and are periodically
evaluated for impairment.
The following table summarizes the Company’s identifiable
intangible assets balance:
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Intangible assets subject to amortization:
|
||||||||
|
Customer relationships
|
$ | 66,825 | $ | 66,825 | ||||
|
Accumulated amortization
|
(13,701 | ) | (9,549 | ) | ||||
|
Other intangibles
|
5,003 | 5,187 | ||||||
|
Accumulated amortization
|
(2,845 | ) | (2,289 | ) | ||||
| 55,282 | 60,174 | |||||||
|
Intangible assets not subject to amortization
|
912 | 912 | ||||||
|
Prepaid and other assets
|
34,485 | 35,816 | ||||||
| $ | 90,679 | $ | 96,902 | |||||
| The Greenbrier Companies 2010 Annual Report | 45 |
Table of Contents
Intangible assets with finite lives are amortized using the
straight line method over their estimated useful lives and
include the following: proprietary technology, 10 years;
trade names, 5 years; patents, 11 years; and long-term
customer agreements and relationships, 5 to 20 years.
Amortization expense for the years ended August 31, 2010,
2009 and 2008 was $4.8 million, $4.8 million and
$3.7 million. Amortization expense for the years ending
August 31, 2011, 2012, 2013, 2014 and 2015 is expected to
be $4.7 million, $4.5 million, $4.4 million,
$4.3 million and $4.3 million.
In April 2010, WLR - Greenbrier Rail Inc. (WLR-GBX) was
formed and acquired a lease fleet of nearly 4,000 railcars
valued at approximately $230.0 million. WLR-GBX is wholly
owned by affiliates of WL Ross. The Company paid a
$6.1 million contract placement fee to WLR-GBX for the
right to perform certain management and advisory services and in
exchange will receive management and other fee income and
incentive compensation tied to the performance of WLR-GBX. The
contract placement fee is accounted for under the equity method
and is recorded in Intangibles and other assets on the
Consolidated Balance Sheet.
WLR-GBX qualifies as a variable interest entity under
ASC 810,
Consolidations
. While the Company acts as
asset manager to WLR-GBX, it is not the primary beneficiary. The
Company has no authority to make decisions regarding key
business activities that most significantly impact the
entity’s economic performance, such as asset re-marketing
and disposition activities, which requires the approval of
affiliates of WL Ross.
In June 2003, the Company acquired a 33% minority ownership
interest in a joint venture which produces castings for freight
cars. This joint venture is accounted for under the equity
method and the investment is included in Intangibles and other
assets on the Consolidated Balance Sheets. The facility has been
idled and expects to restart production when demand returns. The
Company, along with the other partners, has made additional
investments during fiscal year 2010, the Company’s share of
which was $0.9 million. Additional investments may be
required.
All amounts originating in foreign currency have been translated
at the August 31, 2010 exchange rate for the following
discussion. As of August 31, 2010 senior secured credit
facilities, consisting of two components, aggregated
$111.1 million. As of August 31, 2010 a
$100.0 million revolving line of credit secured by
substantially all the Company’s assets in the United States
not otherwise pledged as security for term loans, maturing
November 2011, was available to provide working capital and
interim financing of equipment, principally for the United
States and Mexican operations. Advances under this facility bear
interest at variable rates that depend on the type of borrowing
and the defined ratio of debt to total capitalization. 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 interest coverage ratios. In
addition, as of August 31, 2010, lines of credit totaling
$11.1 million secured by substantially all of the
Company’s European assets, with various variable rates,
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 April 2011 through
June 2011. Subsequent to year end, the Company’s Mexican
joint venture renewed its line of credit of up to
$10.0 million secured by certain of the joint
venture’s accounts receivable and inventory. Advances under
this facility bear interest at LIBOR plus 2.5% and are due
180 days after the date of borrowing. Currently the joint
venture will be able to draw against the facility through August
2011.
As of August 31, 2010 outstanding borrowings under these
facilities consists of $3.6 million in letters of credit
outstanding under the North American credit facility and
$2.6 million in revolving notes outstanding under the
European credit facilities.
| 46 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Trade payables
|
$ | 141,767 | $ | 128,807 | ||||
|
Accrued payroll and related liabilities
|
19,025 | 16,332 | ||||||
|
Accrued maintenance
|
12,460 | 16,206 | ||||||
|
Accrued warranty
|
6,304 | 8,184 | ||||||
|
Other
|
2,082 | 1,360 | ||||||
| $ | 181,638 | $ | 170,889 | |||||
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Accrued
maintenance
|
||||||||||||
|
Balance at beginning of period
|
$ | 16,206 | $ | 17,067 | $ | 20,498 | ||||||
|
Charged to cost of revenue
|
13,581 | 17,005 | 17,720 | |||||||||
|
Payments
|
(17,327 | ) | (17,866 | ) | (21,151 | ) | ||||||
|
Balance at end of period
|
$ | 12,460 | $ | 16,206 | $ | 17,067 | ||||||
|
Accrued
warranty
|
||||||||||||
|
Balance at beginning of period
|
$ | 8,184 | $ | 11,873 | $ | 15,911 | ||||||
|
Charged to cost of revenue
|
425 | 32 | 2,808 | |||||||||
|
Payments
|
(2,252 | ) | (3,193 | ) | (5,655 | ) | ||||||
|
Currency translation effect
|
(53 | ) | (528 | ) | 956 | |||||||
|
De-consolidation effect
|
– | – | (2,147 | ) | ||||||||
|
Balance at end of period
|
$ | 6,304 | $ | 8,184 | $ | 11,873 | ||||||
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Senior unsecured notes
|
$ | 235,000 | $ | 235,000 | ||||
|
Convertible senior notes
|
67,724 | 100,000 | ||||||
|
Term loans
|
212,019 | 219,075 | ||||||
|
Other notes payable
|
176 | 398 | ||||||
| 514,919 | 554,473 | |||||||
|
Debt discount net of accretion
|
(16,219 | ) | (29,324 | ) | ||||
| $ | 498,700 | $ | 525,149 | |||||
Senior unsecured notes, due 2015, bear interest at a fixed rate
of
8
3
/
8
%,
paid semi-annually in arrears on May
15
th
and
November
15
th
of
each year. Payment on the notes is guaranteed by substantially
all of the Company’s domestic subsidiaries.
Convertible senior notes, due 2026, bear interest at a fixed
rate of
2
3
/
8
%,
paid semi-annually in arrears on May
15
th
and
November
15
th
. The
Company will also pay contingent interest of
3
/
8
%
on the notes in certain circumstances commencing with the
six-month period beginning May 15, 2013. Payment on the
convertible notes is guaranteed by substantially all of the
Company’s domestic subsidiaries. The convertible senior
notes will be convertible upon the occurrence of specified
events into cash and shares, if any, of Greenbrier’s common
stock at an initial conversion
| The Greenbrier Companies 2010 Annual Report | 47 |
Table of Contents
rate of 20.8125 shares per $1,000 principal amount of the
notes (which is equal to an initial conversion price of $48.05
per share). The initial conversion rate is subject to adjustment
upon the occurrence of certain events, as defined. On or after
May 15, 2013, Greenbrier may redeem all or a portion of the
notes at a redemption price equal to 100% of the principal
amount of the notes plus accrued and unpaid interest. On
May 15, 2013, May 15, 2016 and May 15, 2021 and
in the event of certain fundamental changes, holders may require
the Company to repurchase all or a portion of their notes at a
price equal to 100% of the principal amount of the notes plus
accrued and unpaid interest. During fiscal 2010, the Company
retired $32.3 million of the convertible notes early and
realized a gain of $3.2 million which was recorded as
Interest and foreign exchange in the Consolidated Statement of
Operations. The debt discount associated with the convertible
senior notes is being accreted using the effective interest rate
method through May 2013 and the accretion expense is included in
Interest and foreign exchange on the Consolidated Statements of
Operations. The pre-tax accretion is expected to be
approximately $3.0 million in the year ending
August 31, 2011, $3.3 million in the year ending
August 31, 2012 and $2.5 million in the year ending
August 31, 2013.
On March 30, 2007, the Company issued a $100.0 million
senior term note secured by a pool of leased railcars. The note
bears a floating interest rate of LIBOR plus 1% with principal
of $0.7 million paid quarterly in arrears and a balloon
payment of $81.8 million due at the end of the seven-year
loan term. On May 9, 2008, the Company issued an additional
$50.0 million senior term note secured by a pool of leased
railcars. The note bears a floating interest rate of LIBOR plus
1% with principal of $0.3 million paid quarterly in arrears
and a balloon payment of $41.2 million due at the end of
the seven-year loan term. An interest rate swap agreement was
entered into to swap the floating interest rate of LIBOR plus 1%
to a fixed rate of 4.24%. At August 31, 2010, the notional
amount of the agreement was $45.6 million and matures in
March 2014. On June 10, 2009, the Company issued a
$75.0 million term loan, maturing in June 2012, which is
principally secured by certain assets including all of a
subsidiary’s assets. The loan contains no financial
covenants, is
non-amortizing
and requires mandatory prepayments under certain circumstances.
The balance as of August 31, 2010 was $71.8 million
and has a variable interest rate of LIBOR plus 3.5% paid
quarterly in arrears with a balloon payment due at the end of
the three-year loan term. In connection with the loan, the
Company issued warrants to purchase 3.378 million shares of
its common stock at $6 per share, both subject to adjustment in
certain circumstances. The warrants have a five-year term. The
warrants were valued at $13.4 million, and recorded as a
debt discount (reducing Notes payable) and Additional paid-in
capital (increasing Stockholders’ equity Greenbrier) on the
Consolidated Balance Sheet. This debt discount will be accreted
and recorded as Interest and foreign exchange in the Statements
of Operations over the life of the loan. The accretion of the
debt discount was $4.8 million and $1.1 million for
the years ended August 31, 2010 and 2009. Accretion is
expected to be $4.3 million for the year ending
August 31, 2011 and $3.2 million for the year ending
August 31, 2012.
The revolving and operating lines of credit, along with notes
payable, contain covenants with respect to the Company and
various subsidiaries, the most restrictive of which, among other
things, limit the ability to: incur additional indebtedness or
guarantees; pay dividends or repurchase stock; enter into sale
leaseback transactions; 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 the Company’s
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 and rent) coverage.
Principal payments on the notes payable are expected as follows:
| (In thousands) | ||||
|
Year ending August 31,
|
||||
|
2011
|
$ | 4,565 | ||
|
2012
|
76,320 | |||
|
2013
|
72,219 | |||
|
2014
|
84,710 | |||
|
2015
|
276,933 | |||
|
Thereafter
|
172 | |||
| $ | 514,919 | |||
| 48 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
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 in Pound Sterling and
Euro. Interest rate swap agreements are utilized to reduce the
impact of changes in interest rates on certain debt. The
Company’s foreign currency forward exchange contracts and
interest rate swap agreements are designated as cash flow
hedges, and therefore the unrealized gains and losses are
recorded in accumulated other comprehensive loss.
At August 31, 2010 exchange rates, forward exchange
contracts for the purchase of Polish Zloty and the sale of Euro
aggregated $37.8 million. Adjusting the foreign currency
exchange contracts to the fair value of the cash flow hedges at
August 31, 2010 resulted in an unrealized pre-tax gain of
$0.2 million that was recorded in accumulated other
comprehensive loss. The fair value of the contracts is included
in accounts payable and accrued liabilities when there is a
loss, or accounts receivable when there is a gain, on the
Consolidated Balance Sheets. As the contracts mature at various
dates through December 2011, any such gain or loss remaining
will be recognized in manufacturing revenue along with the
related transactions. In the event that the underlying sales
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 current year’s results of operations in Interest and
foreign exchange.
At August 31, 2010, an interest rate swap agreement had a
notional amount of $45.6 million and matures March 2014.
The fair value of this cash flow hedge at August 31, 2010
resulted in an unrealized pre-tax loss of $5.1 million. The
loss is included in accumulated other comprehensive loss and the
fair value of the contract is included in accounts payable and
accrued liabilities on the Consolidated Balance Sheet. 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 August 31, 2010 interest rates,
approximately $1.2 million would be reclassified to
interest expense in the next 12 months.
Fair
Values of Derivative Instruments
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||
| August 31, | August 31, | |||||||||||||||||||
| 2010 | 2009 | |||||||||||||||||||
| 2010 | 2009 | |||||||||||||||||||
|
Balance Sheet
|
Fair
|
Fair
|
Balance Sheet
|
Fair
|
Fair
|
|||||||||||||||
| (In thousands) | Location | Value | Value | Location | Value | Value | ||||||||||||||
|
Derivatives designated as hedging instruments
|
||||||||||||||||||||
|
Foreign forward exchange contracts
|
Accounts receivable | $ | 573 | $ | 1,004 |
Accounts payable
and accrued liabilities |
$ | 215 | $ | 1,650 | ||||||||||
|
Interest rate swap contracts
|
Other assets | – | – |
Accounts payable
and accrued liabilities |
5,141 | 3,617 | ||||||||||||||
| $ | 573 | $ | 1,004 | $ | 5,356 | $ | 5,267 | |||||||||||||
|
Derivatives not designated as hedging instruments
|
||||||||||||||||||||
|
Foreign forward exchange contracts
|
Accounts receivable | $ | 111 | $ | 279 |
Accounts payable
and accrued liabilities |
$ | 14 | $ | 590 | ||||||||||
| The Greenbrier Companies 2010 Annual Report | 49 |
Table of Contents
The
Effect of Derivative Instruments on the Statement of
Operations
|
Derivatives in
Cash
|
Location of Loss
Recognized in
|
Loss Recognized
in Income on Derivative
|
||||||||||
| Flow Hedging Relationships | Income on Derivative | Twelve Months Ended August 31, | ||||||||||
| 2010 | 2009 | |||||||||||
|
Foreign forward exchange contract
|
Interest and foreign exchange | $ | (354 | ) | $ | (8,243 | ) | |||||
|
Location of
Loss
|
Loss Recognized
on
|
|||||||||||||||||||||||||||
|
in Income on
|
Derivative
|
|||||||||||||||||||||||||||
|
Location of
|
Gain (Loss)
|
Derivative
|
(Ineffective
Portion
|
|||||||||||||||||||||||||
|
Gain (Loss)
|
Gain (Loss)
|
Reclassified
from
|
(Ineffective
|
and Amount
|
||||||||||||||||||||||||
|
Recognized in OCI
on
|
Reclassified
|
Accumulated OCI
into
|
Portion and
|
Excluded from
|
||||||||||||||||||||||||
|
Derivatives in
|
Derivatives
(Effective
|
From
|
Income
(Effective
|
Amount
|
Effectiveness
|
|||||||||||||||||||||||
|
Cash Flow
|
Portion)
|
Accumulated
|
Portion)
|
Excluded from
|
Testing)
|
|||||||||||||||||||||||
|
Hedging
|
Twelve Months
|
OCI Into
|
Twelve Months
|
Effectiveness
|
Twelve Months
|
|||||||||||||||||||||||
| Relationships | Ended August 31, | Income | Ended August 31, | Testing) | Ended August 31, | |||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||
|
Foreign forward exchange contracts
|
$ | 736 | $ | (7,709 | ) | Revenue | $ | 231 | $ | (6,777 | ) |
Interest and
foreign exchange |
$ | – | $ | – | ||||||||||||
|
Interest rate swap contracts
|
(1,523 | ) | (3,295 | ) |
Interest and
foreign exchange |
(1,829 | ) | (1,345 | ) |
Interest and
foreign exchange |
– | – | ||||||||||||||||
| $ | (797 | ) | $ | (11,004 | ) | $ | (1,598 | ) | $ | (8,122 | ) | $ | – | $ | – | |||||||||||||
On May 12, 2010, the Company issued 4,000,000 shares
of its common stock at a price of $12.50 per share, less
underwriting commissions, discounts and expenses. On
May 19, 2010, an additional 500,000 shares were issued
pursuant to the
30-day
over-allotment option exercised by the underwriters.
Greenbrier’s management has broad discretion to allocate
the net proceeds of $52.7 million from the offering for
such purposes as working capital, capital expenditures,
repayment or repurchase of a portion of the Company’s
indebtedness or acquisitions of, or investment in, complementary
businesses and products.
In January 2005, the stockholders approved the 2005 Stock
Incentive Plan. The plan provides for the grant of incentive
stock options, non-statutory stock options, restricted shares,
stock units and stock appreciation rights. The maximum aggregate
number of the Company’s common shares available for
issuance under the plan is 1,300,000. In January 2009, the
stockholders approved an amendment to the 2005 Stock Incentive
Plan that increased by 525,000 the maximum number of shares of
the Company’s common stock that may be issued under the
plan. During the years ended August 31, 2010, 2009 and
2008, the Company awarded restricted stock grants totaling
302,326, 696,134 and 443,387 shares under the 2005 Stock
Incentive Plan. During the year ended August 31, 2009, the
Company accepted voluntarily cancellation and surrender of
performance based stock awards covering 205,250 shares.
| 50 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The following table summarizes restricted stock award
transactions for shares under the 2005 Stock Incentive Plan:
| Shares | ||||
|
Balance at September 1, 2007
|
607,276 | |||
|
Granted
|
443,387 | |||
|
Forfeited
|
(11,000 | ) | ||
|
Balance at August 31, 2008
|
1,039,663 | |||
|
Granted
|
696,134 | |||
|
Forfeited
|
(210,650 | ) | ||
|
Balance at August 31, 2009
|
1,525,147 | |||
|
Granted
|
302,326 | |||
|
Forfeited
|
(27,900 | ) | ||
|
Balance at August 31, 2010
|
1,799,573 | |||
The following table summarizes stock option transactions for
shares under option and the related weighted average option
price:
|
Weighted
|
||||||||
|
Average
|
||||||||
|
Option
|
||||||||
| Shares | Price | |||||||
|
Balance at September 1, 2007
|
36,660 | $ | 7.60 | |||||
|
Exercised
|
(5,000 | ) | $ | 8.69 | ||||
|
Balance at August 31, 2008
|
31,660 | $ | 7.42 | |||||
|
Exercised
|
(2,500 | ) | $ | 9.19 | ||||
|
Forfeited
|
(17,000 | ) | $ | 9.19 | ||||
|
Balance at August 31, 2009
|
12,160 | $ | 4.59 | |||||
|
Exercised
|
(6,660 | ) | $ | 4.47 | ||||
|
Balance at August 31, 2010
|
5,500 | $ | 4.74 | |||||
At August 31, 2010 options outstanding have exercise prices
ranging from $4.36 to $6.44 per share, have a remaining average
contractual life of .12 years and options to purchase
5,500 shares were exercisable. On August 31, 2010,
2009 and 2008, 25,427, 299,853 and 262,837 shares were
available for grant.
The value, at the date of grant, of stock awarded under
restricted stock grants is amortized as compensation expense
over the vesting period of two to five years. Compensation
expense recognized related to restricted stock grants for the
years ended August 31, 2010, 2009 and 2008 was
$5.8 million, $5.1 million and $3.9 million.
The shares used in the computation of the Company’s basic
and diluted earnings per common share are reconciled as follows:
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Weighted average basic common shares outstanding
|
18,585 | 16,815 | 16,395 | |||||||||
|
Dilutive effect of employee stock
options
(1)
|
6 | – | 22 | |||||||||
|
Dilutive effect of
warrants
(1)
|
1,622 | – | – | |||||||||
|
Weighted average diluted common shares outstanding
|
20,213 | 16,815 | 16,417 | |||||||||
| (1) | Dilutive effect of common stock equivalents is excluded from per share calculations for the year ended August 31, 2009 due to net loss. The dilutive effect of warrants, issued in 2009, equivalent to 0.3 million shares were excluded from the calculation of diluted earnings (loss) per common share attributable to Greenbrier for the year ended August 31, 2009 as these warrants were anti-dilutive due to net loss. |
| The Greenbrier Companies 2010 Annual Report | 51 |
Table of Contents
Weighted average diluted common shares outstanding include the
incremental shares that would be issued upon the assumed
exercise of stock options and warrants. No options were
anti-dilutive for the years ended August 31, 2010 and 2008
and no warrants were anti-dilutive for the year ended
August 31, 2010.
The Company follows a policy that all proposed transactions with
directors, officers, five percent shareholders and their
affiliates will be entered into only if such transactions are on
terms no less favorable to the Company than could be obtained
from unaffiliated parties, are reasonably expected to benefit
the Company and are approved by a majority of the disinterested,
independent members of the Board of Directors.
Aircraft Usage Policy.
William Furman, Director,
President and Chief Executive Officer of the Company, is a part
owner of private aircraft managed by a private independent
management company. From time to time, the Company’s
business requires charter use of privately-owned aircraft. In
such instances, it is possible that charters may be placed with
the company that manages Mr. Furman’s aircraft. In
such event, any such use will be subject to the Company’s
travel and entertainment policy and the fees paid to the
management company will be no less favorable than would have
been available to the Company for similar services provided by
unrelated parties.
On June 10, 2009, the Company entered into a transaction
with affiliates of WL Ross & Co., LLC (WL Ross) which
provides for a $75.0 million secured term loan. In
connection with the loan, the Company also entered into a
warrant agreement pursuant to which the Company issued warrants
to WL Ross and its affiliates to purchase 3,377,903 shares
of the Company’s Common Stock with an initial exercise
price of $6.00 per share. In connection with Victoria
McManus’ 3% participation in the WL Ross transaction, WL
Ross and its affiliates transferred the right to purchase
101,337 shares of Common Stock under the warrant agreement
to Ms. McManus, a director of the Company.
Wilbur L. Ross, Jr., founder, Chairman and Chief Executive
Officer at WL Ross, and Wendy Teramoto, Senior Vice President at
WL Ross, are directors of the Company.
In April 2010, WLR - Greenbrier Rail Inc. (WLR-GBX) was
formed and acquired a lease fleet of nearly 4,000 railcars
valued at approximately $230.0 million. WLR-GBX is wholly
owned by affiliates of WL Ross. The Company paid a
$6.1 million contract placement fee to WLR-GBX for the
right to perform certain management and advisory services and in
exchange will receive management and other fee income and
incentive compensation tied to the performance of WLR-GBX. The
Company has also paid certain incidental fees and agreed to
indemnify WLR-GBX and its affiliates against certain liabilities
in connection with such advisory services. Under the management
agreement the Company has received $0.2 million in fees for
the year ended August 31, 2010. The contract placement fee
is accounted for under the equity method and is recorded in
Intangibles and other assets on the Consolidated Balance Sheet.
A defined contribution plan is available to substantially all
United States employees. Contributions are based on a percentage
of employee contributions and amounted to $2.0 million,
$1.6 million and $1.8 million for the years ended
August 31, 2010, 2009 and 2008.
Nonqualified deferred benefit plans exist for certain employees.
Expenses resulting from contributions to the plans were
insignificant for the years ended August 31, 2010 and 2009,
and $1.6 million for the year ended August 31, 2008.
In accordance with Mexican labor law, under certain
circumstances, the Company provides seniority premium benefits
to its employees. These benefits consist of a one-time payment
equivalent to 12 days wages for each year of service (at
the employee’s most recent salary, but not to exceed twice
the legal minimum wage), payable to all employees with 15 or
more years of service, as well as to certain employees
terminated involuntarily prior to the vesting of their seniority
premium benefit.
| 52 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Mexican labor law also requires the Company to provide
statutorily mandated severance benefits to Mexican employees
terminated under certain circumstances. Such benefits consist of
a one-time payment of three months wages plus 20 days wages
for each year of service payable upon involuntary termination
without just cause. Costs associated with these benefits are
provided for based on actuarial computations using the projected
unit credit method.
Components of income tax expense (benefit) of continuing
operations are as follows:
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Current
|
||||||||||||
|
Federal
|
$ | (9,471 | ) | $ | (4,555 | ) | $ | 359 | ||||
|
State
|
(2,191 | ) | 470 | 860 | ||||||||
|
Foreign
|
712 | 532 | 4,154 | |||||||||
| (10,950 | ) | (3,553 | ) | 5,373 | ||||||||
|
Deferred
|
||||||||||||
|
Federal
|
10,059 | (11,016 | ) | 11,517 | ||||||||
|
State
|
1,745 | (1,024 | ) | 1,369 | ||||||||
|
Foreign
|
(933 | ) | 723 | 7,345 | ||||||||
| 10,871 | (11,317 | ) | 20,231 | |||||||||
|
Change in valuation allowance
|
(880 | ) | (2,047 | ) | (8,445 | ) | ||||||
| $ | (959 | ) | $ | (16,917 | ) | $ | 17,159 | |||||
Income tax expense is computed at rates different than statutory
rates. The reconciliation between effective and statutory tax
rates on continuing operations is as follows:
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Federal statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State income taxes, net of federal benefit
|
10.7 | 3.5 | 7.0 | |||||||||
|
Impact of foreign operations
|
(0.1 | ) | 0.4 | 1.5 | ||||||||
|
Release of obligations in the bankruptcy of the de-consolidated
subsidiary
|
(51.8 | ) | – | – | ||||||||
|
Change in valuation allowance related to deferred tax asset
|
(9.8 | ) | 2.8 | (27.7 | ) | |||||||
|
Reversal of Canadian subsidiary’s deferred tax asset
|
– | – | 31.7 | |||||||||
|
Loss of benefit from the closing of TrentonWorks
|
– | – | 12.9 | |||||||||
|
Change in income tax reserve for uncertain tax positions
|
4.1 | 1.8 | – | |||||||||
|
Reversal of net deferred tax liability on the basis difference
in a foreign subsidiary
|
– | 2.4 | – | |||||||||
|
Noncontrolling interest in flow through entity
|
(17.7 | ) | – | – | ||||||||
|
Non-deductible goodwill write-off
|
– | (23.1 | ) | – | ||||||||
|
Permanent differences
|
9.4 | 2.1 | 2.8 | |||||||||
|
Other
|
9.5 | (2.1 | ) | (6.9 | ) | |||||||
| (10.7 | )% | 22.8 | % | 56.3 | % | |||||||
| The Greenbrier Companies 2010 Annual Report | 53 |
Table of Contents
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities are as follows:
| Years Ended August 31, | ||||||||
| (In thousands) | 2010 | 2009 | ||||||
|
Deferred tax assets:
|
||||||||
|
Contract placement
|
$ | (526 | ) | $ | – | |||
|
Maintenance and warranty accruals
|
(6,352 | ) | (7,337 | ) | ||||
|
Accrued payroll and related liabilities
|
(7,062 | ) | (5,829 | ) | ||||
|
Deferred revenue
|
(6,712 | ) | (9,676 | ) | ||||
|
Inventories and other
|
(3,878 | ) | (6,102 | ) | ||||
|
Derivative instruments and translation adjustment
|
(2,068 | ) | (257 | ) | ||||
|
Investment and asset tax credits
|
(884 | ) | (671 | ) | ||||
|
Net operating loss
|
(10,460 | ) | (15,888 | ) | ||||
| (37,942 | ) | (45,760 | ) | |||||
|
Deferred tax liabilities:
|
||||||||
|
Fixed assets
|
89,341 | 83,002 | ||||||
|
Original issue discount
|
8,707 | – | ||||||
|
Intangibles
|
9,954 | 9,983 | ||||||
|
Debt conversion option
|
– | 6,669 | ||||||
|
Deferred gain on redemption of debt
|
4,512 | – | ||||||
|
Other
|
156 | 8,017 | ||||||
| 112,670 | 107,671 | |||||||
|
Valuation allowance
|
6,408 | 7,288 | ||||||
|
Net deferred tax liability
|
$ | 81,136 | $ | 69,199 | ||||
For the year ended August 31, 2010, the Company generated a
net operating loss (NOL) of approximately $17.8 million for
U.S. federal income tax purposes, $9.7 million of
which will be carried back to 2008. The remaining NOL of
$8.1 million will be carried forward. On September 27,
2010, legislation was adopted that provides an additional year
of bonus depreciation which will increase the Company’s NOL
from $17.8 million to $20.5 million.
The Company also had NOL carryforwards of approximately
$21.2 million for foreign income tax purposes. The ultimate
realization of the deferred tax assets resulting from NOL’s
is dependent upon the generation of future taxable income before
these carryforwards expire. Net operating losses in Poland of
$9.2 million expire between 2012 and 2013. Net operating
losses in Mexico of $12.0 million expire between 2017 and
2020.
The cumulative net decrease in the valuation allowance for the
year ended August 31, 2010 was approximately
$0.9 million. The decrease in the valuation allowance is
mainly due to a decrease in the Polish subsidiary’s overall
deferred tax assets for which a full valuation allowance is
provided.
As a result of certain realization requirements of ASC Topic
718, the table of deferred tax assets and liabilities shown
above does not include certain deferred tax liabilities at
August 31, 2010 and 2009 that arose directly from tax
deductions related to equity compensation in excess of
compensation recognized for financial reporting. The Company
uses tax law ordering for purposes of determining when excess
tax benefits have been realized.
| 54 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The following is a tabular reconciliation of the total amounts
of unrecognized tax benefits for the year.
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Unrecognized Tax Benefit – Opening Balance
|
$ | 2,959 | $ | 12,832 | $ | 11,839 | ||||||
|
Gross increases – tax positions in prior period
|
200 | 533 | 993 | |||||||||
|
Gross decreases – tax positions in prior period
|
– | – | – | |||||||||
|
Gross increases – tax positions in current period
|
– | – | – | |||||||||
|
Settlements
|
– | – | – | |||||||||
|
Restoration of statute of limitations due to 5 year NOL
carry back
|
1,809 | – | – | |||||||||
|
Lapse of statute of limitations
|
(1,442 | ) | (10,406 | ) | – | |||||||
|
Unrecognized Tax Benefit – Ending Balance
|
$ | 3,526 | $ | 2,959 | $ | 12,832 | ||||||
The Company is subject to taxation in the U.S., various states
and foreign jurisdictions. The Companies tax returns for 2004
through 2010 are subject to examination by the tax authorities.
The Company is no longer subject to U.S. Federal, State,
Local or Foreign examinations by tax authorities for years
before 2004. Included in the balance of unrecognized tax
benefits at August 31, 2010 and 2009 are $2.3 million
and $2.0 million, respectively, of tax benefits, which if
recognized would affect the effective tax rate.
The Company recorded additional interest expense of
$0.2 million and $0.3 million relating to reserves for
uncertain tax provisions during the years ended August 31,
2010 and 2009. As of August 31, 2010 and 2009 the Company
had accrued $1.2 million and $1.0 million of interest
related to uncertain tax positions. The Company has accrued no
penalties as of August 31, 2010 and 2009. The Company
restored $1.3 million of reserves and $0.5 million of
related accrued interest for uncertain tax provisions during the
tax years for which the statue of limitations previously
expired. These were restored due to the Company’s election
to carry back prior year’s net operating loss for five
years for U.S. tax purposes. The Company reversed
$1.4 million of reserves and related accrued interest for
the items that were no longer subject to examination by the tax
authorities. The $1.4 million reversal resulted in an
income tax benefit of $0.9 million and a reduction of
interest expense of $0.5 million. Interest and penalties
related to income taxes are not classified as a component of
income tax expense. When unrecognized tax benefits are realized,
the benefit related to deductible differences attributable to
ordinary operations will be recognized as a reduction of income
tax expense. The benefit related to the deductible difference
attributable to purchase accounting will also be recognized as a
reduction of income tax expense and will not go to goodwill.
Within the next 12 months the Company does not expect any
significant changes in the reserves for uncertain tax positions
but expects an increase in interest expense of $0.3 million.
U.S. income taxes have not been provided for approximately
$5.9 million of cumulative undistributed earnings of
certain foreign subsidiaries as Greenbrier plans to reinvest
these earnings indefinitely in operations outside the
U.S. Generally, such amounts become subject to
U.S. taxation upon the remittance of dividends and under
certain other circumstances. It is not practicable to estimate
the amount of deferred tax liability related to investments in
foreign subsidiaries.
Greenbrier currently operates in three reportable segments:
Manufacturing, Wheel Services, Refurbishment & Parts
and Leasing & Services. The accounting policies of the
segments are the same as those described in the summary of
significant accounting policies. Performance is evaluated based
on margin. Intersegment sales and transfers are accounted for as
if the sales or transfers were to third parties. While
intercompany transactions are treated the same as third-party
transactions to evaluate segment performance, the revenues and
related expenses are eliminated in consolidation and therefore
do not impact consolidated results.
| The Greenbrier Companies 2010 Annual Report | 55 |
Table of Contents
The information in the following tables is derived directly from
the segments’ internal financial reports used for corporate
management purposes. Unallocated assets primarily consist of
cash and short-term investments.
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Revenue:
|
||||||||||||
|
Manufacturing
|
$ | 305,333 | $ | 470,834 | $ | 724,072 | ||||||
|
Wheel Services, Refurbishment & Parts
|
404,321 | 480,425 | 535,031 | |||||||||
|
Leasing & Services
|
79,733 | 79,684 | 98,041 | |||||||||
|
Intersegment eliminations
|
(24,937 | ) | (12,818 | ) | (67,065 | ) | ||||||
| $ | 764,450 | $ | 1,018,125 | $ | 1,290,079 | |||||||
|
Margin:
|
||||||||||||
|
Manufacturing
|
$ | 27,171 | $ | 3,763 | $ | 11,214 | ||||||
|
Wheel Services, Refurbishment & Parts
|
45,539 | 55,870 | 101,283 | |||||||||
|
Leasing & Services
|
37,458 | 33,474 | 49,746 | |||||||||
| $ | 110,168 | $ | 93,107 | $ | 162,243 | |||||||
|
Assets:
|
||||||||||||
|
Manufacturing
|
$ | 205,863 | $ | 197,603 | $ | 325,632 | ||||||
|
Wheel services, Refurbishment & Parts
|
387,356 | 386,260 | 519,575 | |||||||||
|
Leasing & Services
|
377,761 | 386,659 | 403,889 | |||||||||
|
Unallocated
|
101,908 | 77,769 | 7,864 | |||||||||
| $ | 1,072,888 | $ | 1,048,291 | $ | 1,256,960 | |||||||
|
Depreciation and amortization:
|
||||||||||||
|
Manufacturing
|
$ | 11,061 | $ | 11,471 | $ | 11,267 | ||||||
|
Wheel Services, Refurbishment & Parts
|
11,435 | 11,885 | 10,338 | |||||||||
|
Leasing & Services
|
15,015 | 14,313 | 13,481 | |||||||||
| $ | 37,511 | $ | 37,669 | $ | 35,086 | |||||||
|
Capital expenditures:
|
||||||||||||
|
Manufacturing
|
$ | 8,715 | $ | 9,109 | $ | 24,113 | ||||||
|
Wheel Services, Refurbishment & Parts
|
12,215 | 6,599 | 7,651 | |||||||||
|
Leasing & Services
|
18,059 | 23,139 | 45,880 | |||||||||
| $ | 38,989 | $ | 38,847 | $ | 77,644 | |||||||
The following table summarizes selected geographic information.
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Revenue:
|
||||||||||||
|
United States
|
$ | 667,867 | $ | 851,450 | $ | 1,058,418 | ||||||
|
Foreign
|
96,583 | 166,675 | 231,661 | |||||||||
| $ | 764,450 | $ | 1,018,125 | $ | 1,290,079 | |||||||
|
Identifiable assets:
|
||||||||||||
|
United States
|
$ | 918,553 | $ | 897,111 | $ | 1,012,585 | ||||||
|
Mexico
|
115,721 | 95,149 | 130,295 | |||||||||
|
Europe
|
38,614 | 56,031 | 114,080 | |||||||||
| $ | 1,072,888 | $ | 1,048,291 | $ | 1,256,960 | |||||||
| 56 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Reconciliation of segment margin to earnings before income tax,
noncontrolling interest and earnings (loss) from unconsolidated
affiliates:
| Years Ended August 31, | ||||||||||||
| (In thousands) | 2010 | 2009 | 2008 | |||||||||
|
Segment
margin
|
$ | 110,168 | $ | 93,107 | $ | 162,243 | ||||||
|
Less unallocated expenses:
|
||||||||||||
|
Selling and administrative
|
69,931 | 65,743 | 85,133 | |||||||||
|
Interest and foreign exchange
|
43,134 | 45,912 | 44,320 | |||||||||
|
Special items
|
(11,870 | ) | 55,667 | 2,302 | ||||||||
|
Earnings (loss) before income tax and earnings (loss) from
unconsolidated affiliates
|
$ | 8,973 | $ | (74,215 | ) | $ | 30,488 | |||||
In 2010, one customer represented 16% of total revenue, a second
customer represented 15% of total revenue and a third customer
represented 11% of total revenue. Revenue from two customers
each represented 14% of total revenue for the year ending
August 31, 2009 and revenue from two customers was 26% and
11% of total revenue for the year ended August 31, 2008. No
other customers accounted for more than 10% of total revenues
for the years ended August 31, 2010, 2009, or 2008. Only
one customer had a balance that equaled or exceeded 10% of
accounts receivable and in total represented 12% of the
consolidated accounts receivable balance at August 31, 2010.
Lease expense for railcar equipment leased-in under
non-cancelable leases was $8.2 million, $10.3 million
and $11.6 million for the years ended August 31, 2010,
2009 and 2008. Aggregate minimum future amounts payable under
these non-cancelable railcar equipment leases are as follows:
| (In thousands) | ||||
|
Year ending August 31,
|
||||
|
2011
|
$ | 6,711 | ||
|
2012
|
3,708 | |||
|
Thereafter
|
– | |||
| $ | 10,419 | |||
Operating leases for domestic railcar repair facilities, office
space and certain manufacturing and office equipment expire at
various dates through November 2016. Rental expense for
facilities, office space and equipment was $12.4 million,
$12.5 million and $12.3 million for the years ended
August 31, 2010, 2009 and 2008. Aggregate minimum future
amounts payable under these non-cancelable operating leases are
as follows:
| (In thousands) | ||||
|
Year ending August 31,
|
||||
|
2011
|
$ | 6,781 | ||
|
2012
|
3,679 | |||
|
2013
|
2,205 | |||
|
2014
|
1,488 | |||
|
2015
|
1,318 | |||
|
Thereafter
|
1,591 | |||
| $ | 17,062 | |||
| The Greenbrier Companies 2010 Annual Report | 57 |
Table of Contents
Environmental studies have been conducted of the Company’s
owned and leased properties that indicate additional
investigation and some remediation on certain properties may be
necessary. The Company’s Portland, Oregon manufacturing
facility is located adjacent to the Willamette River. The United
States Environmental Protection Agency (EPA) has classified
portions of the river bed, including the portion fronting
Greenbrier’s facility, as a federal “National Priority
List” or “Superfund” site due to sediment
contamination (the Portland Harbor Site). Greenbrier and more
than 130 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, 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. A draft of the RI
study was submitted on October 27, 2009. The Feasibility
Study is being developed and is expected to be submitted in the
third calendar quarter of 2011. Eighty-two parties 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,
US 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, pending
completion of the RI/FS. In addition, the Company has entered
into a Voluntary
Clean-Up
Agreement with the Oregon Department of Environmental Quality 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 to the
environment. The Company is also conducting groundwater
remediation relating to a historical spill on the property which
antedates its ownership.
Because these environmental investigations are still underway,
the Company is unable to determine the amount of ultimate
liability relating to these matters. Based on the results of the
pending investigations and future assessments of natural
resource damages, Greenbrier may be required to incur costs
associated with additional phases of investigation or remedial
action, and may be liable for damages to natural resources. In
addition, the Company may be required to perform periodic
maintenance dredging in order to continue to launch vessels from
its launch ways in Portland, Oregon, on the Willamette River,
and the river’s classification as a Superfund site could
result in some limitations on future dredging and launch
activities. Any of these matters could adversely affect the
Company’s business and results of operations, or the value
of its Portland property.
From time to time, Greenbrier is involved as a defendant in
litigation in the ordinary course of business, the outcome of
which cannot be predicted with certainty. The most significant
litigation is as follows:
Greenbrier’s customer, SEB Finans AB (SEB), has raised
performance concerns related to a component that the Company
installed on 372 railcar units with an aggregate sales value of
approximately $20.0 million produced under a contract with
SEB. On December 9, 2005, SEB filed a Statement of Claim in
an arbitration proceeding in Stockholm, Sweden, against
Greenbrier alleging that the cars were defective and could not
be used for their intended purpose. A settlement agreement was
entered into effective February 28, 2007 pursuant to which
the railcar units previously delivered were to be repaired and
the remaining units completed and delivered to SEB. Greenbrier
is proceeding with repairs of the railcars in accordance with
terms of the settlement agreement, though SEB has recently made
additional warranty claims, including claims with respect to
cars that have been repaired pursuant to the agreement.
Greenbrier is evaluating SEB’s new warranty claim. Current
estimates of potential costs of such repairs do not exceed
amounts accrued.
When the Company acquired the assets of the Freight Wagon
Division of DaimlerChrysler in January 2000, it acquired a
contract to build 201 freight cars for Okombi GmbH, a subsidiary
of Rail Cargo Austria AG. Subsequently, Okombi made breach of
warranty and late delivery claims against the Company which grew
out of design and certification problems. All of these issues
were settled as of March 2004. Additional allegations have been
made, the most serious of which involve cracks to the structure
of the cars. Okombi has been required to remove all 201 freight
cars from service, and a formal claim has been made against the
Company. Legal, technical
| 58 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
and commercial evaluations are on-going to determine what
obligations the Company might have, if any, to remedy the
alleged defects.
Management intends to vigorously defend its position in each of
the open foregoing cases. While the ultimate outcome of such
legal proceedings cannot be determined at this time, management
believes that the resolution of these actions will not have a
material adverse effect on the Company’s Consolidated
Financial Statements.
The Company is involved as a defendant in other litigation
initiated in the ordinary course of business. While the ultimate
outcome of such legal proceedings cannot be determined at this
time, management believes that the resolution of these actions
will not have a material adverse effect on the Company’s
Consolidated Financial Statements.
The Company delivered 500 railcar units during fiscal year 2009
for which the Company has an obligation to guarantee the
purchaser minimum earnings. The obligation expires
December 31, 2011. The maximum potential obligation totaled
$13.1 million and in certain defined instances the
obligation may be reduced due to early termination. The
purchaser has agreed to utilize the railcars on a preferential
basis, and the Company is entitled to re-market the railcar
units when they are not being utilized by the purchaser during
the obligation period. Any earnings generated from the railcar
units will offset the obligation and be recognized as revenue
and margin in future periods. Upon delivery of the railcar
units, the entire purchase price was recorded as revenue and
paid in full. The minimum earnings due to the purchaser were
considered a reduction of revenue and were recorded as deferred
revenue. As of August 31, 2010, the Company has
$9.1 million of the potential obligation remaining in
deferred revenue.
The Company has entered into contingent rental assistance
agreements, aggregating $5.9 million, on certain railcars
subject to leases that have been sold to third parties. These
agreements guarantee the purchasers a minimum lease rental,
subject to a maximum defined rental assistance amount, over
remaining periods of up to two years. A liability is established
and revenue is reduced in the period during which a
determination can be made that it is probable that a rental
shortfall will occur and the amount can be estimated. For the
years ended August 31, 2010 and 2008 an accrual of
$0.2 million and $1.2 million was recorded to cover
future obligations. For the year ended August 31, 2009 no
accrual was made to cover estimated obligations as management
determined no additional rental shortfall was probable. The
remaining balance of the accrued liability was $30 thousand as
of August 31, 2010. All of these agreements were entered
into prior to December 31, 2002 and have not been modified
since.
In accordance with customary business practices in Europe, the
Company has $9.1 million in bank and third party
performance and warranty guarantee facilities, all of which have
been utilized as of August 31, 2010. To date no amounts
have been drawn under these performance and warranty guarantee
facilities.
At August 31, 2010, an unconsolidated affiliate had
$0.7 million of third party debt, for which the Company has
guaranteed 33% or approximately $0.2 million. In the event
that there is a change in control or insolvency by any of the
three 33% investors that have guaranteed the debt, the remaining
investors’ share of the guarantee will increase
proportionately.
As of August 31, 2010 the Company had outstanding letters
of credit aggregating $3.6 million associated with facility
leases and payroll.
The estimated fair values of financial instruments and the
methods and assumptions used to estimate such fair values are as
follows:
|
Carrying
|
Estimated
|
|||||||
| (In thousands) | Amount | Fair Value | ||||||
|
Notes payable as of August 31, 2010
|
$ | 498,700 | $ | 482,589 | ||||
|
Notes payable as of August 31, 2009
|
$ | 525,149 | $ | 508,372 | ||||
| The Greenbrier Companies 2010 Annual Report | 59 |
Table of Contents
The carrying amount of cash and cash equivalents, accounts and
notes receivable, revolving notes, accounts payable and accrued
liabilities, foreign currency forward contracts and interest
rate swaps is a reasonable estimate of fair value of these
financial instruments. Estimated rates currently available to
the Company for debt with similar terms and remaining maturities
are used to estimate the fair value of notes payable.
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 which prioritizes the
inputs used in measuring a 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 August 31, 2010 are:
| (In thousands) | Total | Level 1 | Level 2 (1) | Level 3 | |||||||||||||
|
Assets:
|
|||||||||||||||||
|
Derivative financial instruments
|
$ | 684 | $ | – | $ | 684 | $ | – | |||||||||
|
Nonqualified savings plan
|
6,489 | 6,489 | – | – | |||||||||||||
|
Money market investments
|
57,300 | 57,300 | – | – | |||||||||||||
| $ | 64,473 | $ | 63,789 | $ | 684 | $ | – | ||||||||||
|
Liabilities:
|
|||||||||||||||||
|
Derivative financial instruments
|
$ | 5,370 | $ | – | $ | 5,370 | $ | – | |||||||||
| (1) | Level 2 assets include derivative financial instruments which are valued based on significant observable inputs. See note 17 Derivative Instruments for further discussion. |
Assets or liabilities measured at fair value on a nonrecurring
basis as of August 31, 2010 are:
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | |||||||||||||
|
Assets:
|
|||||||||||||||||
|
Goodwill
|
$ | 137,066 | $ | – | $ | – | $ | 137,066 | |||||||||
|
Liabilities:
|
|||||||||||||||||
|
Warrants
|
$ | 7,484 | $ | – | $ | – | $ | 7,484 | |||||||||
| 60 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Note 29 - | Guarantor/Non Guarantor |
The combined senior unsecured notes (the Notes) issued on
May 11, 2005 and November 21, 2005 and convertible
senior notes issued on May 22, 2006 are fully and
unconditionally and jointly and severally guaranteed by
substantially all of Greenbrier’s material 100% owned
United States subsidiaries: Autostack Company LLC,
Greenbrier-Concarril, LLC, Greenbrier Leasing Company LLC,
Greenbrier Leasing Limited Partner, LLC, Greenbrier Management
Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar LLC,
Gunderson LLC, Gunderson Marine LLC, Gunderson Rail Services
LLC, Meridian Rail Holding Corp., Meridian Rail Acquisition
Corp., Meridian Rail Mexico City Corp., Brandon Railroad LLC,
Gunderson Specialty Products, LLC and Greenbrier Railcar
Leasing, Inc. No other subsidiaries guarantee the Notes
including Greenbrier Leasing Limited, Greenbrier Europe B.V.,
Greenbrier Germany GmbH, WagonySwidnica S.A.,
Gunderson-Concarril, S.A. de C.V., Mexico Meridian Rail
Services, S.A. de C.V., Greenbrier Railcar Services —
Tierra Blanca S.A. de C.V., YSD Doors, S.A. de C.V.,
Greenbrier-Gimsa, LLC and Gunderson-Gimsa S de RL de C.V.
The following represents the supplemental consolidating
condensed financial information of Greenbrier and its guarantor
and non guarantor subsidiaries, as of August 31, 2010 and
2009 and for the years ended August 31, 2010, 2009 and
2008. The information is presented on the basis of Greenbrier
accounting for its ownership of its wholly owned subsidiaries
using the equity method of accounting. The equity method
investment for each subsidiary is recorded by the parent in
intangibles and other assets. Intercompany transactions of goods
and services between the guarantor and non guarantor
subsidiaries are presented as if the sales or transfers were at
fair value to third parties and eliminated in consolidation.
Certain reclassifications between Combined Non Guarantor
Subsidiaries and Eliminations have been made to prior
year’s condensed consolidating statements to conform to the
current year presentation.
| The Greenbrier Companies 2010 Annual Report | 61 |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
For the year ended August 31, 2010
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Assets
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 91,472 | $ | 859 | $ | 6,533 | $ | – | $ | 98,864 | ||||||||||
|
Restricted cash
|
– | 2,525 | – | – | 2,525 | |||||||||||||||
|
Accounts receivable
|
33,001 | 45,154 | 11,094 | 3 | 89,252 | |||||||||||||||
|
Inventories
|
– | 121,557 | 64,047 | – | 185,604 | |||||||||||||||
|
Assets held for sale
|
– | 28,357 | 3,469 | – | 31,826 | |||||||||||||||
|
Investment in direct finance leases
|
– | 1,795 | – | – | 1,795 | |||||||||||||||
|
Equipment on operating leases, net
|
– | 304,872 | – | (2,209 | ) | 302,663 | ||||||||||||||
|
Property, plant and equipment, net
|
6,710 | 89,246 | 36,658 | – | 132,614 | |||||||||||||||
|
Goodwill
|
– | 137,066 | – | – | 137,066 | |||||||||||||||
|
Intangibles and other assets
|
525,539 | 96,680 | 2,384 | (533,924 | ) | 90,679 | ||||||||||||||
| $ | 656,722 | $ | 828,111 | $ | 124,185 | $ | (536,130 | ) | $ | 1,072,888 | ||||||||||
| Liabilities and Equity | ||||||||||||||||||||
|
Revolving notes
|
$ | – | $ | – | $ | 2,630 | $ | – | $ | 2,630 | ||||||||||
|
Accounts payable and accrued liabilities
|
11,180 | 112,454 | 58,001 | 3 | 181,638 | |||||||||||||||
|
Deferred income taxes
|
728 | 87,582 | (6,685 | ) | (489 | ) | 81,136 | |||||||||||||
|
Deferred revenue
|
621 | 9,693 | 1,063 | – | 11,377 | |||||||||||||||
|
Notes payable
|
358,255 | 139,029 | 1,416 | – | 498,700 | |||||||||||||||
|
Total equity Greenbrier
|
285,938 | 479,353 | 56,291 | (535,644 | ) | 285,938 | ||||||||||||||
|
Noncontrolling interest
|
– | – | 11,469 | – | 11,469 | |||||||||||||||
|
Total
equity
|
285,938 | 479,353 | 67,760 | (535,644 | ) | 297,407 | ||||||||||||||
| $ | 656,722 | $ | 828,111 | $ | 124,185 | $ | (536,130 | ) | $ | 1,072,888 | ||||||||||
| 62 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Operations
For the year ended August 31, 2010
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Manufacturing
|
$ | – | $ | 74,526 | $ | 242,771 | $ | (21,731 | ) | $ | 295,566 | |||||||||
|
Wheel Services, Refurbishment & Parts
|
– | 396,680 | 1,584 | (8,203 | ) | 390,061 | ||||||||||||||
|
Leasing & Services
|
1,803 | 78,556 | – | (1,536 | ) | 78,823 | ||||||||||||||
| 1,803 | 549,762 | 244,355 | (31,470 | ) | 764,450 | |||||||||||||||
|
Cost of
revenue
|
||||||||||||||||||||
|
Manufacturing
|
– | 69,872 | 218,890 | (20,367 | ) | 268,395 | ||||||||||||||
|
Wheels Services, Refurbishment & Parts
|
– | 351,565 | 1,160 | (8,203 | ) | 344,522 | ||||||||||||||
|
Leasing & Services
|
– | 41,438 | – | (73 | ) | 41,365 | ||||||||||||||
| – | 462,875 | 220,050 | (28,643 | ) | 654,282 | |||||||||||||||
|
Margin
|
1,803 | 86,887 | 24,305 | (2,827 | ) | 110,168 | ||||||||||||||
|
Other
costs
|
||||||||||||||||||||
|
Selling and administrative
|
33,441 | 21,263 | 15,227 | – | 69,931 | |||||||||||||||
|
Interest and foreign
exchange |
36,796 | 4,191 | 3,687 | (1,540 | ) | 43,134 | ||||||||||||||
|
Special items
|
(11,870 | ) | – | – | – | (11,870 | ) | |||||||||||||
| 58,367 | 25,454 | 18,914 | (1,540 | ) | 101,195 | |||||||||||||||
|
Earnings (loss) before income taxes and earnings (loss) from
unconsolidated affiliates
|
(56,564 | ) | 61,433 | 5,391 | (1,287 | ) | 8,973 | |||||||||||||
|
Income tax (expense) benefit
|
24,143 | (25,144 | ) | 1,710 | 250 | 959 | ||||||||||||||
| (32,421 | ) | 36,289 | 7,101 | (1,037 | ) | 9,932 | ||||||||||||||
|
Earnings (loss) from unconsolidated affiliates
|
36,698 | (6,179 | ) | – | (32,120 | ) | (1,601 | ) | ||||||||||||
|
Net earnings (loss)
|
4,277 | 30,110 | 7,101 | (33,157 | ) | 8,331 | ||||||||||||||
|
Net loss (earnings) attributable to noncontrolling interest
|
– | – | (4,734 | ) | 680 | (4,054 | ) | |||||||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | 4,277 | $ | 30,110 | $ | 2,367 | $ | (32,477 | ) | $ | 4,277 | |||||||||
| The Greenbrier Companies 2010 Annual Report | 63 |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Cash Flows
For the year ended August 31, 2010
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Cash flows from
operating activities:
|
||||||||||||||||||||
|
Net earnings (loss)
|
$ | 4,277 | $ | 30,110 | $ | 7,101 | $ | (33,157 | ) | $ | 8,331 | |||||||||
|
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
|
||||||||||||||||||||
|
Deferred income taxes
|
5,898 | 10,045 | 427 | (1,318 | ) | 15,052 | ||||||||||||||
|
Depreciation and amortization
|
2,063 | 28,241 | 7,280 | (73 | ) | 37,511 | ||||||||||||||
|
Gain on sales of equipment
|
– | (6,543 | ) | – | – | (6,543 | ) | |||||||||||||
|
Special items
|
(11,870 | ) | – | – | – | (11,870 | ) | |||||||||||||
|
Accretion of debt discount
|
8,581 | – | – | – | 8,581 | |||||||||||||||
|
Gain on extinguishment of debt
|
(3,218 | ) | – | – | – | (3,218 | ) | |||||||||||||
|
Other
|
5,175 | 354 | (1,972 | ) | 680 | 4,237 | ||||||||||||||
|
Decrease (increase) in assets:
|
||||||||||||||||||||
|
Accounts receivable
|
(9,292 | ) | 17,743 | 12,914 | 1,065 | 22,430 | ||||||||||||||
|
Inventories
|
– | (20,457 | ) | (23,819 | ) | – | (44,276 | ) | ||||||||||||
|
Assets held for sale
|
– | 3,100 | (3,277 | ) | – | (177 | ) | |||||||||||||
|
Other
|
1,364 | 6,773 | (966 | ) | – | 7,171 | ||||||||||||||
|
Increase (decrease) in liabilities:
|
||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
3,143 | (9,134 | ) | 18,765 | 3 | 12,777 | ||||||||||||||
|
Deferred revenue
|
(155 | ) | (8,353 | ) | 1,063 | – | (7,445 | ) | ||||||||||||
|
Net cash provided by (used in) operating activities
|
5,966 | 51,879 | 17,516 | (32,800 | ) | 42,561 | ||||||||||||||
|
Cash flows from
investing activities:
|
||||||||||||||||||||
|
Principal payments received under direct finance leases
|
– | 390 | – | – | 390 | |||||||||||||||
|
Proceeds from sales of equipment
|
– | 22,978 | – | – | 22,978 | |||||||||||||||
|
Investment in and net advances to unconsolidated affiliates
|
(36,697 | ) | 3,650 | – | 32,120 | (927 | ) | |||||||||||||
|
Intercompany advances
|
7,866 | – | – | (7,866 | ) | – | ||||||||||||||
|
Contract placement fee
|
– | (6,050 | ) | – | – | (6,050 | ) | |||||||||||||
|
Decrease (increase) in restricted cash
|
– | (1,442 | ) | – | – | (1,442 | ) | |||||||||||||
|
Capital expenditures
|
(3,645 | ) | (30,430 | ) | (5,594 | ) | 680 | (38,989 | ) | |||||||||||
|
Other
|
– | (130 | ) | (130 | ) | |||||||||||||||
|
Net cash provided by (used in) investing activities
|
(32,476 | ) | (11,034 | ) | (5,594 | ) | 24,934 | (24,170 | ) | |||||||||||
|
Cash flows from
financing activities:
|
||||||||||||||||||||
|
Net changes in revolving notes with maturities of 90 days
or less
|
– | – | (11,934 | ) | – | (11,934 | ) | |||||||||||||
|
Proceeds from revolving notes with maturities longer than
90 days
|
– | – | 5,698 | – | 5,698 | |||||||||||||||
|
Repayment of revolving notes with maturities longer than
90 days
|
– | – | (5,698 | ) | – | (5,698 | ) | |||||||||||||
|
Intercompany advances
|
33,850 | (34,061 | ) | (7,655 | ) | 7,866 | – | |||||||||||||
|
Net proceeds from issuance of notes payable
|
– | 328 | 1,712 | – | 2,040 | |||||||||||||||
|
Repayments of notes payable
|
(32,090 | ) | (5,772 | ) | (405 | ) | – | (38,267 | ) | |||||||||||
|
Net proceeds from equity offering
|
52,708 | – | – | – | 52,708 | |||||||||||||||
|
Other
|
29 | – | – | – | 29 | |||||||||||||||
|
Net cash provided by (used in) financing activities
|
54,497 | (39,505 | ) | (18,282 | ) | 7,866 | 4,576 | |||||||||||||
|
Effect of exchange rate changes
|
– | (902 | ) | 612 | – | (290 | ) | |||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
27,987 | 438 | (5,748 | ) | – | 22,677 | ||||||||||||||
|
Cash and cash
equivalents
|
||||||||||||||||||||
|
Beginning of period
|
63,485 | 421 | 12,281 | – | 76,187 | |||||||||||||||
|
End of period
|
$ | 91,472 | $ | 859 | $ | 6,533 | $ | – | $ | 98,864 | ||||||||||
| 64 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
For the year ended August 31, 2009
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Assets
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$ | 63,485 | $ | 421 | $ | 12,281 | $ | – | $ | 76,187 | ||||||||||
|
Restricted cash
|
– | 1,083 | – | – | 1,083 | |||||||||||||||
|
Accounts receivable
|
65,425 | 28,213 | 18,665 | 1,068 | 113,371 | |||||||||||||||
|
Inventories
|
– | 101,100 | 41,724 | – | 142,824 | |||||||||||||||
|
Assets held for sale
|
– | 31,519 | 192 | – | 31,711 | |||||||||||||||
|
Investment in direct finance leases
|
– | 7,990 | – | – | 7,990 | |||||||||||||||
|
Equipment on operating leases, net
|
– | 314,785 | – | (1,602 | ) | 313,183 | ||||||||||||||
|
Property, plant and equipment, net
|
5,157 | 83,907 | 38,910 | – | 127,974 | |||||||||||||||
|
Goodwill
|
– | 137,066 | – | – | 137,066 | |||||||||||||||
|
Intangibles and other assets
|
492,406 | 106,121 | 2,380 | (504,005 | ) | 96,902 | ||||||||||||||
| $ | 626,473 | $ | 812,205 | $ | 114,152 | $ | (504,539 | ) | $ | 1,048,291 | ||||||||||
|
Liabilities and
Equity
|
||||||||||||||||||||
|
Revolving notes
|
$ | – | $ | – | $ | 16,041 | $ | – | $ | 16,041 | ||||||||||
|
Accounts payable and accrued liabilities
|
8,037 | 121,578 | 41,274 | – | 170,889 | |||||||||||||||
|
Losses in excess of investment in de-consolidated subsidiary
|
15,313 | – | – | – | 15,313 | |||||||||||||||
|
Deferred income taxes
|
(2,055 | ) | 77,537 | (7,112 | ) | 829 | 69,199 | |||||||||||||
|
Deferred revenue
|
776 | 18,474 | – | – | 19,250 | |||||||||||||||
|
Notes payable
|
380,676 | 144,473 | – | – | 525,149 | |||||||||||||||
|
Total equity Greenbrier
|
223,726 | 450,143 | 55,225 | (505,368 | ) | 223,726 | ||||||||||||||
|
Noncontrolling interest
|
– | – | 8,724 | – | 8,724 | |||||||||||||||
|
Total
equity
|
223,726 | 450,143 | 63,949 | (505,368 | ) | 232,450 | ||||||||||||||
| $ | 626,473 | $ | 812,205 | $ | 114,152 | $ | (504,539 | ) | $ | 1,048,291 | ||||||||||
| The Greenbrier Companies 2010 Annual Report | 65 |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Operations
For the year ended August 31, 2009
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Manufacturing
|
$ | 547 | $ | 227,404 | $ | 336,399 | $ | (101,854 | ) | $ | 462,496 | |||||||||
|
Wheels Service, Refurbishment & Parts
|
– | 476,133 | 31 | – | 476,164 | |||||||||||||||
|
Leasing & Services
|
1,314 | 78,899 | – | (748 | ) | 79,465 | ||||||||||||||
| 1,861 | 782,436 | 336,430 | (102,602 | ) | 1,018,125 | |||||||||||||||
|
Cost of
revenue
|
||||||||||||||||||||
|
Manufacturing
|
124 | 230,848 | 328,761 | (101,000 | ) | 458,733 | ||||||||||||||
|
Wheel Services, Refurbishment & Parts
|
– | 420,261 | 33 | – | 420,294 | |||||||||||||||
|
Leasing & Services
|
– | 46,056 | – | (65 | ) | 45,991 | ||||||||||||||
| 124 | 697,165 | 328,794 | (101,065 | ) | 925,018 | |||||||||||||||
|
Margin
|
1,737 | 85,271 | 7,636 | (1,537 | ) | 93,107 | ||||||||||||||
|
Other
costs
|
||||||||||||||||||||
|
Selling and administrative
|
31,169 | 24,729 | 9,845 | – | 65,743 | |||||||||||||||
|
Interest and foreign exchange
|
34,013 | 5,316 | 8,156 | (1,573 | ) | 45,912 | ||||||||||||||
|
Special charges
|
– | 55,531 | – | 136 | 55,667 | |||||||||||||||
| 65,182 | 85,576 | 18,001 | (1,437 | ) | 167,322 | |||||||||||||||
|
Loss before income taxes and earnings (loss) from unconsolidated
affiliates
|
(63,445 | ) | (305 | ) | (10,365 | ) | (100 | ) | (74,215 | ) | ||||||||||
|
Income tax (expense) benefit
|
29,821 | (16,573 | ) | 2,606 | 1,063 | 16,917 | ||||||||||||||
| (33,624 | ) | (16,878 | ) | (7,759 | ) | 963 | (57,298 | ) | ||||||||||||
|
Earnings (loss) from unconsolidated affiliates
|
(22,767 | ) | (7,150 | ) | – | 29,352 | (565 | ) | ||||||||||||
|
Net earnings (loss)
|
(56,391 | ) | (24,028 | ) | (7,759 | ) | 30,315 | (57,863 | ) | |||||||||||
|
Net loss attributable to noncontrolling interest
|
– | – | 2,202 | (730 | ) | 1,472 | ||||||||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | (56,391 | ) | $ | (24,028 | ) | $ | (5,557 | ) | $ | 29,585 | $ | (56,391 | ) | ||||||
| 66 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Cash Flows
For the year ended August 31, 2009
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Cash flows from
operating activities:
|
||||||||||||||||||||
|
Net earnings (loss)
|
$ | (56,391 | ) | $ | (24,028 | ) | $ | (7,759 | ) | $ | 30,315 | $ | (57,863 | ) | ||||||
|
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
|
||||||||||||||||||||
|
Deferred income taxes
|
(16,609 | ) | 5,820 | (2,800 | ) | 290 | (13,299 | ) | ||||||||||||
|
Depreciation and amortization
|
1,544 | 28,797 | 7,393 | (65 | ) | 37,669 | ||||||||||||||
|
Gain on sales of equipment
|
– | (692 | ) | – | (475 | ) | (1,167 | ) | ||||||||||||
|
Special items
|
– | 55,531 | – | 136 | 55,667 | |||||||||||||||
|
Accretion of debt discount
|
4,948 | – | – | – | 4,948 | |||||||||||||||
|
Other
|
– | 3,402 | 2,111 | (1,930 | ) | 3,583 | ||||||||||||||
|
Decrease (increase) in assets:
|
||||||||||||||||||||
|
Accounts receivable
|
(6,940 | ) | 75,691 | (9,163 | ) | (1,067 | ) | 58,521 | ||||||||||||
|
Inventories
|
– | 42,456 | 56,295 | – | 98,751 | |||||||||||||||
|
Assets held for sale
|
– | 14,875 | 6,966 | – | 21,841 | |||||||||||||||
|
Other
|
(277 | ) | 1,614 | 6,028 | (6,208 | ) | 1,157 | |||||||||||||
|
Increase (decrease) in liabilities:
|
||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
15,522 | (58,533 | ) | (44,199 | ) | 696 | (86,514 | ) | ||||||||||||
|
Deferred revenue
|
(155 | ) | 1,202 | (3,876 | ) | – | (2,829 | ) | ||||||||||||
|
Net cash provided by (used in) operating activities
|
(58,358 | ) | 146,135 | 10,996 | 21,692 | 120,465 | ||||||||||||||
|
Cash flows from
investing activities:
|
||||||||||||||||||||
|
Principal payments received under direct finance leases
|
– | 429 | – | – | 429 | |||||||||||||||
|
Proceeds from sales of equipment
|
– | 15,555 | – | – | 15,555 | |||||||||||||||
|
Investment in and net advances to unconsolidated affiliates
|
15,359 | 6,585 | – | (21,944 | ) | – | ||||||||||||||
|
Intercompany advances
|
(26,958 | ) | – | – | 26,958 | – | ||||||||||||||
|
Decrease (increase) in restricted cash
|
– | (1,083 | ) | 974 | – | (109 | ) | |||||||||||||
|
Capital expenditures
|
(2,699 | ) | (30,642 | ) | (5,758 | ) | 252 | (38,847 | ) | |||||||||||
|
Net cash provided by (used in) investing activities
|
(14,298 | ) | (9,156 | ) | (4,784 | ) | 5,266 | (22,972 | ) | |||||||||||
|
Cash flows from
financing activities:
|
||||||||||||||||||||
|
Net changes in revolving notes with maturities of 90 days
or less
|
(65,000 | ) | – | (16,251 | ) | – | (81,251 | ) | ||||||||||||
|
Intercompany advances
|
133,592 | (126,496 | ) | 19,862 | (26,958 | ) | – | |||||||||||||
|
Net proceeds from issuance of notes payable
|
69,768 | – | – | – | 69,768 | |||||||||||||||
|
Repayments of notes payable
|
(4,339 | ) | (8,183 | ) | (3,914 | ) | – | (16,436 | ) | |||||||||||
|
Investment by joint venture partner
|
– | – | 1,400 | – | 1,400 | |||||||||||||||
|
Dividends paid
|
(2,001 | ) | – | – | – | (2,001 | ) | |||||||||||||
|
Other
|
3,973 | – | – | – | 3,973 | |||||||||||||||
|
Net cash provided by (used in) financing activities
|
135,993 | (134,679 | ) | 1,097 | (26,958 | ) | (24,547 | ) | ||||||||||||
|
Effect of exchange rate changes
|
148 | (3,472 | ) | 608 | – | (2,716 | ) | |||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
63,485 | (1,172 | ) | 7,917 | – | 70,230 | ||||||||||||||
|
Cash and cash
equivalents
|
||||||||||||||||||||
|
Beginning of period
|
– | 1,593 | 4,364 | – | 5,957 | |||||||||||||||
|
End of period
|
$ | 63,485 | $ | 421 | $ | 12,281 | $ | – | $ | 76,187 | ||||||||||
| The Greenbrier Companies 2010 Annual Report | 67 |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Operations
For the year ended August 31, 2008
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Manufacturing
|
$ | 1,869 | $ | 368,285 | $ | 543,526 | $ | (248,587 | ) | $ | 665,093 | |||||||||
|
Wheel Services, Refurbishment & Parts
|
– | 527,413 | 53 | – | 527,466 | |||||||||||||||
|
Leasing & Services
|
1,162 | 96,854 | – | (496 | ) | 97,520 | ||||||||||||||
| 3,031 | 992,552 | 543,579 | (249,083 | ) | 1,290,079 | |||||||||||||||
|
Cost of
revenue
|
||||||||||||||||||||
|
Manufacturing
|
600 | 371,940 | 529,743 | (248,404 | ) | 653,879 | ||||||||||||||
|
Wheel Services, Refurbishment & Parts
|
– | 426,138 | 45 | – | 426,183 | |||||||||||||||
|
Leasing & Services
|
– | 47,836 | – | (62 | ) | 47,774 | ||||||||||||||
| 600 | 845,914 | 529,788 | (248,466 | ) | 1,127,836 | |||||||||||||||
|
Margin
|
2,431 | 146,638 | 13,791 | (617 | ) | 162,243 | ||||||||||||||
|
Other
costs
|
||||||||||||||||||||
|
Selling and administrative
|
32,927 | 35,601 | 16,606 | (1 | ) | 85,133 | ||||||||||||||
|
Interest and foreign exchange
|
31,593 | 5,946 | 7,280 | (499 | ) | 44,320 | ||||||||||||||
|
Special items
|
– | – | 2,302 | – | 2,302 | |||||||||||||||
| 64,520 | 41,547 | 26,188 | (500 | ) | 131,755 | |||||||||||||||
|
Earnings (loss) before income taxes and earnings (loss) from
unconsolidated affiliates
|
(62,089 | ) | 105,091 | (12,397 | ) | (117 | ) | 30,488 | ||||||||||||
|
Income tax (expense) benefit
|
27,018 | (42,194 | ) | (3,146 | ) | 1,163 | (17,159 | ) | ||||||||||||
| (35,071 | ) | 62,897 | (15,543 | ) | 1,046 | 13,329 | ||||||||||||||
|
Earnings (loss) from unconsolidated affiliates
|
52,454 | 4,359 | – | (55,941 | ) | 872 | ||||||||||||||
|
Net earnings (loss)
|
17,383 | 67,256 | (15,543 | ) | (54,895 | ) | 14,201 | |||||||||||||
|
Net loss attributable to noncontrolling interest
|
– | – | 4,245 | (1,063 | ) | 3,182 | ||||||||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | 17,383 | $ | 67,256 | $ | (11,298 | ) | $ | (55,958 | ) | $ | 17,383 | ||||||||
| 68 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of
Cash Flows
For the year ended August 31, 2008
|
Combined
|
||||||||||||||||||||
|
Combined
|
Non-
|
|||||||||||||||||||
|
Guarantor
|
Guarantor
|
|||||||||||||||||||
| (In thousands) | Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
|
Cash flows from
operating activities:
|
||||||||||||||||||||
|
Net earnings (loss)
|
$ | 17,383 | $ | 67,256 | $ | (15,543 | ) | $ | (54,895 | ) | $ | 14,201 | ||||||||
|
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
|
||||||||||||||||||||
|
Deferred income taxes
|
37 | 12,165 | (1,352 | ) | 678 | 11,528 | ||||||||||||||
|
Depreciation and amortization
|
668 | 27,501 | 6,979 | (62 | ) | 35,086 | ||||||||||||||
|
Gain on sales of equipment
|
– | (8,007 | ) | – | (3 | ) | (8,010 | ) | ||||||||||||
|
Special items
|
– | – | 2,302 | – | 2,302 | |||||||||||||||
|
Accretion of debt discount
|
3,550 | – | – | – | 3,550 | |||||||||||||||
|
Other
|
(136 | ) | 428 | 1,150 | (1,052 | ) | 390 | |||||||||||||
|
Decrease (increase) in assets:
|
||||||||||||||||||||
|
Accounts receivable
|
4 | (6,538 | ) | (1,084 | ) | (3 | ) | (7,621 | ) | |||||||||||
|
Inventories
|
– | (25,099 | ) | (4,593 | ) | – | (29,692 | ) | ||||||||||||
|
Assets held for sale
|
– | (17,525 | ) | 6,904 | – | (10,621 | ) | |||||||||||||
|
Other
|
1,086 | (3,638 | ) | 19,123 | (19,271 | ) | (2,700 | ) | ||||||||||||
|
Increase (decrease) in liabilities:
|
||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
20,108 | 3,375 | (987 | ) | (695 | ) | 21,801 | |||||||||||||
|
Deferred revenue
|
(155 | ) | 9,257 | (7,198 | ) | – | 1,904 | |||||||||||||
|
Net cash provided by (used in) operating activities
|
42,545 | 59,175 | 5,701 | (75,303 | ) | 32,118 | ||||||||||||||
|
Cash flows from
investing activities:
|
||||||||||||||||||||
|
Principal payments received under direct finance leases
|
– | 375 | – | – | 375 | |||||||||||||||
|
Proceeds from sales of equipment
|
– | 14,598 | – | – | 14,598 | |||||||||||||||
|
Investment in and net advances to unconsolidated affiliates
|
(71,735 | ) | (2,629 | ) | – | 75,222 | 858 | |||||||||||||
|
Acquisitions, net of cash acquired
|
– | (91,166 | ) | – | – | (91,166 | ) | |||||||||||||
|
De-consolidation of subsidiary
|
– | – | (1,217 | ) | – | (1,217 | ) | |||||||||||||
|
Decrease in restricted cash
|
– | – | 2,046 | – | 2,046 | |||||||||||||||
|
Capital expenditures
|
(2,379 | ) | (55,922 | ) | (19,434 | ) | 91 | (77,644 | ) | |||||||||||
|
Net cash provided by (used in) investing activities
|
(74,114 | ) | (134,744 | ) | (18,605 | ) | 75,313 | (152,150 | ) | |||||||||||
|
Cash flows from
financing activities:
|
||||||||||||||||||||
|
Net changes in revolving notes with maturities of 90 days
or less
|
65,000 | – | (9,486 | ) | – | 55,514 | ||||||||||||||
|
Intercompany advances
|
(42,735 | ) | 31,576 | 11,159 | – | – | ||||||||||||||
|
Proceeds from issuance of notes payable
|
– | 49,613 | – | – | 49,613 | |||||||||||||||
|
Repayments of notes payable
|
(1,349 | ) | (4,278 | ) | (1,292 | ) | – | (6,919 | ) | |||||||||||
|
Investment by joint venture partner
|
– | – | 6,600 | – | 6,600 | |||||||||||||||
|
Dividends paid
|
(5,261 | ) | – | – | – | (5,261 | ) | |||||||||||||
|
Other
|
3,931 | – | – | – | 3.931 | |||||||||||||||
|
Net cash provided by financing activities
|
19,586 | 76,911 | 6,981 | – | 103,478 | |||||||||||||||
|
Effect of exchange rate changes
|
(3,439 | ) | 251 | 4,901 | (10 | ) | 1,703 | |||||||||||||
|
Increase (decrease) in cash and cash equivalents
|
(15,422 | ) | 1,593 | (1,022 | ) | – | (14,851 | ) | ||||||||||||
|
Cash and cash
equivalents
|
||||||||||||||||||||
|
Beginning of period
|
15,422 | – | 5,386 | – | 20,808 | |||||||||||||||
|
End of period
|
$ | – | $ | 1,593 | $ | 4,364 | $ | – | $ | 5,957 | ||||||||||
| The Greenbrier Companies 2010 Annual Report | 69 |
Table of Contents
Quarterly Results
of Operations (Unaudited)
Operating results by quarter for 2010 are as follows:
| (In thousands, except per share amount) | First | Second | Third | Fourth | Total | |||||||||||||||
|
2010
|
||||||||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Manufacturing
|
$ | 60,078 | $ | 88,065 | $ | 77,877 | $ | 69,546 | $ | 295,566 | ||||||||||
|
Wheel Services, Refurbishment & Parts
|
92,983 | 94,329 | 112,186 | 90,563 | 390,061 | |||||||||||||||
|
Leasing & Services
|
18,632 | 17,556 | 21,392 | 21,243 | 78,823 | |||||||||||||||
| 171,693 | 199,950 | 211,455 | 181,352 | 764,450 | ||||||||||||||||
|
Cost of
revenue
|
||||||||||||||||||||
|
Manufacturing
|
55,847 | 81,608 | 68,931 | 62,009 | 268,395 | |||||||||||||||
|
Wheel Services, Refurbishment & Parts
|
83,286 | 83,387 | 96,725 | 81,124 | 344,522 | |||||||||||||||
|
Leasing & Services
|
10,918 | 10,789 | 9,931 | 9,727 | 41,365 | |||||||||||||||
| 150,051 | 175,784 | 175,587 | 152,860 | 654,282 | ||||||||||||||||
|
Margin
|
21,642 | 24,166 | 35,868 | 28,492 | 110,168 | |||||||||||||||
|
Other
costs
|
||||||||||||||||||||
|
Selling and administrative
|
16,208 | 16,958 | 17,519 | 19,246 | 69,931 | |||||||||||||||
|
Interest and foreign exchange
|
11,112 | 12,406 | 9,536 | 10,080 | 43,134 | |||||||||||||||
|
Special items
|
– | – | – | (11,870 | ) | (11,870 | ) (1) | |||||||||||||
| 27,320 | 29,364 | 27,055 | 17,456 | 101,195 | ||||||||||||||||
|
Earnings (loss) before income tax and loss from unconsolidated
affiliates
|
(5,678 | ) | (5,198 | ) | 8,813 | 11,036 | 8,973 | |||||||||||||
|
Income tax benefit (expense)
|
2,500 | 944 | (2,418 | ) | (67 | ) | 959 | |||||||||||||
|
Loss from unconsolidated affiliates
|
(183 | ) | (131 | ) | (318 | ) | (969 | ) | (1,601 | ) | ||||||||||
|
Net earnings (loss)
|
(3,361 | ) | (4,385 | ) | 6,077 | 10,000 | 8,331 | |||||||||||||
|
Net loss (earnings) attributable to noncontrolling interest
|
117 | (367 | ) | (1,514 | ) | (2,290 | ) | (4,054 | ) | |||||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | (3,244 | ) | $ | (4,752 | ) | $ | 4,563 | $ | 7,710 | $ | 4,277 | ||||||||
|
Basic earnings
(loss) per common share:
|
$ | (0.19 | ) | $ | (0.28 | ) | $ | 0.25 | $ | 0.35 | $ | 0.23 | ||||||||
|
Diluted earnings
(loss) per common share:
|
$ | (0.19 | ) | $ | (0.28 | ) | $ | 0.23 | $ | 0.33 | $ | 0.21 | (2) | |||||||
| (1) | 2010 includes income of $11.9 million net of tax for a special item related to the release of the liability associated with the 2008 de-consolidation of our former Canadian subsidiary. |
| (2) | Quarterly amounts do not total the year to date amount as each period is calculated discretely. The dilutive effect of common stock equivalents is excluded from per share calculations for the first and second quarters due to a net loss for those periods. |
| 70 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
Quarterly Results
of Operations (Unaudited)
Operating results by quarter for 2009 are as follows:
| (In thousands, except per share amount) | First | Second | Third | Fourth | Total | |||||||||||||||
|
2009
|
||||||||||||||||||||
|
Revenue
|
||||||||||||||||||||
|
Manufacturing
|
$ | 102,717 | $ | 145,574 | $ | 105,986 | $ | 108,219 | $ | 462,496 | ||||||||||
|
Wheel Services, Refurbishment & Parts
|
132,279 | 121,681 | 120,190 | 102,014 | 476,164 | |||||||||||||||
|
Leasing & Services
|
21,133 | 19,877 | 18,272 | 20,183 | 79,465 | |||||||||||||||
| 256,129 | 287,132 | 244,448 | 230,416 | 1,018,125 | ||||||||||||||||
|
Cost of
revenue
|
||||||||||||||||||||
|
Manufacturing
|
106,923 | 152,003 | 100,847 | 98,960 | 458,733 | |||||||||||||||
|
Wheel Services, Refurbishment & Parts
|
119,326 | 107,427 | 104,859 | 88,682 | 420,294 | |||||||||||||||
|
Leasing & Services
|
11,929 | 11,547 | 12,049 | 10,466 | 45,991 | |||||||||||||||
| 238,178 | 270,977 | 217,755 | 198,108 | 925,018 | ||||||||||||||||
|
Margin
|
17,951 | 16,155 | 26,693 | 32,308 | 93,107 | |||||||||||||||
|
Other
costs
|
||||||||||||||||||||
|
Selling and administrative
|
15,980 | 16,265 | 15,886 | 17,612 | 65,743 | |||||||||||||||
|
Interest and foreign exchange
|
11,771 | 9,146 | 11,710 | 13,285 | 45,912 | |||||||||||||||
|
Special items
|
– | – | 55,667 | – | 55,667 | |||||||||||||||
| 27,751 | 25,411 | 83,263 | 30,897 | 167,322 | ||||||||||||||||
|
Earnings (loss) before income tax and earnings (loss) from
unconsolidated affiliates
|
(9,800 | ) | (9,256 | ) | (56,570 | ) | 1,411 | (74,215 | ) | |||||||||||
|
Income tax benefit
|
4,906 | 1,698 | 5,217 | 5,096 | 16,917 | |||||||||||||||
|
Earnings (loss) in earnings (loss) from unconsolidated affiliates
|
434 | (251 | ) | (457 | ) | (291 | ) | (565 | ) | |||||||||||
|
Net earnings (loss)
|
(4,460 | ) | (7,809 | ) | (51,810 | ) | 6,216 | (57,863 | ) | |||||||||||
|
Net loss (earnings) attributable to noncontrolling interest
|
568 | 351 | 687 | (134 | ) | 1,472 | ||||||||||||||
|
Net earnings
(loss) attributable to Greenbrier
|
$ | (3,892 | ) | $ | (7,458 | ) | $ | (51,123 | ) | $ | 6,082 | $ | (56,391 | ) | ||||||
|
Basic earnings
(loss) per common share:
|
$ | (0.23 | ) | $ | (0.45 | ) | $ | (3.04 | ) | $ | 0.36 | $ | (3.35 | ) | ||||||
|
Diluted earnings
(loss) per common share:
|
$ | (0.23 | ) | $ | (0.45 | ) | $ | (3.04 | ) | $ | 0.33 | $ | (3.35 | ) (1) | ||||||
| (1) | Quarterly amounts do not total the year to date amount as each period is calculated discretely. The dilutive effect of common stock equivalents is excluded from per share calculations for the first three quarters and the year ended August 31, 2009 due to a net loss for those periods. |
| The Greenbrier Companies 2010 Annual Report | 71 |
Table of Contents
Report of
Independent Registered Public Accounting Firm
To the Board of
Directors and Stockholders
The Greenbrier
Companies, Inc.
We have audited the accompanying consolidated balance sheets of
The Greenbrier Companies, Inc. and subsidiaries (the
“Company”) as of August 31, 2010 and 2009, and
the related consolidated statements of operations, equity and
comprehensive income (loss), and cash flows for each of the
three years in the period ended August 31, 2010. These
financial statements are the responsibility of the
Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of The
Greenbrier Companies, Inc. and subsidiaries as of
August 31, 2010 and 2009, and the results of their
operations and their cash flows for each of the three years in
the period ended August 31, 2010, in conformity with
accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as
of August 31, 2010, based on the criteria established in
Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission
and our report dated November 10, 2010
expressed an unqualified opinion on the Company’s internal
control over financial reporting.
Portland, Oregon
November 10, 2010
| Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
| 72 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Item 9a. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the
participation of our President and Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure
controls and procedures as of the end of the period covered by
this report pursuant to
Rule 13a-15(b)
under the Securities Exchange Act of 1934 (the Exchange Act).
Based on that evaluation, our President and Chief Executive
Officer and Chief Financial Officer have concluded that, as of
the end of the period covered by this report, our disclosure
controls and procedures were effective in ensuring that
information required to be disclosed in our Exchange Act reports
is (1) recorded, processed, summarized and reported in a
timely manner, and (2) accumulated and communicated to our
management, including our President and Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Changes in Internal Controls
There have been no material changes in our internal control over
financial reporting that occurred during our last fiscal quarter
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Management’s
Report on Internal Control over Financial Reporting
Management of The Greenbrier Companies, Inc. together with its
consolidated subsidiaries (the Company), is responsible for
establishing and maintaining adequate internal control over
financial reporting. The Company’s internal control over
financial reporting is a process designed under the supervision
of the Company’s principal executive and principal
financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the
Company’s financial statements for external reporting
purposes in accordance with accounting principles generally
accepted in the United States of America.
As of the end of the Company’s 2010 fiscal year, management
conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting based
on the framework established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management has determined that the Company’s
internal control over financial reporting as of August 31,
2010 is effective.
Our independent registered public accounting firm,
Deloitte & Touche LLP, independently assessed the
effectiveness of the Company’s internal control over
financial reporting, as stated in their attestation report,
which is included at the end of Part II, Item 9A of
this
Form 10-K.
Inherent Limitations on Effectiveness of Controls
The Company’s management, including the Chief Executive
Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal control over
financial reporting will prevent or detect all error and all
fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that the control system’s objectives will be met. The
design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that misstatements due
to error or fraud will not occur or that all control issues and
instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Controls can also
be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in
part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with policies or
procedures.
| The Greenbrier Companies 2010 Annual Report | 73 |
Table of Contents
Report of
Independent Registered Public Accounting Firm
To the Board of
Directors and Stockholders
The Greenbrier
Companies, Inc.
We have audited the internal control over financial reporting of
The Greenbrier Companies, Inc. and subsidiaries (the
“Company”) as of August 31, 2010 based on
criteria established in
Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission
. The Company’s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying “Management’s Report on
Internal Control over Financial Reporting”. Our
responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a
process designed by, or under the supervision of, the
company’s principal executive and principal financial
officers, or persons performing similar functions, and effected
by the company’s board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of August 31, 2010, based on the criteria established in
Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway
Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
August 31, 2010 of the Company and our report dated
November 10, 2010 expressed an unqualified opinion on those
financial statements.
Portland, Oregon
November 10, 2010
| Item 9b. | OTHER INFORMATION |
None
| 74 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
| Item 10. | DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
There is hereby incorporated by reference the information under
the captions “Election of Directors” and
“Section 16(a) Beneficial Ownership Reporting
Compliance” and “Executive Officers of the
Company” in the Company’s definitive Proxy Statement
to be filed pursuant to Regulation 14A, which Proxy
Statement is anticipated to be filed with the Securities and
Exchange Commission within 120 days after the end of
Registrant’s year ended August 31, 2010.
| Item 11. | EXECUTIVE COMPENSATION |
There is hereby incorporated by reference the information under
the caption “Executive Compensation” in
Registrant’s definitive Proxy Statement to be filed
pursuant to Regulation 14A, which Proxy Statement is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of
Registrant’s year ended August 31, 2010.
| Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS |
There is hereby incorporated by reference the information under
the captions “Voting” and “Security Ownership of
Certain Beneficial Owners and Management” in
Registrant’s definitive Proxy Statement to be filed
pursuant to Regulation 14A, which Proxy Statement is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of
Registrant’s year ended August 31, 2010.
| Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
There is hereby incorporated by reference the information under
the caption “Certain Relationships and Related Party
Transactions” in Registrant’s definitive Proxy
Statement to be filed pursuant to Regulation 14A, which
Proxy Statement is anticipated to be filed with the Securities
and Exchange Commission within 120 days after the end of
Registrant’s year ended August 31, 2010.
| Item 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
There is hereby incorporated by reference the information under
the caption “Ratification of Appointment of Auditors”
in Registrant’s definitive Proxy Statement to be filed
pursuant to Regulation 14A, which Proxy Statement is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of the
Registrant’s year ended August 31, 2010.
| The Greenbrier Companies 2010 Annual Report | 75 |
Table of Contents
| Item 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
(1) Financial
Statements
See
Consolidated Financial Statements in Item 8
(a) (2) Financial
Statements Schedule*
| * | All other schedules have been omitted because they are inapplicable, not required or because the information is given in the Consolidated Financial Statements or notes thereto. This supplemental schedule should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this report. |
| (a) (3) | The following exhibits are filed herewith and this list is intended to constitute the exhibit index: |
| 3 | .1 | Registrant’s Articles of Incorporation are incorporated herein by reference by Exhibit 3.1 to the Registrant’s Form 10-Q filed April 5, 2006. | ||
| 3 | .2 | Articles of Merger amending the Registrant’s Articles of Incorporation, is incorporated herein by reference to Exhibit 3.2 to the Registrant’s Form 10-Q filed April 5, 2006. | ||
| 3 | .3 | Registrant’s Bylaws, as amended January 11, 2006, are incorporated herein by reference to Exhibit 3.3 to the Registrant’s Form 10-Q filed April 5, 2006. | ||
| 3 | .4 | Amendment to the Registrant’s Bylaws dated October 31, 2006, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed November 6, 2006. | ||
| 3 | .5 | Amendment to the Registrant’s Bylaws dated January 8, 2008, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed November 8, 2007. | ||
| 3 | .6 | Amendment to the Registrant’s Bylaws dated April 8, 2008, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed April 11, 2008. | ||
| 3 | .7 | Amendment to the Registrant’s Bylaws dated April 7, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed April 13, 2009. | ||
| 3 | .8 | Amendment to the Registrant’s Bylaws dated June 8, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed June 10, 2009. | ||
| 3 | .9 | Amendment to the Registrant’s Bylaws dated June 10, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 4 | .1 | Specimen Common Stock Certificate of Registrant is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 filed April 7, 2010 (SEC File Number 333-165924). | ||
| 4 | .2 | Indenture between the Registrant, AutoStack Corporation, Greenbrier-Concarril, LLC, Greenbrier Leasing Corporation, Greenbrier Leasing Limited Partner, LLC, Greenbrier Management Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar, Inc., Gunderson, Inc., Gunderson Marine, Inc., Gunderson Rail Services, Inc., Gunderson Specialty Products, LLC and U.S. Bank National Association as Trustee dated May 11, 2005, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed May 13, 2005. | ||
| 4 | .3 | Indenture between the Registrant, the Guarantors named therein and U.S. Bank National Association as Trustee dated May 22, 2006, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed May 25, 2006. | ||
| 4 | .4 | Rights Agreement, dated as of July 13, 2004, between the Registrant and EquiServe Trust Company, N.A., as Rights Agent, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A filed September 16, 2004. | ||
| 4 | .5 | Amendment No. 1, dated November 9, 2004, to the Rights Agreement, dated as of July 13, 2004, is incorporated herein by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed November 15, 2004. | ||
| 4 | .6 | Amendment No. 2, dated February 5, 2005, to the Rights Agreement, dated as of July 13, 2004, is incorporated herein by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed February 9, 2005. |
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EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES (continued)
| 4 | .7 | Amendment No. 3, dated June 10, 2009, to the Rights Agreement, dated as of July 13, 2004, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 4 | .8 | Warrant Agreement, dated June 10, 2009, among the Registrant, WLR Recovery Fund IV, L.P., WLR IV Parallel ESC, L.P. and each other holder from time to time party thereto, is incorporated herein by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 4 | .9 | Investor Rights and Restrictions Agreement, dated June 10, 2009, among the Registrant, WLR Recovery Fund IV, L.P., WLR IV Parallel ESC, L.P., WL Ross & Co. LLC and the other holders from time to time party thereto, is incorporated herein by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 10 | .1 | Registration Rights Agreement among the Registrant and Banc of America Securities LLC and Bear, Stearns & Co. Inc., dated May 11, 2005, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 13, 2005. | ||
| 10 | .2 | Registration Rights Agreement among the Registrant and Banc of America LLC and Bear, Stearns & Co. Inc., dated November 21, 2005, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed December 1, 2005. | ||
| 10 | .3 | Registration Rights Agreement among the Registrant, the Guarantors named therein, Bear, Stearns & Co. Inc. and Banc of America Securities LLC, dated May 22, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 25, 2006. | ||
| 10 | .4 | Purchase Agreement among the Registrant, the Guarantors named therein, Bear, Stearns & Co. Inc., and Banc of America Securities LLC, as initial purchasers, and the guaranteeing subsidiaries named therein, dated May 17, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 18, 2006. | ||
| 10 | .5 | Purchase Agreement among the Registrant and Banc of America Securities LLC and Bear, Stearns & Co. Inc., as initial purchasers, dated November 16, 2005, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed December 1, 2005. | ||
| 10 | .6 | Amended and Restated Credit Agreement dated November 7, 2006 among the Registrant, TrentonWorks Limited, a Nova Scotia company, Bank of America, N.A. as U.S. Administrative Agent, Bank of America, N.A. through its Canada branch as Canadian Administrative Agent, U.S. Bank National Association as Documentation Agent, Banc of America Securities LLC as Sole Lead Arranger and Sole Book Manager, and the other lenders party thereto, is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed November 13, 2006. | ||
| 10 | .7 | First Amendment, dated January 8, 2008, to the Amended and Restated Credit Agreement, dated as of November 7, 2006, is incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed April 9, 2009. | ||
| 10 | .8 | Second Amendment, dated May 8, 2008, to the Amended and Restated Credit Agreement, dated as of November 7, 2006, is incorporated herein by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed April 9, 2009. | ||
| 10 | .9 | Third Amendment, dated September 26, 2008, to the Amended and Restated Credit Agreement, dated as of November 7, 2006, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed June 12, 2009 | ||
| 10 | .10 | Fourth Amendment, dated June 10, 2009, to the Amended and Restated Credit Agreement, dated as of November 7, 2006, is incorporated herein by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 10 | .11 | Fifth Amendment, dated July 20, 2010, to the Amended and Restated Credit Agreement, dated as of November 7, 2006. | ||
| 10 | .12 | Sixth Amendment, dated September 8, 2010, to the Amended and Restated Credit Agreement, dated as of November 7, 2006. |
| The Greenbrier Companies 2010 Annual Report | 77 |
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EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES (continued)
| 10 | .13 | Credit Agreement dated June 10, 2009 among the Registrant, WLR Recovery Fund IV, L.P. and WLR IV Parallel ESC, L.P. as holders, the other holders party thereto, and WL Ross and Co. LLC, as administrative agent, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed June 12, 2009. | ||
| 10 | .14* | Employment Agreement dated April 7, 2006 between Mr. Mark Rittenbaum and Registrant, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed April 13, 2006. | ||
| 10 | .15* | Amendment dated June 24, 2008 to Employment Agreement dated April 7, 2006 between Mark Rittenbaum and Registrant, is incorporated herein by reference to Exhibit 10.7 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .16* | Employment Agreement dated April 20, 2005 between the Registrant and Mr. William A. Furman, is incorporated herein by reference herein to Exhibit 10.1 to the Registrant’s Form 8-K filed April 20, 2005. | ||
| 10 | .17* | Amendment dated May 11, 2006 to Employment Agreement between Mr. William A. Furman and Registrant dated April 20, 2005, is incorporated by reference herein to Exhibit 10.1 to the Registrant’s Form 8-K filed May 12, 2006. | ||
| 10 | .18* | Amendment dated November 1, 2006 to Employment Agreement between the Registrant and Mr. William A. Furman dated April 20, 2005 is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed November 6, 2006. | ||
| 10 | .19* | Amendment dated June 5, 2008 to Employment Agreement between the Registrant and William A. Furman, is incorporated herein by reference to Exhibit 10.11 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .20* | Amendment dated April 6, 2009 to Employment Agreement between the Registrant and William A. Furman, is incorporated herein by reference to Exhibit 10.5 to the Registrant’s Form 10-Q filed April 9, 2009. | ||
| 10 | .21* | Employment Agreement dated May 11, 2006 between Robin Bisson and Registrant, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed May 12, 2006. | ||
| 10 | .22* | Employment Agreement dated June 26, 2007 between Timothy A. Stuckey and Registrant, is incorporated herein by reference to Exhibit 10.13 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .23* | 2007 Restated Greenbrier Leasing Corporation’s Manager Owned Target Benefit Plan, is incorporated herein by reference to Exhibit 10.14 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .24 | Form of Agreement concerning Indemnification and Related Matters (Directors) between Registrant and its directors, is incorporated herein by reference to Exhibit 10.15 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .25 | Form of Agreement concerning Indemnification and Related Matters (Officers) between Registrant and its officers, is incorporated herein by reference to Exhibit 10.16 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .26* | Stock Incentive Plan — 2000, dated as of April 6, 1999 is incorporated herein by reference to Exhibit 10.23 to the Registrant’s Annual Report on Form 10-K filed November 24, 1999. | ||
| 10 | .27* | Amendment No. 1 to the Stock Incentive Plan — 2000, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed April 11, 2001. | ||
| 10 | .28* | Amendment No. 2 to the Stock Incentive Plan — 2000, is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed April 11, 2001. | ||
| 10 | .29* | Amendment No 3 to the Stock Incentive Plan — 2000, is incorporated herein by reference to Exhibit 10.25 to the Registrant’s Form 10-K filed November 27, 2002. | ||
| 10 | .30* | Employment Agreement dated April 7, 2008 between James T. Sharp and Registrant, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed April 11, 2008. | ||
| 10 | .31* | Amendment dated June 26, 2008 to Employment Agreement dated April 7, 2008 between James T. Sharp and Registrant, is incorporated herein by reference to Exhibit 10.23 to the Registrant’s Form 10-K filed November 10, 2008. |
| 78 | The Greenbrier Companies 2010 Annual Report |
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EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES (continued)
| 10 | .32* | Employment Agreement dated April 6, 2009 between Alejandro Centurion and Registrant, is incorporated herein by reference to Exhibit 10.6 to the Registrant’s Form 10-Q dated April 9, 2009. | ||
| 10 | .33* | Form of Employee Restricted Share Agreement (5 year vesting) related to the 2005 Stock Incentive Plan, is incorporated herein by reference to Exhibit 10.24 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .34* | Form of Employee Restricted Share Agreement (time and performance vesting) related to the 2005 Stock Incentive Plan, is incorporated herein by reference to Exhibit 10.25 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .35* | Form of Change of Control Agreement for Senior Managers, is incorporated herein by reference to Exhibit 10.26 to the Registrant’s Form 10-K filed November 10, 2008. | ||
| 10 | .36* | Form of Amendment dated as of March 1, 2009 to Employment Agreements between Registrant and certain of Registrant’s Executive Officers, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed April 9, 2009. | ||
| 10 | .37* | 2009 Employee Stock Purchase Plan, is incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement on Schedule 14A filed November 25, 2008. | ||
| 10 | .38* | First Amendment to 2009 Employee Stock Purchase Plan dated April 5, 2010, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed July 7, 2010. | ||
| 10 | .39* | 2005 Stock Incentive Plan is incorporated herein by reference to Appendix C to the Registrant’s Proxy Statement on Schedule 14A filed November 24, 2004. | ||
| 10 | .40* | Amendment No. 1 dated June 30, 2005 to the 2005 Stock Incentive Plan, is incorporated herein by reference to Exhibit 10.36 to the Registrant’s Annual Report on Form 10-K filed November 4, 2005. | ||
| 10 | .41* | Amendment No. 2 dated April 3, 2007 to the 2005 Stock Incentive Plan, is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 10-Q filed July 10, 2007. | ||
| 10 | .42* | Amendment No. 3 dated November 6, 2008 to the 2005 Stock Incentive Plan, is incorporated herein by reference to Appendix C to the Registrant’s Proxy Statement on Schedule 14A filed November 25, 2008. | ||
| 10 | .43 | Stock purchase agreement among Gunderson Rail Services LLC and Meridian Rail Holdings Corp. dated October 15, 2006 and incorporated herein by reference to Exhibit 10.34 of the Registrant’s Annual Report on Form 10-K filed November 2, 2006. | ||
| 10 | .44 | Asset Purchase Agreement among Gunderson Rail Services LLC, American Allied Railway Equipment Co., Inc., and American Allied Freight Car Co., Inc. dated January 24, 2008, is incorporated herein by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed April 3, 2008. | ||
| 10 | .45 | Railcar Remarketing and Management Agreement among Greenbrier Management Services, LLC and WL Ross-Greenbrier Rail I LLC dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed May 3, 2010.** | ||
| 10 | .46 | Advisory Services Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc. dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed May 3, 2010.** | ||
| 10 | .47 | Contract Placement Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc. dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed May 3, 2010.** | ||
| 10 | .48 | Syndication Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc. dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed May 3, 2010.** | ||
| 10 | .49 | Amendment to Syndication Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of August 18, 2010, is incorporated herein by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed August 20, 2010. | ||
| 10 | .50 | Line of Credit Participation Letter Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc. dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed May 3, 2010.** |
| The Greenbrier Companies 2010 Annual Report | 79 |
Table of Contents
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES (continued)
| 10 | .51 | Guaranty of Greenbrier Leasing Company LLC dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.6 of the Registrant’s Form 8-K filed May 3, 2010.** | ||
| 10 | .52 | Guaranty of the Greenbrier Companies, Inc., dated as of August 18, 2010, is incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed August 20, 2010. | ||
| 14 | .1 | Code of Business Conduct and Ethics, is incorporated herein by reference to Exhibit 14.1 of the Registrant’s Form 8-K filed January 13, 2010. | ||
| 21 | .1 | List of the subsidiaries of the Registrant | ||
| 23 | .1 | Consent of Deloitte & Touche LLP, independent auditors | ||
| 31 | .1 | Certification pursuant to Rule 13(a) — 14(a) | ||
| 31 | .2 | Certification pursuant to Rule 13(a) — 14(a) | ||
| 32 | .1 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
| 32 | .2 | Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Management contract or compensatory plan or arrangement |
| ** | Certain confidential information contained in these Exhibits was omitted by means of redacting a portion of the text and replacing it with brackets and asterisks ([***]). These Exhibits have been filed separately with the SEC without the redaction and have been granted confidential treatment by the Securities and Exchange Commission pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
Note: For all exhibits incorporated by reference, unless
otherwise noted above, the SEC file number is
001-13146.
CERTIFICATIONS
The Company filed the required 303A.12(a) New York Stock
Exchange Certification of its Chief Financial Officer with the
New York Stock Exchange with no qualifications following the
2010 Annual Meeting of Shareholders and the Company filed as an
exhibit to its Annual Report on
Form 10-K
for the year ended August 31, 2009, as filed with the
Securities and Exchange Commission, a Certification of the Chief
Executive Officer and a Certification of the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| 80 | The Greenbrier Companies 2010 Annual Report |
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE
GREENBRIER COMPANIES, INC.
|
Dated: November 10, 2010
|
By:
/s/ William
A. Furman
William
A. Furman
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
| Signature | Date | |||
|
/s/ Benjamin
R. Whiteley
|
November 10, 2010 | |||
|
/s/ William
A. Furman
Chief Executive Officer, Director |
November 10, 2010 | |||
|
/s/ Graeme
Jack
|
November 10, 2010 | |||
|
/s/ Duane
C. McDougall
|
November 10, 2010 | |||
|
/s/ Victoria
McManus
|
November 10, 2010 | |||
|
/s/ A.
Daniel O’Neal
|
November 10, 2010 | |||
|
/s/ Wilbur
L. Ross
|
November 10, 2010 | |||
|
/s/ Charles
J. Swindells
|
November 10, 2010 | |||
|
/s/ Wendy
L. Teramoto
|
November 10, 2010 | |||
|
/s/ C.
Bruce Ward
|
November 10, 2010 | |||
|
/s/ Donald
A. Washburn
|
November 10, 2010. | |||
|
/s/ Mark
J. Rittenbaum
President And Chief Financial Officer (Principal Financial Officer) |
November 10, 2010 | |||
|
/s/ James
W. Cruckshank
President And Chief Accounting Officer (Principal Accounting Officer) |
November 10, 2010 | |||
| The Greenbrier Companies 2010 Annual Report | 81 |
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Removed and ReservedPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. Selected Financial Data(1)Item 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1 - Nature Of OperationsNote 2 - Summary Of Significant Accounting PoliciesNote 3 - Special ItemsNote 4 - De-consolidation Of SubsidiaryNote 5 - InventoriesNote 6 - Assets Held For SaleNote 7 - Investment in Direct Finance LeasesNote 8 - Equipment on Operating Leases, NetNote 9 - Property, Plant and Equipment, NetNote 10 - GoodwillNote 11 - Intangibles and Other AssetsNote 12 - Investment in Unconsolidated AffiliatesNote 13 - Revolving NotesNote 14 - Accounts Payable and Accrued LiabilitiesNote 15 - Maintenance and Warranty AccrualsNote 16 - Notes PayableNote 17 - Derivative InstrumentsNote 18 - EquityNote 19 - Earnings Per ShareNote 20 - Related Party TransactionsNote 21 - Employee Benefit PlansNote 22 - Income TaxesNote 23 - Segment InformationNote 24 - Customer ConcentrationNote 25 - Lease CommitmentsNote 26 - Commitments and ContingenciesNote 27 - Fair Value Of Financial InstrumentsNote 28 - Fair Value MeasuresNote 29 - Guarantor/non GuarantorItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItem 10. Directors and Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholders MattersItem 13. Certain Relationships and Related Transactions and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits and Financial Statement Schedules