UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended February 28, 2013
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the transition period from to
Commission File No. 1-13146
THE GREENBRIER COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Oregon | 93-0816972 | |
(State of Incorporation) |
(I.R.S. Employer Identification No.) |
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One Centerpointe Drive, Suite 200, Lake Oswego, OR | 97035 | |
(Address of principal executive offices) | (Zip Code) |
(503) 684-7000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
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 definition 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 | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ¨ No x
The number of shares of the registrants common stock, without par value, outstanding on March 27, 2013 was 27,221,816 shares.
THE GREENBRIER COMPANIES, INC.
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-Q. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to:
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availability of financing sources and borrowing base for working capital, other business development activities, capital spending and leased railcars for syndication (sale of railcars with lease attached); |
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ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms; |
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ability to utilize beneficial tax strategies; |
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ability to grow our businesses; |
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ability to obtain lease and sales contracts which provide adequate protection against changes in interest rates and increased costs of materials and components; |
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ability to obtain adequate insurance coverage at acceptable rates; |
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ability to obtain adequate certification and licensing of products; and |
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short-term and long-term revenue and earnings effects of the above items. |
The following factors, among others, could cause actual results or outcomes to differ materially from the forward-looking statements:
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fluctuations in demand for newly manufactured railcars or marine barges; |
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fluctuations in demand for wheel services, refurbishment and parts; |
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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; |
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ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements; |
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domestic and global economic conditions including such matters as embargoes or quotas; |
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U.S., Mexican and other global political or security conditions including such matters as terrorism, war, civil disruption and crime; |
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growth or reduction in the surface transportation industry; |
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ability to maintain good relationships with third party labor providers or collective bargaining units; |
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steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and availability and their impact on product demand and margin; |
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delay or failure of acquired businesses, assets, start-up operations, or new products or services to compete successfully; |
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changes in product mix and the mix of revenue levels among reporting segments; |
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labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo; |
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production difficulties and product delivery delays as a result of, among other matters, inefficiencies associated with the start-up of production lines or increased production rates, changing technologies or non-performance of alliance partners, subcontractors or suppliers; |
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ability to renew or replace expiring customer contracts on satisfactory terms; |
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ability to obtain and execute suitable contracts for leased railcars for syndication; |
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lower than anticipated lease renewal rates, earnings on utilization based leases or residual values for leased equipment; |
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discovery of defects in railcars resulting in increased warranty costs or litigation; |
2
THE GREENBRIER COMPANIES, INC.
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resolution or outcome of pending or future litigation and investigations; |
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natural disasters or severe weather patterns that may affect either us, our suppliers or our customers; |
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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; |
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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; |
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industry overcapacity and our manufacturing capacity utilization; |
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decreases or write-downs in carrying value of inventory, goodwill, intangibles or other assets due to impairment; |
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severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations; |
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changes in future maintenance or warranty requirements; |
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ability to adjust to the cyclical nature of the industries in which we operate; |
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changes in interest rates and financial impacts from interest rates; |
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ability and cost to maintain and renew operating permits; |
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actions by various regulatory agencies, including potential environmental remediation obligations; |
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changes in fuel and/or energy prices; |
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risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continued use of such rights; |
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expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry; |
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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; |
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failure to successfully integrate acquired businesses; |
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discovery of previously unknown liabilities associated with acquired businesses; |
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failure of or delay in implementing and using new software or other technologies; |
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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; |
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credit limitations upon our ability to maintain effective hedging programs; and |
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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, goal, contemplates, expects, intends, plans, projects, hopes, seeks, estimates, could, would, will, may, can, designed to, foreseeable future and similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability to control or predict. 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.
3
THE GREENBRIER COMPANIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Consolidated Balance Sheets
(In thousands, unaudited)
February 28,
2013 |
August 31,
2012 |
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Assets |
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Cash and cash equivalents |
$ | 55,637 | $ | 53,571 | ||||
Restricted cash |
8,899 | 6,277 | ||||||
Accounts receivable, net |
144,933 | 146,326 | ||||||
Inventories |
359,281 | 316,741 | ||||||
Leased railcars for syndication |
36,198 | 97,798 | ||||||
Equipment on operating leases, net |
344,576 | 362,968 | ||||||
Property, plant and equipment, net |
194,887 | 182,429 | ||||||
Goodwill |
134,316 | 137,066 | ||||||
Intangibles and other assets, net |
86,194 | 81,368 | ||||||
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$ | 1,364,921 | $ | 1,384,544 | |||||
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Liabilities and Equity |
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Revolving notes |
$ | 50,058 | $ | 60,755 | ||||
Accounts payable and accrued liabilities |
278,221 | 329,508 | ||||||
Deferred income taxes |
99,965 | 95,363 | ||||||
Deferred revenue |
23,178 | 17,194 | ||||||
Notes payable |
427,553 | 428,079 | ||||||
Commitments and contingencies (Note 14) |
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Equity: |
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Greenbrier |
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Preferred stock - without par value; 25,000 shares authorized; none outstanding |
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Common stock - without par value; 50,000 shares authorized; 27,222 and 27,143 shares outstanding at February 28, 2013 and August 31, 2012 |
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Additional paid-in capital |
255,738 | 252,256 | ||||||
Retained earnings |
210,156 | 185,890 | ||||||
Accumulated other comprehensive loss |
(4,758 | ) | (6,369 | ) | ||||
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Total equity - Greenbrier |
461,136 | 431,777 | ||||||
Noncontrolling interest |
24,810 | 21,868 | ||||||
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Total equity |
485,946 | 453,645 | ||||||
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$ | 1,364,921 | $ | 1,384,544 | |||||
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The accompanying notes are an integral part of these financial statements
4
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Income
(In thousands, except per share amounts, unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
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Revenue |
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Manufacturing |
$ | 294,047 | $ | 320,206 | $ | 579,416 | $ | 582,863 | ||||||||
Wheel Services, Refurbishment & Parts |
111,952 | 119,894 | 224,051 | 237,643 | ||||||||||||
Leasing & Services |
17,167 | 18,086 | 35,073 | 35,879 | ||||||||||||
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423,166 | 458,186 | 838,540 | 856,385 | |||||||||||||
Cost of revenue |
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Manufacturing |
262,650 | 290,851 | 521,142 | 527,040 | ||||||||||||
Wheel Services, Refurbishment & Parts |
103,134 | 106,554 | 204,610 | 212,445 | ||||||||||||
Leasing & Services |
9,107 | 9,295 | 16,735 | 18,958 | ||||||||||||
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374,891 | 406,700 | 742,487 | 758,443 | |||||||||||||
Margin |
48,275 | 51,486 | 96,053 | 97,942 | ||||||||||||
Selling and administrative expense |
24,942 | 24,979 | 51,042 | 48,214 | ||||||||||||
Net gain on disposition of equipment |
(3,076 | ) | (2,654 | ) | (4,484 | ) | (6,312 | ) | ||||||||
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Earnings from operations |
26,409 | 29,161 | 49,495 | 56,040 | ||||||||||||
Other costs |
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Interest and foreign exchange |
6,322 | 6,630 | 12,222 | 12,014 | ||||||||||||
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Earnings before income taxes and earnings (loss) from unconsolidated affiliates |
20,087 | 22,531 | 37,273 | 44,026 | ||||||||||||
Income tax expense |
(5,590 | ) | (5,348 | ) | (10,176 | ) | (13,144 | ) | ||||||||
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Earnings before earnings (loss) from unconsolidated affiliates |
14,497 | 17,183 | 27,097 | 30,882 | ||||||||||||
Earnings (loss) from unconsolidated affiliates |
(105 | ) | 72 | (145 | ) | (300 | ) | |||||||||
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Net earnings |
14,392 | 17,255 | 26,952 | 30,582 | ||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
(553 | ) | 415 | (2,686 | ) | 1,604 | ||||||||||
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Net earnings attributable to Greenbrier |
$ | 13,839 | $ | 17,670 | $ | 24,266 | $ | 32,186 | ||||||||
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Basic earnings per common share |
$ | 0.51 | $ | 0.66 | $ | 0.89 | $ | 1.23 | ||||||||
Diluted earnings per common share |
$ | 0.45 | $ | 0.57 | $ | 0.80 | $ | 1.04 | ||||||||
Weighted average common shares: |
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Basic |
27,210 | 26,683 | 27,177 | 26,073 | ||||||||||||
Diluted |
34,044 | 33,668 | 34,018 | 33,528 |
The accompanying notes are an integral part of these financial statements
5
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands, unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
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Net earnings |
$ | 14,392 | $ | 17,255 | $ | 26,952 | $ | 30,582 | ||||||||
Other comprehensive income |
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Translation adjustment |
(95 | ) | 3,310 | 2,040 | (1,533 | ) | ||||||||||
Reclassification of derivative financial instruments recognized in net earnings 1 |
(279 | ) | 2,213 | (895 | ) | 860 | ||||||||||
Unrealized gain (loss) on derivative financial instruments 2 |
(791 | ) | 6,406 | 508 | 3,151 | |||||||||||
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(1,165 | ) | 11,929 | 1,653 | 2,478 | ||||||||||||
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Comprehensive income |
13,227 | 29,184 | 28,605 | 33,060 | ||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest |
(549 | ) | 329 | (2,728 | ) | 1,665 | ||||||||||
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Comprehensive income attributable to Greenbrier |
$ | 12,678 | $ | 29,513 | $ | 25,877 | $ | 34,725 | ||||||||
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1 |
Net of tax of effect of $0.03 million and $0.2 million for the three months ended February 28, 2013 and February 29, 2012 and $0.01 million and $0.3 million for the six months ended February 28, 2013 and February 29, 2012. |
2 |
Net of tax of effect of $0.2 million and $0.3 million for the three months ended February 28, 2013 and February 29, 2012 and $0.1 million and $0.4 million for the six months ended February 28, 2013 and February 29, 2012. |
The accompanying notes are an integral part of these financial statements
6
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Equity
(In thousands, unaudited)
Attributable to Greenbrier | ||||||||||||||||||||||||||||
Common
Stock Shares |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
Attributable to Greenbrier |
Attributable to
Noncontrolling Interest |
Total Equity | ||||||||||||||||||||||
Balance September 1, 2012 |
27,143 | $ | 252,256 | $ | 185,890 | $ | (6,369 | ) | $ | 431,777 | $ | 21,868 | $ | 453,645 | ||||||||||||||
Net earnings |
| | 24,266 | | 24,266 | 2,686 | 26,952 | |||||||||||||||||||||
Other comprehensive income, net |
| | | 1,611 | 1,611 | 42 | 1,653 | |||||||||||||||||||||
Noncontrolling interest adjustments |
| | | | | (1,735 | ) | (1,735 | ) | |||||||||||||||||||
Investment by joint venture partner |
| | | | | 1,949 | 1,949 | |||||||||||||||||||||
Restricted stock awards (net of cancellations) |
27 | 310 | | | 310 | | 310 | |||||||||||||||||||||
Unamortized restricted stock |
| (310 | ) | | | (310 | ) | | (310 | ) | ||||||||||||||||||
Restricted stock amortization |
| 3,301 | | | 3,301 | | 3,301 | |||||||||||||||||||||
Excess tax benefit from restricted stock awards |
| 181 | | | 181 | | 181 | |||||||||||||||||||||
Warrants exercised |
52 | | | | | | | |||||||||||||||||||||
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Balance February 28, 2013 |
27,222 | $ | 255,738 | $ | 210,156 | $ | (4,758 | ) | $ | 461,136 | $ | 24,810 | $ | 485,946 | ||||||||||||||
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Attributable to Greenbrier | ||||||||||||||||||||||||||||
Common
Stock Shares |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
Attributable to Greenbrier |
Attributable to
Noncontrolling Interest |
Total Equity | ||||||||||||||||||||||
Balance September 1, 2011 |
25,186 | $ | 242,286 | $ | 127,182 | $ | (7,895 | ) | $ | 361,573 | $ | 14,328 | $ | 375,901 | ||||||||||||||
Net earnings (loss) |
| | 32,186 | | 32,186 | (1,604 | ) | 30,582 | ||||||||||||||||||||
Other comprehensive income, net |
| | | 2,539 | 2,539 | (61 | ) | 2,478 | ||||||||||||||||||||
Noncontrolling interest adjustments |
| | | | | 3,151 | 3,151 | |||||||||||||||||||||
Restricted stock awards (net of cancellations) |
23 | 600 | | | 600 | | 600 | |||||||||||||||||||||
Unamortized restricted stock |
| (600 | ) | | | (600 | ) | | (600 | ) | ||||||||||||||||||
Restricted stock amortization |
| 3,490 | | | 3,490 | | 3,490 | |||||||||||||||||||||
Warrants exercised |
1,483 | | | | | | | |||||||||||||||||||||
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Balance February 29, 2012 |
26,692 | $ | 245,776 | $ | 159,368 | $ | (5,356 | ) | $ | 399,788 | $ | 15,814 | $ | 415,602 | ||||||||||||||
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The accompanying notes are an integral part of these financial statements
7
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Cash Flows
(In thousands, unaudited)
Six Months Ended | ||||||||
February 28,
2013 |
February 29,
2012 |
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Cash flows from operating activities |
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Net earnings |
$ | 26,952 | $ | 30,582 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
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Deferred income taxes |
4,203 | 5,828 | ||||||
Depreciation and amortization |
21,398 | 20,322 | ||||||
Net gain on disposition of equipment |
(4,484 | ) | (6,312 | ) | ||||
Accretion of debt discount |
1,725 | 1,599 | ||||||
Stock based compensation expense |
2,887 | 3,490 | ||||||
Other |
(1,612 | ) | 3,759 | |||||
Decrease (increase) in assets: |
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Accounts receivable |
3,079 | 8,898 | ||||||
Inventories |
(27,208 | ) | (43,751 | ) | ||||
Leased railcars for syndication |
56,960 | (52,925 | ) | |||||
Other |
245 | (603 | ) | |||||
Increase (decrease) in liabilities: |
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Accounts payable and accrued liabilities |
(56,493 | ) | 25,854 | |||||
Deferred revenue |
5,936 | (4,657 | ) | |||||
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Net cash provided by (used in) operating activities |
33,588 | (7,916 | ) | |||||
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Cash flows from investing activities |
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Proceeds from sales of assets |
22,301 | 20,058 | ||||||
Capital expenditures |
(35,525 | ) | (35,713 | ) | ||||
Increase in restricted cash |
(2,622 | ) | (136 | ) | ||||
Investment in and net advances to unconsolidated affiliates |
(386 | ) | 70 | |||||
Other |
(3,582 | ) | 22 | |||||
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Net cash used in investing activities |
(19,814 | ) | (15,699 | ) | ||||
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Cash flows from financing activities |
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Net change in revolving notes with maturities of 90 days or less |
(16,579 | ) | (18,716 | ) | ||||
Proceeds from revolving notes with maturities longer than 90 days |
19,968 | 46,646 | ||||||
Repayments of revolving notes with maturities longer than 90 days |
(14,998 | ) | (15,818 | ) | ||||
Proceeds from issuance of notes payable |
| 2,500 | ||||||
Repayments of notes payable |
(2,251 | ) | (4,784 | ) | ||||
Investment by joint venture partner |
1,949 | | ||||||
Excess tax benefit from restricted stock awards |
181 | | ||||||
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Net cash provided by (used in) financing activities |
(11,730 | ) | 9,828 | |||||
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Effect of exchange rate changes |
22 | 4,231 | ||||||
Increase (decrease) in cash and cash equivalents |
2,066 | (9,556 | ) | |||||
Cash and cash equivalents |
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Beginning of period |
53,571 | 50,222 | ||||||
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End of period |
$ | 55,637 | $ | 40,666 | ||||
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Cash paid during the period for |
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Interest |
$ | 7,867 | $ | 8,170 | ||||
Income taxes, net |
$ | 8,288 | $ | (2,483 | ) | |||
Non-cash activity |
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Transfer of Leased railcars for syndication to Equipment on operating leases |
$ | 4,640 | $ | | ||||
Transfer of Equipment on operating leases to Inventories |
$ | 17,762 | $ | |
The accompanying notes are an integral part of these financial statements
8
THE GREENBRIER COMPANIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Interim Financial Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and Subsidiaries (Greenbrier or the Company) as of February 28, 2013, for the three and six months ended February 28, 2013 and for the three and six months ended February 29, 2012 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the financial position and operating results and cash flows for the periods indicated. The results of operations for the three and six months ended February 28, 2013 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2013.
Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Companys 2012 Annual Report on Form 10-K.
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.
Reclassification In the current quarter, the Company reported manufacturing revenue and an operating cash inflow of approximately $40.0 million attributable to a sale of railcars to a single customer. Approximately $17.8 million of the railcars sold were originally produced for our lease fleet and recorded in Equipment on operating leases. This amount had been reported in the Consolidated Statement of Cash Flows as capital expenditures in the amount of $13.5 million for the year ended August 31, 2012 and $4.3 million for the quarter ended November 30, 2012. These railcars originally produced for the lease fleet were never placed on a long term lease, accordingly the railcars have been reflected as a non-cash transfer in the current period from equipment on operating lease to inventory within the accompanying cash flow statement.
Initial Adoption of Accounting Policies In the first quarter of 2013, the Company adopted an accounting standard update that increased the prominence of items reported in other comprehensive income. The standard eliminated the option of presenting other comprehensive income as part of the statement of equity and instead requires the Company to present other comprehensive income as either a single statement of comprehensive income combined with net income or as two separate but continuous statements. The adoption of this accounting standard update did impact the presentation of other comprehensive income, as the Company has elected to present two separate but consecutive statements, but did not have an impact on the Companys financial position, results of operations or cash flows.
In the first quarter of 2013, the Company adopted an accounting standard update regarding how entities test goodwill for impairment. This accounting standard update is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This update impacts testing steps only and therefore the adoption did not have an effect on the Companys Consolidated Financial Statements.
Prospective Accounting Changes In July 2012, an accounting standard update was issued regarding the testing of indefinite-lived intangible assets for impairment. This update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This update will be effective for the Company as of September 1, 2013. However, early adoption is permitted if an entitys financial statements for the most recent annual or interim period have not yet been issued. This update impacts testing steps only, and therefore adoption will not have an effect on the Companys Consolidated Financial Statements.
9
THE GREENBRIER COMPANIES, INC.
In February 2013, an accounting standard update was issued which amended prior reporting requirements with respect to comprehensive income by requiring additional disclosures about the amounts reclassified out of accumulated other comprehensive loss by component. This update will be effective for the Company as of March 1, 2013. As this accounting standard update impacts disclosure only, the adoption of this update is not expected to have an impact on the Companys financial position, results of operations or cash flows.
Note 2 Assets Held For Sale
On February 28, 2013, the Company announced that it had entered into an asset purchase agreement for the sale of substantially all the equipment utilized in Greenbriers reconditioned wheelset roller bearing operations in Elizabethtown, Kentucky. These operations are included as part of the Companys Wheel Services, Refurbishment & Parts segment. Concurrent with the sale, Greenbrier will enter into a long-term supply agreement with the purchaser for reconditioned and new bearings. The Company expects to close this transaction before May 31, 2013.
The Company determined that the assets attributed to the roller bearing operations in Elizabethtown, Kentucky meet the criteria to be classified as assets held for sale as of February 28, 2013. A total of $7.4 million in assets are included as assets held for sale as of February 28, 2013 in Intangibles and other assets, net in the Consolidated Balance Sheet.
In accordance with ASC 360, the assets held for sale, including the portion of goodwill associated with the assets, were measured and adjusted to the lower of the carrying amount or fair value less costs to sell. As a result, the Company recorded a loss of $1.3 million in Net gain on disposition of equipment in the Consolidated Statements of Income for the three and six months ended February 28, 2013.
Note 3 Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Work-in-process includes material, labor and overhead. The following table summarizes the Companys inventory balance:
(In thousands) |
February 28,
2013 |
August 31,
2012 |
||||||
Manufacturing supplies and raw materials |
$ | 225,574 | $ | 228,092 | ||||
Work-in-process |
73,147 | 71,210 | ||||||
Finished goods |
65,841 | 22,571 | ||||||
Excess and obsolete adjustment |
(5,281 | ) | (5,132 | ) | ||||
|
|
|
|
|||||
$ | 359,281 | $ | 316,741 | |||||
|
|
|
|
10
THE GREENBRIER COMPANIES, INC.
Note 4 Intangibles and Other Assets, net
Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment.
The following table summarizes the Companys identifiable intangible and other assets balance:
(In thousands) |
February 28,
2013 |
August 31,
2012 |
||||||
Intangible assets subject to amortization: |
||||||||
Customer relationships |
$ | 66,288 | $ | 66,825 | ||||
Accumulated amortization |
(25,102 | ) | (22,995 | ) | ||||
Other intangibles |
4,997 | 4,906 | ||||||
Accumulated amortization |
(4,033 | ) | (3,779 | ) | ||||
|
|
|
|
|||||
42,150 | 44,957 | |||||||
Intangible assets not subject to amortization |
912 | 912 | ||||||
Prepaid and other assets |
10,559 | 10,337 | ||||||
Debt issuance costs, net |
8,930 | 10,194 | ||||||
Investment in unconsolidated affiliates |
8,410 | 8,301 | ||||||
Nonqualified savings plan investments |
7,865 | 6,667 | ||||||
Assets held for sale |
7,368 | | ||||||
|
|
|
|
|||||
Total intangible and other assets |
$ | 86,194 | $ | 81,368 | ||||
|
|
|
|
Amortization expense for the three and six months ended February 28, 2013 was $1.1 million and $2.3 million and for the three and six months ended February 29, 2012 was $1.1 million and $2.3 million. Amortization expense for the years ending August 31, 2013, 2014, 2015, 2016 and 2017 is expected to be $4.2 million, $4.0 million, $4.0 million, $4.0 million and $3.8 million.
Note 5 Goodwill
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 the 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.
As disclosed in Note 2 Assets held for sale, a loss of $1.3 million was recognized attributed to the anticipated sale of substantially all the equipment utilized in the Companys roller bearing operations in Elizabethtown, Kentucky. The loss includes a reduction of $2.8 million of goodwill for the three and six months ended February 28, 2013 which represents the portion of goodwill associated with the assets classified as assets held for sale. This loss was included in Net gain on disposition of equipment in the Consolidated Statements of Income for the three and six months ended February 28, 2013. The goodwill balance was $134.3 million as of February 28, 2013 and $137.1 million as of August 31, 2012 and relates to the Wheel Services, Refurbishment & Parts segment.
11
THE GREENBRIER COMPANIES, INC.
Note 6 Revolving Notes
Senior secured credit facilities, consisting of three components, aggregated to $361.0 million as of February 28, 2013.
As of February 28, 2013, a $290.0 million revolving line of credit secured by substantially all the Companys assets in the U.S. not otherwise pledged as security for term loans and maturing June 2016, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 2.5% and Prime plus 1.5% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of February 28, 2013, lines of credit totaling $21.0 million secured by certain of the Companys European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.3% to WIBOR plus 1.5%, 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 June 2013 through March 2015.
As of February 28, 2013, the Companys Mexican joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $20.0 million and is secured by certain of the joint ventures accounts receivable and inventory. Advances under this facility bear interest at LIBOR plus 2.5%. The Mexican joint venture will be able to draw against this facility through December 2013. The second line of credit provides up to $30.0 million and is fully guaranteed by each of the joint venture partners, including the Company. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through February 2015.
As of February 28, 2013, outstanding borrowings under the senior secured credit facilities consisted of $5.6 million in letters of credit under the North American credit facility, $0.1 million outstanding under the European credit facilities and $50.0 million outstanding under the Mexican joint venture credit facilities.
Note 7 Accounts Payable and Accrued Liabilities
(In thousands) |
February 28,
2013 |
August 31,
2012 |
||||||
Trade payables and other accrued liabilities |
$ | 213,436 | $ | 258,316 | ||||
Accrued payroll and related liabilities |
35,905 | 37,915 | ||||||
Accrued maintenance |
10,920 | 11,475 | ||||||
Accrued warranty |
10,289 | 9,221 | ||||||
Income taxes payable |
5,643 | 9,625 | ||||||
Other |
2,028 | 2,956 | ||||||
|
|
|
|
|||||
$ | 278,221 | $ | 329,508 | |||||
|
|
|
|
12
THE GREENBRIER COMPANIES, INC.
Note 8 Warranty Accruals
Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on the history of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirations of warranty periods.
Warranty accrual activity:
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
||||||||||||
Balance at beginning of period |
$ | 10,102 | $ | 8,943 | $ | 9,221 | $ | 8,644 | ||||||||
Charged to cost of revenue, net |
1,028 | 488 | 2,612 | 1,395 | ||||||||||||
Payments |
(835 | ) | (260 | ) | (1,636 | ) | (668 | ) | ||||||||
Currency translation effect |
(6 | ) | 126 | 92 | (74 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at end of period |
$ | 10,289 | $ | 9,297 | $ | 10,289 | $ | 9,297 | ||||||||
|
|
|
|
|
|
|
|
Note 9 Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
(In thousands) |
Unrealized
Loss on Derivative Financial Instruments |
Pension
Adjustment |
Foreign
Currency Translation Adjustment |
Accumulated
Other Comprehensive Income (Loss) |
||||||||||||
Balance, August 31, 2012 |
$ | (93 | ) | $ | (325 | ) | $ | (5,951 | ) | $ | (6,369 | ) | ||||
Year to date activity |
(386 | ) | | 1,997 | 1,611 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, February 28, 2013 |
$ | (479 | ) | $ | (325 | ) | $ | (3,954 | ) | $ | (4,758 | ) | ||||
|
|
|
|
|
|
|
|
13
THE GREENBRIER COMPANIES, INC.
Note 10 Earnings Per Share
The shares used in the computation of the Companys basic and diluted earnings per common share are reconciled as follows:
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
||||||||||||
Weighted average basic common shares outstanding (1) |
27,210 | 26,683 | 27,177 | 26,073 | ||||||||||||
Dilutive effect of warrants |
789 | 940 | 796 | 1,410 | ||||||||||||
Dilutive effect of convertible notes (2) |
6,045 | 6,045 | 6,045 | 6,045 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares outstanding |
34,044 | 33,668 | 34,018 | 33,528 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | Restricted stock grants are treated as outstanding when issued and are included in weighted average basic common shares outstanding when the Company is in a net earnings position. |
(2) | The dilutive effect of the 2018 Convertible notes are included as they were considered dilutive under the if converted method as further discussed below. The dilutive effect of the 2026 Convertible notes was excluded from the share calculations as the stock price for each period presented was less than the initial conversion price of $48.05 and therefore considered anti-dilutive. |
Dilutive EPS for the three and six months ended February 28, 2013 was calculated using the more dilutive of two approaches. The first approach includes the dilutive effect of outstanding warrants and shares underlying the 2026 Convertible notes in the share count using the treasury stock method. The second approach supplements the first by including the if converted effect of the 2018 Convertible notes issued in March 2011. Under the if converted method debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2026 Convertible notes would only be included in the calculation of both approaches if the current stock price is greater than the initial conversion price of $48.05 using the treasury stock method.
Three Months Ended | Six Months Ended | |||||||||||||||
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
|||||||||||||
Net earnings attributable to Greenbrier |
$ | 13,839 | $ | 17,670 | $ | 24,266 | $ | 32,186 | ||||||||
Add back: |
||||||||||||||||
Interest and debt issuance costs on the 2018 Convertible notes, net of tax |
1,416 | 1,376 | 2,846 | 2,766 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings before interest and debt issuance costs on convertible notes |
$ | 15,255 | $ | 19,046 | $ | 27,112 | $ | 34,952 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares outstanding |
34,044 | 33,668 | 34,018 | 33,528 | ||||||||||||
Diluted earnings per share (1) |
$ | 0.45 | $ | 0.57 | $ | 0.80 | $ | 1.04 |
(1) | Diluted earnings per share was calculated as follows: |
Earnings before interest and debt issuance costs (net of tax) on convertible notes
Weighted average diluted common shares outstanding
14
THE GREENBRIER COMPANIES, INC.
Note 11 Stock Based Compensation
The value, at the date of grant, of restricted stock awards is amortized as compensation expense over the lesser of the vesting period or to the recipients eligible retirement date.
For the three and six months ended February 28, 2013, $1.0 million and $2.9 million in compensation expense was recorded for restricted stock grants. For the three and six months ended February 29, 2012, $1.7 million and $3.5 million in compensation expense was recorded for restricted stock grants. Compensation expense related to restricted stock grants is recorded in Selling and administrative expense on the Consolidated Statements of Income.
Note 12 Derivative Instruments
Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk in Euro. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The Companys foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses are recorded in accumulated other comprehensive loss.
At February 28, 2013 exchange rates, forward exchange contracts for the purchase of Polish Zloty and the sale of Euro aggregated to $79.7 million. Adjusting the foreign currency exchange contracts to the fair value of the cash flow hedges at February 28, 2013 resulted in an unrealized pre-tax gain of $1.0 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, net when there is a gain, on the Consolidated Balance Sheets. As the contracts mature at various dates through January 2014, any such gain or loss remaining will be recognized in manufacturing revenue along with the related transactions when they occur. 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 years results of operations in Interest and foreign exchange.
At February 28, 2013, an interest rate swap agreement had a notional amount of $42.2 million and matures March 2014. The fair value of this cash flow hedge at February 28, 2013 resulted in an unrealized pre-tax loss of $2.1 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 February 28, 2013 interest rates, approximately $1.6 million would be reclassified to interest expense in the next 12 months.
Fair Values of Derivative Instruments
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
Balance sheet |
February 28,
2013 |
August 31,
2012 |
Balance sheet |
February 28,
2013 |
August 31,
2012 |
|||||||||||||||
(In thousands) | location | Fair Value | Fair Value | location | Fair Value | Fair Value | ||||||||||||||
Derivatives designated as hedging instruments |
|
|||||||||||||||||||
Foreign forward exchange contracts |
Accounts
receivable |
$ | 2,360 | $ | 2,703 |
Accounts payable
and accrued liabilities |
$ | 294 | $ | 182 | ||||||||||
Interest rate swap contracts |
Other assets | | |
Accounts payable
and accrued liabilities |
2,055 | 2,861 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
$ | 2,360 | $ | 2,703 | $ | 2,349 | $ | 3,043 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Derivatives not designated as hedging instruments |
|
|||||||||||||||||||
Foreign forward exchange contracts |
Accounts
receivable |
$ | 262 | $ | 141 |
Accounts payable
and accrued liabilities |
$ | | $ | 102 |
15
THE GREENBRIER COMPANIES, INC.
The Effect of Derivative Instruments on the Statement of Operations
Derivatives in cash flow hedging relationships |
Location of gain (loss) recognized in
income on derivative |
Gain recognized in income on derivative
six months ended |
||||||||||
February 28,
2013 |
February 29,
2012 |
|||||||||||
Foreign forward exchange contracts |
Interest and foreign exchange | $ | 148 | $ | 163 |
Derivatives in cash flow hedging relationships |
Gain (loss) recognized
in OCI on derivatives (effective portion) six months ended |
Location of gain (loss) reclassified from accumulated OCI into income |
Gain (loss) reclassified
from accumulated OCI into income (effective portion) six months ended |
Location of gain in income on derivative (ineffective portion and amount excluded from effectiveness testing) |
Gain recognized on
derivative (ineffective portion and amount excluded from effectiveness testing) six months ended |
|||||||||||||||||||||||
2/28/13 | 2/29/12 | 2/28/13 | 2/29/12 | 2/28/13 | 2/29/12 | |||||||||||||||||||||||
Foreign forward exchange contracts |
$ | 534 | $ | 113 | Revenue | $ | 1,735 | $ | (3,547 | ) | Interest and foreign exchange | $ | 1,481 | $ | | |||||||||||||
Interest rate swap contracts |
(21 | ) | (1,711 | ) | Interest and foreign exchange | (828 | ) | (852 | ) | Interest and foreign exchange | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 513 | $ | (1,598 | ) | $ | 907 | $ | (4,399 | ) | $ | 1,481 | $ | | |||||||||||||||
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16
THE GREENBRIER COMPANIES, INC.
Note 13 Segment Information
Greenbrier operates in three reportable segments: Manufacturing; Wheel Services, Refurbishment & Parts; and Leasing & Services. The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Companys 2012 Annual Report on Form 10-K. Performance is evaluated based on margin. The Companys integrated business model results in selling and administrative costs being intertwined among the segments. Currently, Greenbriers management does not allocate these costs for either external or internal reporting purposes. Intersegment sales and transfers are valued as if the sales or transfers were to third parties. Related revenue and margin is eliminated in consolidation and therefore are not included in consolidated results in the Companys Consolidated Financial Statements.
The information in the following table is derived directly from the segments internal financial reports used for corporate management purposes.
Three Months Ended | Six Months Ended | |||||||||||||||
February 28,
2013 |
February 29,
2012 |
February 28,
2013 |
February 29,
2012 |
|||||||||||||
(In thousands) | ||||||||||||||||
Revenue: |
||||||||||||||||
Manufacturing |
$ | 275,154 | $ | 328,675 | $ | 545,448 | $ | 633,514 | ||||||||
Wheel Services, Refurbishment & Parts |
115,650 | 123,699 | 233,136 | 246,318 | ||||||||||||
Leasing & Services |
19,622 | 25,753 | 41,920 | 46,337 | ||||||||||||
Intersegment eliminations |
12,740 | (19,941 | ) | 18,036 | (69,784 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 423,166 | $ | 458,186 | $ | 838,540 | $ | 856,385 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Margin: |
||||||||||||||||
Manufacturing |
$ | 31,397 | $ | 29,355 | $ | 58,274 | $ | 55,823 | ||||||||
Wheel Services, Refurbishment & Parts |
8,818 | 13,340 | 19,441 | 25,198 | ||||||||||||
Leasing & Services |
8,060 | 8,791 | 18,338 | 16,921 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Segment margin total |
48,275 | 51,486 | 96,053 | 97,942 | ||||||||||||
Less unallocated expenses: |
||||||||||||||||
Selling and administrative expense |
24,942 | 24,979 | 51,042 | 48,214 | ||||||||||||
Net gain on disposition of equipment |
(3,076 | ) | (2,654 | ) | (4,484 | ) | (6,312 | ) | ||||||||
Interest and foreign exchange |
6,322 | 6,630 | 12,222 | 12,014 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings before income taxes and earnings (loss) from unconsolidated affiliates |
$ | 20,087 | $ | 22,531 | $ | 37,273 | $ | 44,026 | ||||||||
|
|
|
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|
17
THE GREENBRIER COMPANIES, INC.
Note 14 Commitments and Contingencies
The Companys Portland, Oregon manufacturing facility is located adjacent to the Willamette River. 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 precedes its ownership.
The U.S. Environmental Protection Agency (EPA) has classified portions of the river bed of the Portland Harbor, including the portion fronting the Companys manufacturing facility, as a federal National Priority List or Superfund site due to sediment contamination (the Portland Harbor Site). The Company and more than 140 other parties have received a General Notice of potential liability from the EPA relating to the Portland Harbor Site. The letter advised the Company that it may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including the Company (the Lower Willamette Group or LWG), have signed an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but are nevertheless contributing money to the effort. The EPA-mandated RI/FS is being conducted by the LWG and has cost over $100 million over a 13-year period. The Company has agreed to initially bear a percentage of the total costs incurred by the LWG in connection with the investigation. The Companys aggregate expenditure has not been material over the 13-year period. Some or all of any such outlay may be recoverable from other responsible parties. The investigation is expected to continue for at least one more year and additional costs are expected to be incurred. The Company cannot estimate the amount of such investigation costs at this time.
Eighty-three parties, including the State of Oregon and the federal government, have entered into a non-judicial mediation process to try to allocate costs associated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On April 23, 2009, the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A & C Foundry Products, Inc.et al, 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. Although, as described below, the draft feasibility study has been submitted, the RI/FS will not be complete until the EPA approves it, which is not likely to occur until at least 2014.
A draft of the remedial investigation study was submitted to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30, 2012. The draft feasibility study evaluates several alternative cleanup approaches. The approaches submitted would take from 2 to 28 years with costs ranging from $169 million to $1.8 billion for cleanup of the entire Portland Harbor Site, depending primarily on the selected remedial action levels. The draft feasibility study suggests costs ranging from $9 million to $163 million for cleanup of the area of the Willamette River adjacent to the Companys Portland, Oregon manufacturing facility, depending primarily on the selected remedial action level.
The draft feasibility study does not address responsibility for the costs of clean-up or allocate such costs among the potentially responsible parties, or define precise boundaries for the cleanup. Responsibility for funding and implementing the EPAs selected cleanup will be determined after the issuance of the Record of Decision. Based on the investigation to date, the Company believes that it did not contribute in any material way to the damage of natural resources in the Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland, Oregon manufacturing facility. Because these environmental investigations are still underway, sufficient information is currently not available to determine the Companys liability, if any, for the cost of any required remediation of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the rivers classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Companys business and Consolidated Financial Statements, or the value of its Portland property.
18
THE GREENBRIER COMPANIES, INC.
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:
Greenbriers 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 railcars 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. SEB has made multiple additional warranty claims, including claims with respect to railcars that have been repaired pursuant to the original settlement agreement. Greenbrier and SEB are continuing to negotiate the scope of needed repairs. 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 freight 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 and commercial evaluations are on-going to determine what obligations the Company might have, if any, to remedy the alleged defects, though resolution of such issues has not been reached due to delays by Okombi.
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 Companys 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 Companys Consolidated Financial Statements.
In accordance with customary business practices in Europe, the Company has $1.8 million in bank and third party warranty and performance guarantee facilities as of February 28, 2013. To date no amounts have been drawn under these guarantee facilities.
At February 28, 2013, the Mexican joint venture had $50.4 million of third party debt outstanding, for which the Company has guaranteed approximately $40.2 million. In addition, the Company, along with its joint venture partner, has committed to contributing $10.0 million to fund the capital expenditures for a fourth manufacturing line, of which the Company will contribute 50%. These amounts will be contributed at various intervals from May 31, 2012 to October 31, 2013. As of February 28, 2013, the Company and the joint venture partner have each contributed $3.3 million.
As of February 28, 2013 the Company has outstanding letters of credit aggregating $5.6 million associated with facility leases and workers compensation insurance.
19
THE GREENBRIER COMPANIES, INC.
Note 15 Fair Value Measures
Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
Level 1 - | observable inputs such as unadjusted quoted prices in active markets for identical instruments; | |
Level 2 - | inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and | |
Level 3 - |
unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions. |
Assets and liabilities measured at fair value on a recurring basis as of February 28, 2013 are:
(In thousands) | Total | Level 1 | Level 2 (1) | Level 3 | ||||||||||||
Assets: |
||||||||||||||||
Derivative financial instruments |
$ | 2,622 | $ | | $ | 2,622 | $ | | ||||||||
Nonqualified savings plan investments |
7,865 | 7,865 | | | ||||||||||||
Cash equivalents |
1,003 | 1,003 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 11,490 | $ | 8,868 | $ | 2,622 | $ | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative financial instruments |
$ | 2,349 | $ | | $ | 2,349 | $ | |
(1) | Level 2 assets and liabilities include derivative financial instruments which are valued based on significant observable inputs. See note 12 Derivative Instruments for further discussion. |
Assets and liabilities measured at fair value on a recurring basis as of August 31, 2012 are:
(In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: |
||||||||||||||||
Derivative financial instruments |
$ | 2,844 | $ | | $ | 2,844 | $ | | ||||||||
Nonqualified savings plan investments |
6,667 | 6,667 | | | ||||||||||||
Cash equivalents |
1,002 | 1,002 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 10,513 | $ | 7,669 | $ | 2,844 | $ | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative financial instruments |
$ | 3,145 | $ | | $ | 3,145 | $ | |
20
THE GREENBRIER COMPANIES, INC.
Note 16 Variable Interest Entities
In March 2012, the Company formed a special purpose entity that purchased a 1% interest in three trusts (the Trusts) which are 99% owned by a third party. As of February 28, 2013, the Company has sold 1,163 railcars to the Trusts for an aggregate value of $99.6 million. 743 railcars were sold in May 2012 with an aggregate value of $61.1 million, 200 railcars were sold in November 2012 with an aggregate value of $15.9 million and 220 railcars were sold in February 2013 with an aggregate value of $22.6 million.
Gains and losses are allocated between the Company and the third party equal to their respective ownership interest in the Trusts, with the exception that the Company may be entitled to receive a small portion of excess rent if the actual performance of the Trusts exceeds a target rate of return.
The Company contributed $6.9 million of cash collateral into restricted cash accounts to support the railcar portfolio meeting a target minimum rate of return. If the actual return is less than the target return, the third party may withdraw amounts in the restricted cash accounts at certain intervals based on predetermined criteria. This obligation expires in March 2033. This $6.9 million, which is held in restricted cash, was recorded as a reduction in revenue on the sale of 1,020 new railcars and a reduction in gain on sale on the sale of the 143 used railcars with a credit to deferred revenue.
In connection with this transaction, the Company entered into an agreement to provide administrative and remarketing services to the Trusts. The agreement is currently set to expire in March 2033. The Company also entered into an agreement to provide maintenance services to the Trusts during the initial lease term of the railcars. The Company will receive management and maintenance fees under each of the aforementioned agreements.
The Company has evaluated this relationship under ASC 810-10 and has concluded that the Trusts qualify as variable interest entities and that the Company is not the primary beneficiary. The Company will not consolidate the Trusts and will account for the investments under the equity method of accounting.
As of February 28, 2013, the carrying amount of the Companys investment in the Trust is $1.0 million which is recorded in Intangibles and Other Assets, net on the Consolidated Balance Sheets.
21
THE GREENBRIER COMPANIES, INC.
Note 17 Guarantor/Non Guarantor
The convertible senior notes due 2026 (the Notes) issued on May 22, 2006 are fully and unconditionally and jointly and severally guaranteed by substantially all of Greenbriers material 100% owned U.S. 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 Union Holdings I LLC, Greenbrier Leasing Limited, Greenbrier Europe B.V., Greenbrier Germany GmbH, WagonySwidnica S.A., Zaklad Naprawczy Taboru Kolejowego Olawa sp. z o.o., Zaklad Transportu Kolejowego SIARKOPOL Sp. z o.o., Gunderson-Concarril, S.A. de C.V., Greenbrier Rail Services Canada, Inc., Mexico Meridianrail 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.A. de C.V.
The following represents the supplemental consolidating condensed financial information of Greenbrier and its guarantor and non guarantor subsidiaries, as of February 28, 2013 and August 31, 2012, for the three and six months ended February 28, 2013 and for the three and six months ended February 29, 2012. 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.
22
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
February 28, 2013
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 45,734 | $ | 120 | $ | 9,783 | $ | | $ | 55,637 | ||||||||||
Restricted cash |
| 2,000 | 6,899 | | 8,899 | |||||||||||||||
Accounts receivable, net |
(38,451 | ) | 157,705 | 25,677 | 2 | 144,933 | ||||||||||||||
Inventories |
| 182,310 | 177,439 | (468 | ) | 359,281 | ||||||||||||||
Leased railcars for syndication |
| 36,593 | | (395 | ) | 36,198 | ||||||||||||||
Equipment on operating leases, net |
| 344,149 | 3,239 | (2,812 | ) | 344,576 | ||||||||||||||
Property, plant and equipment, net |
2,844 | 103,849 | 88,194 | | 194,887 | |||||||||||||||
Goodwill |
| 134,316 | | | 134,316 | |||||||||||||||
Intangibles and other assets, net |
734,940 | 115,443 | 4,115 | (768,304 | ) | 86,194 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 745,067 | $ | 1,076,485 | $ | 315,346 | $ | (771,977 | ) | $ | 1,364,921 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Revolving notes |
$ | | $ | | $ | 50,058 | $ | | $ | 50,058 | ||||||||||
Accounts payable and accrued liabilities |
(26,771 | ) | 181,077 | 123,914 | 1 | 278,221 | ||||||||||||||
Deferred income taxes |
13,475 | 95,587 | (7,548 | ) | (1,549 | ) | 99,965 | |||||||||||||
Deferred revenue |
233 | 22,409 | 514 | 22 | 23,178 | |||||||||||||||
Notes payable |
296,994 | 128,904 | 1,655 | | 427,553 | |||||||||||||||
Total equity - Greenbrier |
461,136 | 648,508 | 122,439 | (770,947 | ) | 461,136 | ||||||||||||||
Noncontrolling interest |
| | 24,314 | 496 | 24,810 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
461,136 | 648,508 | 146,753 | (770,451 | ) | 485,946 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 745,067 | $ | 1,076,485 | $ | 315,346 | $ | (771,977 | ) | $ | 1,364,921 | ||||||||||
|
|
|
|
|
|
|
|
|
|
23
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Operations
For the three months ended February 28, 2013
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 196,291 | $ | 209,691 | $ | (111,935 | ) | $ | 294,047 | |||||||||
Wheels Services, Refurbishment & Parts |
| 114,506 | | (2,554 | ) | 111,952 | ||||||||||||||
Leasing & Services |
386 | 16,789 | 1 | (9 | ) | 17,167 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
386 | 327,586 | 209,692 | (114,498 | ) | 423,166 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 177,488 | 197,364 | (112,202 | ) | 262,650 | ||||||||||||||
Wheel Services, Refurbishment & Parts |
| 105,848 | | (2,714 | ) | 103,134 | ||||||||||||||
Leasing & Services |
| 9,137 | | (30 | ) | 9,107 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 292,473 | 197,364 | (114,946 | ) | 374,891 | |||||||||||||||
Margin |
386 | 35,113 | 12,328 | 448 | 48,275 | |||||||||||||||
Selling and administrative expense |
10,325 | 7,407 | 7,210 | | 24,942 | |||||||||||||||
Net gain on disposition of equipment |
| (2,523 | ) | (553 | ) | | (3,076 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(9,939 | ) | 30,229 | 5,671 | 448 | 26,409 | ||||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
4,467 | 967 | 973 | (85 | ) | 6,322 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(14,406 | ) | 29,262 | 4,698 | 533 | 20,087 | ||||||||||||||
Income tax (expense) benefit |
6,916 | (11,289 | ) | (973 | ) | (244 | ) | (5,590 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(7,490 | ) | 17,973 | 3,725 | 289 | 14,497 | ||||||||||||||
Earnings (loss) from unconsolidated affiliates |
21,329 | 402 | 7 | (21,843 | ) | (105 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
13,839 | 18,375 | 3,732 | (21,554 | ) | 14,392 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (652 | ) | 99 | (553 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 13,839 | $ | 18,375 | $ | 3,080 | $ | (21,455 | ) | $ | 13,839 | |||||||||
|
|
|
|
|
|
|
|
|
|
24
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Operations
For the six months ended February 28, 2013
(In thousands)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 329,802 | $ | 439,199 | $ | (189,585 | ) | $ | 579,416 | |||||||||
Wheels Services, Refurbishment & Parts |
| 230,730 | | (6,679 | ) | 224,051 | ||||||||||||||
Leasing & Services |
477 | 34,612 | 1 | (17 | ) | 35,073 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
477 | 595,144 | 439,200 | (196,281 | ) | 838,540 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 301,873 | 412,534 | (193,265 | ) | 521,142 | ||||||||||||||
Wheel Services, Refurbishment & Parts |
| 211,507 | | (6,897 | ) | 204,610 | ||||||||||||||
Leasing & Services |
| 16,787 | | (52 | ) | 16,735 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 530,167 | 412,534 | (200,214 | ) | 742,487 | |||||||||||||||
Margin |
477 | 64,977 | 26,666 | 3,933 | 96,053 | |||||||||||||||
Selling and administrative expense |
20,111 | 15,538 | 15,393 | | 51,042 | |||||||||||||||
Net gain on disposition of equipment |
| (3,567 | ) | (553 | ) | (364 | ) | (4,484 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(19,634 | ) | 53,006 | 11,826 | 4,297 | 49,495 | ||||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
8,083 | 1,869 | 2,471 | (201 | ) | 12,222 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(27,717 | ) | 51,137 | 9,355 | 4,498 | 37,273 | ||||||||||||||
Income tax (expense) benefit |
12,685 | (19,370 | ) | (2,396 | ) | (1,095 | ) | (10,176 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(15,032 | ) | 31,767 | 6,959 | 3,403 | 27,097 | ||||||||||||||
Earnings (loss) from unconsolidated affiliates |
39,298 | 438 | 16 | (39,897 | ) | (145 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
24,266 | 32,205 | 6,975 | (36,494 | ) | 26,952 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (1,187 | ) | (1,499 | ) | (2,686 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 24,266 | $ | 32,205 | $ | 5,788 | $ | (37,993 | ) | $ | 24,266 | |||||||||
|
|
|
|
|
|
|
|
|
|
25
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Cash Flows
For the six months ended February 28, 2013
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net earnings (loss) |
$ | 24,266 | $ | 32,205 | $ | 6,975 | $ | (36,494 | ) | $ | 26,952 | |||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Deferred income taxes |
4,377 | (1,006 | ) | (263 | ) | 1,095 | 4,203 | |||||||||||||
Depreciation and amortization |
1,142 | 15,645 | 4,663 | (52 | ) | 21,398 | ||||||||||||||
Net gain on disposition of equipment |
| (3,568 | ) | (552 | ) | (364 | ) | (4,484 | ) | |||||||||||
Accretion of debt discount |
1,725 | | | | 1,725 | |||||||||||||||
Stock based compensation |
2,887 | | | | 2,887 | |||||||||||||||
Other |
| 98 | 25 | (1,735 | ) | (1,612 | ) | |||||||||||||
Decrease (increase) in assets: |
||||||||||||||||||||
Accounts receivable |
(109 | ) | (19,367 | ) | 22,949 | (394 | ) | 3,079 | ||||||||||||
Inventories |
| (30,530 | ) | 3,159 | 163 | (27,208 | ) | |||||||||||||
Leased railcars for syndication |
| 59,357 | | (2,397 | ) | 56,960 | ||||||||||||||
Other |
(765 | ) | 976 | 25,039 | (25,005 | ) | 245 | |||||||||||||
Increase (decrease) in liabilities: |
||||||||||||||||||||
Accounts payable and accrued liabilities |
5,457 | (28,111 | ) | (33,840 | ) | 1 | (56,493 | ) | ||||||||||||
Deferred revenue |
(78 | ) | 6,439 | (435 | ) | 10 | 5,936 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) operating activities |
38,902 | 32,138 | 27,720 | (65,172 | ) | 33,588 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Proceeds from sales of assets |
| 22,301 | | | 22,301 | |||||||||||||||
Investment in and net advances to unconsolidated affiliates |
(44,302 | ) | (20,599 | ) | (386 | ) | 64,901 | (386 | ) | |||||||||||
Intercompany advances |
(3 | ) | | | 3 | | ||||||||||||||
Decrease (increase) in restricted cash |
| 47 | (2,669 | ) | | (2,622 | ) | |||||||||||||
Capital expenditures |
(265 | ) | (17,315 | ) | (18,216 | ) | 271 | (35,525 | ) | |||||||||||
Other |
| | (3,582 | ) | | (3,582 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
(44,570 | ) | (15,566 | ) | (24,853 | ) | 65,175 | (19,814 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Net changes in revolving notes with maturities of 90 days or less |
| | (16,579 | ) | | (16,579 | ) | |||||||||||||
Proceeds from revolving notes with maturities longer than 90 days |
| | 19,968 | | 19,968 | |||||||||||||||
Repayment of revolving notes with maturities longer than 90 days |
| | (14,998 | ) | | (14,998 | ) | |||||||||||||
Intercompany advances |
16,898 | (15,421 | ) | (1,474 | ) | (3 | ) | | ||||||||||||
Repayments of notes payable |
| (2,049 | ) | (202 | ) | | (2,251 | ) | ||||||||||||
Investment by joint venture partner |
| | 1,949 | | 1,949 | |||||||||||||||
Excess tax benefit from restricted stock |
181 | | | | 181 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
17,079 | (17,470 | ) | (11,336 | ) | (3 | ) | (11,730 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate changes |
| 724 | (702 | ) | | 22 | ||||||||||||||
Increase (decrease) in cash and cash equivalents |
11,411 | (174 | ) | (9,171 | ) | | 2,066 | |||||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Beginning of period |
34,323 | 294 | 18,954 | | 53,571 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
End of period |
$ | 45,734 | $ | 120 | $ | 9,783 | $ | | $ | 55,637 | ||||||||||
|
|
|
|
|
|
|
|
|
|
26
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
August 31, 2012
(In thousands)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 34,323 | $ | 294 | $ | 18,954 | $ | | $ | 53,571 | ||||||||||
Restricted cash |
| 2,047 | 4,230 | | 6,277 | |||||||||||||||
Accounts receivable, net |
(21,666 | ) | 122,917 | 45,467 | (392 | ) | 146,326 | |||||||||||||
Inventories |
| 138,236 | 178,810 | (305 | ) | 316,741 | ||||||||||||||
Leased railcars for syndication |
| 100,590 | | (2,792 | ) | 97,798 | ||||||||||||||
Equipment on operating leases, net |
| 365,925 | | (2,957 | ) | 362,968 | ||||||||||||||
Property, plant and equipment, net |
3,721 | 106,219 | 72,489 | | 182,429 | |||||||||||||||
Goodwill |
| 137,066 | | | 137,066 | |||||||||||||||
Intangibles and other assets, net |
688,261 | 91,278 | 3,620 | (701,791 | ) | 81,368 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 704,639 | $ | 1,064,572 | $ | 323,570 | $ | (708,237 | ) | $ | 1,384,544 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Revolving notes |
$ | | $ | | $ | 60,755 | $ | | $ | 60,755 | ||||||||||
Accounts payable and accrued liabilities |
(31,814 | ) | 205,477 | 155,844 | 1 | 329,508 | ||||||||||||||
Deferred income taxes |
9,097 | 96,593 | (7,684 | ) | (2,643 | ) | 95,363 | |||||||||||||
Deferred revenue |
310 | 15,970 | 901 | 13 | 17,194 | |||||||||||||||
Notes payable |
295,269 | 130,953 | 1,857 | | 428,079 | |||||||||||||||
Total equity - Greenbrier |
431,777 | 615,579 | 90,761 | (706,340 | ) | 431,777 | ||||||||||||||
Noncontrolling interest |
| | 21,136 | 732 | 21,868 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
431,777 | 615,579 | 111,897 | (705,608 | ) | 453,645 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 704,639 | $ | 1,064,572 | $ | 323,570 | $ | (708,237 | ) | $ | 1,384,544 | ||||||||||
|
|
|
|
|
|
|
|
|
|
27
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Operations
For the three months ended February 29, 2012
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 210,033 | $ | 256,904 | $ | (146,731 | ) | $ | 320,206 | |||||||||
Wheels Services, Refurbishment & Parts |
| 122,280 | | (2,386 | ) | 119,894 | ||||||||||||||
Leasing & Services |
478 | 17,753 | | (145 | ) | 18,086 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
478 | 350,066 | 256,904 | (149,262 | ) | 458,186 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 188,160 | 245,807 | (143,116 | ) | 290,851 | ||||||||||||||
Wheel Services, Refurbishment & Parts |
| 108,816 | | (2,262 | ) | 106,554 | ||||||||||||||
Leasing & Services |
| 9,312 | | (17 | ) | 9,295 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 306,288 | 245,807 | (145,395 | ) | 406,700 | |||||||||||||||
Margin |
478 | 43,778 | 11,097 | (3,867 | ) | 51,486 | ||||||||||||||
Selling and administrative expense |
11,426 | 6,535 | 7,018 | | 24,979 | |||||||||||||||
Net gain on disposition of equipment |
| (2,654 | ) | | | (2,654 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(10,948 | ) | 39,897 | 4,079 | (3,867 | ) | 29,161 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
4,658 | 1,052 | 1,209 | (289 | ) | 6,630 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(15,606 | ) | 38,845 | 2,870 | (3,578 | ) | 22,531 | |||||||||||||
Income tax (expense) benefit |
5,618 | (14,706 | ) | 3,136 | 604 | (5,348 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(9,988 | ) | 24,139 | 6,006 | (2,974 | ) | 17,183 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
27,519 | (425 | ) | | (27,022 | ) | 72 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
17,531 | 23,714 | 6,006 | (29,996 | ) | 17,255 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
139 | | (1,459 | ) | 1,735 | 415 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 17,670 | $ | 23,714 | $ | 4,547 | $ | (28,261 | ) | $ | 17,670 | |||||||||
|
|
|
|
|
|
|
|
|
|
28
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Operations
For the six months ended February 29, 2012
(In thousands)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 405,342 | $ | 469,347 | $ | (291,826 | ) | $ | 582,863 | |||||||||
Wheels Services, Refurbishment & Parts |
| 244,038 | | (6,395 | ) | 237,643 | ||||||||||||||
Leasing & Services |
747 | 35,497 | | (365 | ) | 35,879 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
747 | 684,877 | 469,347 | (298,586 | ) | 856,385 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 361,811 | 450,554 | (285,325 | ) | 527,040 | ||||||||||||||
Wheel Services, Refurbishment & Parts |
| 218,866 | | (6,421 | ) | 212,445 | ||||||||||||||
Leasing & Services |
| 18,993 | | (35 | ) | 18,958 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 599,670 | 450,554 | (291,781 | ) | 758,443 | |||||||||||||||
Margin |
747 | 85,207 | 18,793 | (6,805 | ) | 97,942 | ||||||||||||||
Selling and administrative expense |
21,325 | 13,494 | 13,395 | | 48,214 | |||||||||||||||
Net gain on disposition of equipment |
| (6,311 | ) | | (1 | ) | (6,312 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(20,578 | ) | 78,024 | 5,398 | (6,804 | ) | 56,040 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
9,570 | 1,781 | 1,219 | (556 | ) | 12,014 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(30,148 | ) | 76,243 | 4,179 | (6,248 | ) | 44,026 | |||||||||||||
Income tax (expense) benefit |
12,243 | (29,723 | ) | 3,230 | 1,106 | (13,144 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(17,905 | ) | 46,520 | 7,409 | (5,142 | ) | 30,882 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
49,952 | (1,410 | ) | | (48,842 | ) | (300 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
32,047 | 45,110 | 7,409 | (53,984 | ) | 30,582 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
139 | | (1,690 | ) | 3,155 | 1,604 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 32,186 | $ | 45,110 | $ | 5,719 | $ | (50,829 | ) | $ | 32,186 | |||||||||
|
|
|
|
|
|
|
|
|
|
29
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Cash Flows
For the six months ended February 29, 2012
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net earnings (loss) |
$ | 32,047 | $ | 45,110 | $ | 7,409 | $ | (53,984 | ) | $ | 30,582 | |||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Deferred income taxes |
14,900 | (3,844 | ) | (4,122 | ) | (1,106 | ) | 5,828 | ||||||||||||
Depreciation and amortization |
1,370 | 14,989 | 3,997 | (34 | ) | 20,322 | ||||||||||||||
Net gain on disposition of equipment |
| (6,311 | ) | | (1 | ) | (6,312 | ) | ||||||||||||
Accretion of debt discount |
1,599 | | | | 1,599 | |||||||||||||||
Stock based compensation expense |
3,490 | | | | 3,490 | |||||||||||||||
Other |
| 600 | 5 | 3,154 | 3,759 | |||||||||||||||
Decrease (increase) in assets |
||||||||||||||||||||
Accounts receivable |
13,721 | (17,527 | ) | 12,682 | 22 | 8,898 | ||||||||||||||
Inventories |
| 3,366 | (47,091 | ) | (26 | ) | (43,751 | ) | ||||||||||||
Leased railcars for syndication |
| (56,080 | ) | | 3,155 | (52,925 | ) | |||||||||||||
Other |
1,234 | (363 | ) | (1,474 | ) | | (603 | ) | ||||||||||||
Increase (decrease) in liabilities |
||||||||||||||||||||
Accounts payable and accrued liabilities |
(34,338 | ) | 57,105 | 3,109 | (22 | ) | 25,854 | |||||||||||||
Deferred revenue |
(77 | ) | (4,835 | ) | 255 | | (4,657 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) operating activities |
33,946 | 32,210 | (25,230 | ) | (48,842 | ) | (7,916 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Proceeds from sales of assets |
| 20,058 | | | 20,058 | |||||||||||||||
Investment in and net advances to unconsolidated affiliates |
(49,952 | ) | 1,180 | | 48,842 | 70 | ||||||||||||||
Intercompany advances |
68 | | | (68 | ) | | ||||||||||||||
Change in restricted cash |
| (136 | ) | | | (136 | ) | |||||||||||||
Capital expenditures |
(510 | ) | (25,902 | ) | (9,301 | ) | | (35,713 | ) | |||||||||||
Other |
| 22 | | | 22 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
(50,394 | ) | (4,778 | ) | (9,301 | ) | 48,774 | (15,699 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Net change in revolving notes with maturities of 90 days or less |
(15,000 | ) | | (3,716 | ) | | (18,716 | ) | ||||||||||||
Proceeds from revolving notes with maturities longer than 90 days |
| | 46,646 | | 46,646 | |||||||||||||||
Repayments of revolving notes with maturities longer than 90 days |
| | (15,818 | ) | (15,818 | ) | ||||||||||||||
Intercompany advances |
24,745 | (26,269 | ) | 1,456 | 68 | | ||||||||||||||
Proceeds from notes payable |
| | 2,500 | | 2,500 | |||||||||||||||
Repayments of notes payable |
| (2,082 | ) | (2,702 | ) | | (4,784 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
9,745 | (28,351 | ) | 28,366 | 68 | 9,828 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate changes |
| 512 | 3,719 | | 4,231 | |||||||||||||||
Decrease in cash and cash equivalents |
(6,703 | ) | (407 | ) | (2,446 | ) | | (9,556 | ) | |||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Beginning of period |
33,368 | 529 | 16,325 | | 50,222 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
End of period |
$ | 26,665 | $ | 122 | $ | 13,879 | $ | | $ | 40,666 | ||||||||||
|
|
|
|
|
|
|
|
|
|
30
THE GREENBRIER COMPANIES, INC.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We 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 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 wheel and axle servicing; railcar repair, refurbishment and maintenance activities; as well as production and reconditioning of a variety of parts for the railroad industry in North America. The Leasing & Services segment owns approximately 9,200 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. We also produce rail castings through an unconsolidated joint venture. Management evaluates segment performance based on margins.
Multi-year supply agreements are a part of rail industry practice. Customer orders may be subject to cancellations or modifications and contain terms and conditions customary in the industry. In most cases, little variation has been experienced between the quantity ordered and the quantity actually delivered.
Our total manufacturing backlog of railcar units as of February 28, 2013 was approximately 11,700 units with an estimated value of $1.30 billion compared to 12,500 units with an estimated value of $1.1 billion as of February 29, 2012. Currently, the entire backlog is for third party sales, therefore no orders in our backlog are for our own lease fleet. 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. Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Subsequent to quarter end we received new railcar orders for 3,700 units valued at approximately $435 million. The new orders referenced are subject to customary documentation and completion of terms.
Marine backlog as of February 28, 2013 was approximately $9 million compared to $2 million as of February 29, 2012. In addition, we are party to a letter of intent for 15 barges valued at $60 million subject to significant permitting and other conditions.
31
THE GREENBRIER COMPANIES, INC.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.
Income taxes - For financial reporting purposes, income tax expense is estimated based on 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 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.
Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information. If further developments or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made. Due to the uncertain nature of estimating potential environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us.
32
THE GREENBRIER COMPANIES, INC.
Revenue recognition - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Railcars are generally manufactured, repaired or refurbished and wheel services and parts produced under firm orders from third parties. Revenue is recognized when these products or services are completed, accepted by an unaffiliated customer and contractual contingencies removed. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears; however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported. These estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar. Adjustments to actual have historically not been significant. Revenues from construction of marine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition.
We will periodically sell railcars with leases attached to financial investors. In addition we will often perform management or maintenance services at market rates for these railcars. Pursuant to the guidance in ASC 840-20-40, we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those provisions. We determine whether the level of retained risk exceeds 10% of the individual fair value of the railcars delivered. For any contracts with multiple elements (i.e. railcars, maintenance, management services, etc) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we will use the elements estimated selling price for purposes of allocating the total arrangement consideration among the elements.
Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assets are evaluated for impairment. If the forecast undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying value of the assets to fair value is recognized in the current period. These estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change. If the forecast undiscounted future cash flows exceeded the carrying amount of the assets it would indicate that the assets were not impaired.
Goodwill and acquired intangible assets - 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. The determination of the value of such intangible assets requires management to make estimates and assumptions. These estimates affect the amount of future period amortization and possible impairment charges.
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill is also tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists. The provisions of Accounting Standards Codification (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 when 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. The goodwill balance as of February 28, 2013 of $134.3 million relates to the Wheel Services, Refurbishment & Parts segment.
33
THE GREENBRIER COMPANIES, INC.
Results of Operations
Greenbrier operates in three reportable segments: Manufacturing; Wheel Services, Refurbishment & Parts; and Leasing & Services. Segment performance is evaluated based on margin. The Companys integrated business model results in selling and administrative costs being intertwined among the segments. Currently, management does not allocate these costs for either external or internal reporting purposes.
Three Months Ended February 28, 2013 Compared to Three Months Ended February 29, 2012
Overview
Total revenue for the three months ended February 28, 2013 was $423.2 million, a decrease of $35.0 million from revenues of $458.2 million in the prior comparable period. The decrease was primarily the result of lower revenues in the manufacturing segment of our business. Manufacturing segment revenues decreased $26.2 million which was primarily attributed to a lower volume of new railcar deliveries as compared to the prior comparable period.
Net earnings attributable to Greenbrier for the three months ended February 28, 2013 were $13.8 million or $0.45 per diluted common share compared to $17.7 million or $0.57 per diluted common share for the three months ended February 29, 2012. The decrease in net income and earnings per share was primarily attributable to a decrease in margin in our Wheel Services, Refurbishment & Parts and Leasing & Services segments partially offset by an increase in margin in our Manufacturing segment.
Three Months Ended | ||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
||||||
Revenue: |
||||||||
Manufacturing |
$ | 294,047 | $ | 320,206 | ||||
Wheel Services, Refurbishment & Parts |
111,952 | 119,894 | ||||||
Leasing & Services |
17,167 | 18,086 | ||||||
|
|
|
|
|||||
423,166 | 458,186 | |||||||
Margin: |
||||||||
Manufacturing |
31,397 | 29,355 | ||||||
Wheel Services, Refurbishment & Parts |
8,818 | 13,340 | ||||||
Leasing & Services |
8,060 | 8,791 | ||||||
|
|
|
|
|||||
48,275 | 51,486 | |||||||
Less unallocated items: |
||||||||
Selling and administrative expense |
24,942 | 24,979 | ||||||
Net gain on disposition of equipment |
(3,076 | ) | (2,654 | ) | ||||
Interest and foreign exchange |
6,322 | 6,630 | ||||||
|
|
|
|
|||||
Earnings before income taxes and earnings (loss) from unconsolidated affiliates |
20,087 | 22,531 | ||||||
Income tax expense |
(5,590 | ) | (5,348 | ) | ||||
|
|
|
|
|||||
Earnings before earnings (loss) from unconsolidated affiliates |
14,497 | 17,183 | ||||||
Earnings (loss) from unconsolidated affiliates |
(105 | ) | 72 | |||||
|
|
|
|
|||||
Net earnings |
14,392 | 17,255 | ||||||
Net (earnings) loss attributable to noncontrolling interest |
(553 | ) | 415 | |||||
|
|
|
|
|||||
Net earnings attributable to Greenbrier |
$ | 13,839 | $ | 17,670 | ||||
|
|
|
|
|||||
Diluted earnings per common share |
$ | 0.45 | $ | 0.57 |
34
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
Manufacturing revenue for the three months ended February 28, 2013 was $294.0 million compared to $320.2 million in the comparable period of the prior year, a decrease of $26.2 million. Railcar unit deliveries, which are the primary source of manufacturing revenue, were approximately 2,700 units in the current period compared to approximately 3,700 units in the prior comparable period. The decrease in revenue was primarily attributed to a lower volume of deliveries as compared to the prior comparable period partially offset by a higher per unit average selling price as a result of a change in product mix and an increase in marine revenue as compared to the prior comparable period.
Manufacturing margin as a percentage of revenue for the three months ended February 28, 2013 was 10.7% compared to a margin of 9.2% for the three months ended February 29, 2012. The increase in margin as a percentage of revenue was primarily attributed to a favorable change in product mix and pricing environment and a marine barge, which was delivered in the current period, accounted for under the completed contract method.
Wheel Services, Refurbishment & Parts Segment
Wheel Services, Refurbishment & Parts revenue was $112.0 million for the three months ended February 28, 2013 compared to $119.9 million in the comparable period of the prior year. The decrease of $7.9 million was primarily attributed to lower demand for wheel set replacements as compared to the prior year and a decrease in scrap metal pricing. These were partially offset by an increase in demand for refurbishment work.
Wheel Services, Refurbishment & Parts margin as a percentage of revenue was 7.9% for the three months ended February 28, 2013 compared to 11.1% for the three months ended February 29, 2012. The decrease in margin as a percentage of revenue was primarily the result of a reduction in efficiencies from operating at lower wheel volumes, a decrease in scrap metal pricing and increased operating costs associated with certain refurbishment locations. These were partially offset by an increase in margin as a percentage of revenue related to a favorable change in parts product mix.
Leasing & Services Segment
Leasing & Services revenue was $17.2 million for the three months ended February 28, 2013 compared to $18.1 million for the comparable period of the prior year. The decrease of $0.9 million was primarily a result of lower rents earned on lower volumes of leased railcars for syndication and less favorable renewal rates on certain leased railcars.
Leasing & Services margin as a percentage of revenue was 47.0% for the three months ended February 28, 2013 and 48.6% for the three months ended February 29, 2012. The decrease in gross margin as a percentage of revenue was primarily attributed to lower rents earned on lower volumes of leased railcars for syndication, an increase in transportation costs and less favorable renewal rates on certain leased railcars.
The percentage of owned units on lease as of February 28, 2013 was 97.5% compared to 97.3% at February 29, 2012.
35
THE GREENBRIER COMPANIES, INC.
Selling and Administrative Expense
Selling and administrative expense was $24.9 million or 5.9% of revenue for the three months ended February 28, 2013 compared to $25.0 million or 5.5% of revenue for the prior comparable period, a decrease of $0.1 million. The decrease for the three months ended February 28, 2013 compared to the prior comparable period was primarily attributed to a decrease in employee related costs.
Net gain on Disposition of Equipment
Net gain on disposition of equipment was $3.1 million for the three months ended February 28, 2013, compared to $2.7 million for the prior comparable period. Assets from Greenbriers lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and manage risk and liquidity.
The current years gain included $3.8 million in gains realized on the disposition of leased assets, a $0.6 million other gain and a $1.3 million loss related to the anticipated sale of certain assets from our roller bearing operation in Elizabethtown, Kentucky. All of the prior years gain of $2.7 million was realized on the disposition of leased assets.
Other Costs
Interest and foreign exchange expense was comprised of the following:
Three Months Ended | ||||||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
Increase
(Decrease) |
|||||||||
Interest and foreign exchange: |
||||||||||||
Interest and other expense |
$ | 5,165 | $ | 5,610 | $ | (445 | ) | |||||
Accretion of convertible debt discount |
876 | 812 | 64 | |||||||||
Foreign exchange loss |
281 | 208 | 73 | |||||||||
|
|
|
|
|
|
|||||||
$ | 6,322 | $ | 6,630 | $ | (308 | ) | ||||||
|
|
|
|
|
|
The decrease in interest and foreign exchange expense as compared to the prior comparable period was primarily attributed to lower interest expense on lower levels of borrowing.
Income Tax
The tax rate for the three months ended February 28, 2013 was 27.8% as compared to 23.7% in the prior comparable period. The provision for income taxes is based on projected consolidated results of operations and geographical mix of earnings for the entire year which results in an estimated 32.0% annual effective tax rate before the impact of discrete items. Discrete items for the quarter primarily related to certain items associated with our Mexican operations. The tax rate fluctuates from period to period due to a change in the geographical mix of pre-tax earnings and losses, minimum tax requirements in certain local jurisdictions and the impact of discrete items.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $0.6 million for the three months ended February 28, 2013 compared to a net loss attributable to noncontrolling interest of $0.4 million in the prior comparable period. These amounts primarily represent our joint venture partners share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The change from the prior comparable period is primarily a result of higher sales to third parties and lower intercompany activity in the current period.
36
THE GREENBRIER COMPANIES, INC.
Six Months Ended February 28, 2013 Compared to Six Months Ended February 29, 2012
Overview
Total revenue for the six months ended February 28, 2013 was $838.5 million, a decrease of $17.9 million from revenues of $856.4 million in the prior comparable period. The decrease was primarily the result of a decrease in revenue in our Wheel Services, Refurbishments & Parts segment of our business. Revenue in this segment decreased by $13.6 million primarily attributed to lower demand for wheel set replacements as compared to the prior year partially offset by an increase in demand for refurbishment work.
Net earnings attributable to Greenbrier for the six months ended February 28, 2013 were $24.3 million or $0.80 per diluted common share compared to $32.2 million or $1.04 per diluted common share for the six months ended February 29, 2012. The decrease in net income and earnings per share was primarily attributable to a decrease in margin in our Wheel Services, Refurbishment & Parts segment, higher selling and administrative expense and increased earnings attributable to noncontrolling interest in the current period.
Six Months Ended | ||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
||||||
Revenue: |
||||||||
Manufacturing |
$ | 579,416 | $ | 582,863 | ||||
Wheel Services, Refurbishment & Parts |
224,051 | 237,643 | ||||||
Leasing & Services |
35,073 | 35,879 | ||||||
|
|
|
|
|||||
838,540 | 856,385 | |||||||
Margin: |
||||||||
Manufacturing |
58,274 | 55,823 | ||||||
Wheel Services, Refurbishment & Parts |
19,441 | 25,198 | ||||||
Leasing & Services |
18,338 | 16,921 | ||||||
|
|
|
|
|||||
96,053 | 97,942 | |||||||
Less unallocated items: |
||||||||
Selling and administrative expense |
51,042 | 48,214 | ||||||
Net gain on disposition of equipment |
(4,484 | ) | (6,312 | ) | ||||
Interest and foreign exchange |
12,222 | 12,014 | ||||||
|
|
|
|
|||||
Earnings before income taxes and loss from unconsolidated affiliates |
37,273 | 44,026 | ||||||
Income tax expense |
(10,176 | ) | (13,144 | ) | ||||
|
|
|
|
|||||
Earnings before loss from unconsolidated affiliates |
27,097 | 30,882 | ||||||
Loss from unconsolidated affiliates |
(145 | ) | (300 | ) | ||||
|
|
|
|
|||||
Net earnings |
26,952 | 30,582 | ||||||
Net (earnings) loss attributable to noncontrolling interest |
(2,686 | ) | 1,604 | |||||
|
|
|
|
|||||
Net earnings attributable to Greenbrier |
$ | 24,266 | $ | 32,186 | ||||
|
|
|
|
|||||
Diluted earnings per common share |
$ | 0.80 | $ | 1.04 |
37
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
Manufacturing revenue for the six months ended February 28, 2013 was $579.4 million compared to $582.9 million in the comparable period of the prior year, a decrease of $3.5 million. Railcar unit deliveries, which are the primary source of manufacturing revenue, were approximately 5,600 units in the current period compared to approximately 7,000 units in the prior comparable period. The decrease in revenue was primarily attributed to a lower volume of deliveries as compared to the prior comparable period partially offset by a higher per unit average selling price as a result of a change in product mix and an increase in marine revenue as compared to the prior comparable period.
Manufacturing margin as a percentage of revenue for the six months ended February 28, 2013 was 10.1% compared to a margin of 9.6% for the six months ended February 29, 2012. The increase in margin as a percentage of revenue was primarily attributed to a favorable change in product mix and pricing environment and a marine barge, which was delivered in the current year, accounted for under the completed contract method.
Wheel Services, Refurbishment & Parts Segment
Wheel Services, Refurbishment & Parts revenue was $224.1 million for the six months ended February 28, 2013 compared to $237.6 million in the comparable period of the prior year. The decrease of $13.5 million was primarily attributed to lower demand for wheel set replacements as compared to the prior year and a decrease in scrap metal pricing. These were partially offset by an increase in demand for refurbishment work.
Wheel Services, Refurbishment & Parts margin as a percentage of revenue was 8.7% for the six months ended February 28, 2013 compared to 10.6% for the six months ended February 29, 2012. The decrease in margin as a percentage of revenue was primarily the result of inefficiencies from operating at lower wheel volumes and a decrease in scrap metal pricing. These were partially offset by an increase in margin as a percentage of revenue related to a favorable change in parts product mix.
Leasing & Services Segment
Leasing & Services revenue was $35.1 million for the six months ended February 28, 2013 compared to $35.9 million for the comparable period of the prior year. The decrease of $0.8 million was primarily attributed to a decrease in mileage utilization leases and lower rents earned on lower volumes of leased railcars for syndication.
Leasing & Services margin as a percentage of revenue was 52.3% for the six months ended February 28, 2013 and 47.2% for the six months ended February 29, 2012. The increase in margin as a percentage of revenue was primarily the result of a reduction in the maintenance accrual on terminated maintenance management agreements partially offset by lower rents earned on lower volumes of leased railcars for syndication and an increase in transportation costs.
Selling and Administrative Expense
Selling and administrative expense was $51.0 million or 6.1% of revenue for the six months ended February 28, 2013 compared to $48.2 million or 5.6% of revenue for the prior comparable period, an increase of $2.8 million. The increase for the six months ended February 28, 2013 compared to the prior comparable period primarily related to higher professional fees and travel and entertainment expenses due to increased business activity levels.
Net gain on Disposition of Equipment
Net gain on disposition of equipment was $4.5 million for the six months ended February 28, 2013, compared to $6.3 million for the prior comparable period. Assets from Greenbriers lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and manage risk and liquidity.
The current years gain primarily included $5.2 million in gains realized on the disposition of leased assets, a $0.6 million other gain and a $1.3 million loss related to the anticipated sale of certain assets from our roller bearing operation in Elizabethtown, Kentucky. All of the prior years gain $6.3 million was realized on the disposition of leased assets.
38
THE GREENBRIER COMPANIES, INC.
Other Costs
Interest and foreign exchange expense was comprised of the following:
Six Months Ended | ||||||||||||
(In thousands) |
February 28,
2013 |
February 29,
2012 |
Increase
(Decrease) |
|||||||||
Interest and foreign exchange: |
||||||||||||
Interest and other expense |
$ | 9,496 | $ | 11,149 | $ | (1,653 | ) | |||||
Accretion of convertible debt discount |
1,725 | 1,599 | 126 | |||||||||
Foreign exchange (gain) loss |
1,001 | (734 | ) | 1,735 | ||||||||
|
|
|
|
|
|
|||||||
$ | 12,222 | $ | 12,014 | $ | 208 | |||||||
|
|
|
|
|
|
The increase in interest and foreign exchange expense as compared to the prior comparable period was primarily attributed to a foreign exchange gain in the prior year and a foreign exchange loss in the current year. This was partially offset by lower interest expense on lower levels of borrowings and from the reversal of interest accruals associated with uncertain tax positions that expired during the year.
Income Tax
The tax rate for the six months ended February 28, 2013 was 27.3% as compared to 29.9% in the prior comparable period. The provision for income taxes is based on projected consolidated results of operations and geographical mix of earnings for the entire year which results in an estimated 32.0% annual effective tax rate before the impact of discrete items. Discrete items for the six months ended February 28, 2013 included the reversal of reserves for uncertain tax positions and certain items associated with our Mexican operations. The tax rate fluctuates from period to period due to a change in the geographical mix of pre-tax earnings and losses, minimum tax requirements in certain local jurisdictions and the impact of discrete items.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $2.7 million for the six months ended February 28, 2013 compared to a net loss attributable to noncontrolling interest of $1.6 million in the prior comparable period. These amounts primarily represent our joint venture partners share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany sales. The change from the prior comparable period is primarily a result of increased sales to third parties and lower intercompany activity in the current period.
39
THE GREENBRIER COMPANIES, INC.
Liquidity and Capital Resources
Six Months Ended | ||||||||
(In thousands) |
February
28, 2013 |
February
29, 2012 |
||||||
Net cash provided by (used in) operating activities |
$ | 33,588 | $ | (7,916 | ) | |||
Net cash used in investing activities |
(19,814 | ) | (15,699 | ) | ||||
Net cash provided by (used in) financing activities |
(11,730 | ) | 9,828 | |||||
Effect of exchange rate changes |
22 | 4,231 | ||||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
$ | 2,066 | $ | (9,556 | ) | |||
|
|
|
|
We have been financed through cash generated from operations, borrowings and issuance of stock. At February 28, 2013, cash and cash equivalents were $55.6 million, an increase of $2.0 million from $53.6 million at August 31, 2012.
Cash provided by operating activities was $33.6 million for the six months ended February 28, 2013 compared to cash used in operating activities of $7.9 million for the six months ended February 29, 2012. The change from the prior year was primarily due to a change in the timing of working capital needs.
Cash used in investing activities, primarily for capital expenditures, was $19.8 million for the six months ended February 28, 2013 compared to $15.7 million in the prior comparable period.
Capital expenditures totaled $35.5 million for the six months ended February 28, 2013 and $35.7 million for the six months ended February 29, 2012. Of these capital expenditures, approximately $12.1 million and $20.1 million were attributable to Leasing & Services operations. Leasing & Services capital expenditures for 2013, net of proceeds from sales of leased railcar equipment, are expected to be approximately $42.0 million. We regularly sell assets from our lease fleet. Proceeds from sales of leased railcar equipment were $19.2 million for the six months ended February 28, 2013 and $20.1 million in the comparable prior period.
Approximately $19.4 million and $10.9 million of capital expenditures for the six months ended February 28, 2013 and the comparable prior period were attributable to Manufacturing operations. Capital expenditures for Manufacturing operations are expected to be approximately $39.0 million in 2013, which includes $5.0 million to be paid by our joint venture partner in Mexico. These capital expenditures primarily relate to enhancements to existing manufacturing facilities and the addition of new production lines.
Wheel Services, Refurbishment & Parts capital expenditures for the six months ended February 28, 2013 and the comparable prior period were $4.0 million and $4.7 million. Capital expenditures are expected to be approximately $15.0 million in 2013 for improvement of existing facilities and some growth.
In the current quarter we reported manufacturing revenue and an operating cash inflow of approximately $40.0 million attributable to a sale of railcars to a single customer. Approximately $17.8 million of the railcars sold were originally produced for our lease fleet and recorded in Equipment on operating leases. This amount had been reported in the Consolidated Statement of Cash Flows as capital expenditures in the amount of $13.5 million for the year ended August 31, 2012 and $4.3 million for the quarter ended November 30, 2012. These railcars originally produced for the lease fleet were never placed on a long term lease, accordingly the railcars have been reflected as a non-cash transfer in the current period from equipment on operating lease to inventory within the accompanying cash flow statement.
Cash used in financing activities was $11.7 million for the six months ended February 28, 2013 compared to cash provided by financing activities of $9.8 million for the six months ended February 29, 2012. During the six months ended February 28, 2013, $13.9 million was utilized in net debt activity. During the six months ended February 29, 2012, $9.8 million was received in net debt activity.
40
THE GREENBRIER COMPANIES, INC.
In May 2013, the holders of our $67.7 million Convertible senior notes due 2026, with an exercise price of $48.05, can require us to repurchase all or a portion of the notes which we anticipate will occur.
Senior secured credit facilities, consisting of three components, aggregated to $361.0 million as of February 28, 2013.
Available borrowings under our credit facilities are generally limited by defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and interest coverage ratios. We had an aggregate of $305.2 million available to draw down under the committed credit facilities as of February 28, 2013. This amount consisted of $284.3 million available on the North American credit facility and $20.9 million on the European credit facilities as of February 28, 2013.
As of February 28, 2013 a $290.0 million revolving line of credit secured by substantially all of our assets in the U.S. not otherwise pledged as security for term loans, maturing June 2016, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 2.5% and Prime plus 1.5% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of February 28, 2013, lines of credit totaling $21.0 million secured by certain of our European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.3% to WIBOR plus 1.5%, 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 June 2013 through March 2015.
As of February 28, 2013 our Mexican joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $20.0 million and is secured by certain of the joint ventures accounts receivable and inventory. Advances under this facility bear interest at LIBOR plus 2.5%. The Mexican joint venture will be able to draw amounts available under this facility through December 2013. The second line of credit provides up to $30.0 million and is fully guaranteed by each of the joint venture partners, including our Company. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through February 2015.
As of February 28, 2013, outstanding borrowings under the senior secured credit facilities consisted of $5.6 million in letters of credit under the North American credit facility, $0.1 million outstanding under the European credit facilities and $50.0 million outstanding under the Mexican joint venture credit facilities.
The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into 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 our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage.
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.
41
THE GREENBRIER COMPANIES, INC.
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, we enter into foreign currency forward exchange contracts to protect the margin on a portion of forecast foreign currency sales primarily in Euro.
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.
As of February 28, 2013, the Mexican joint venture had $50.4 million of third party debt, of which we have guaranteed approximately $40.2 million. In addition, we, along with our joint venture partner, have committed to contributing $10.0 million to fund the capital expenditures to expand production capacity, of which we will contribute 50%. These amounts will be contributed at various intervals from May 31, 2012 to October 31, 2013. As of February 28, 2013, we and our joint venture partner have each contributed $3.3 million.
In accordance with customary business practices in Europe, we have $1.8 million in bank and third party warranty and performance guarantee facilities as of February 28, 2013. To date no amounts have been drawn under these guarantee facilities.
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 next twelve months.
Off Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are likely to have a material current or future effect on our Consolidated Financial Statements.
42
THE GREENBRIER COMPANIES, INC.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
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. At February 28, 2013, $79.7 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.
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 February 28, 2013, net assets of foreign subsidiaries aggregated $46.3 million and a 10% strengthening of the United States dollar relative to the foreign currencies would result in a decrease in equity of $4.6 million, or 1.0% 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 $42.2 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 February 28, 2013, 71% of our outstanding debt had fixed rates and 29% had variable rates. At February 28, 2013, a uniform 10% increase in variable interest rates would result in approximately $0.2 million of additional annual interest expense.
43
THE GREENBRIER COMPANIES, INC.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer, the effectiveness of the Companys 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 Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended February 28, 2013 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Effective March 11, 2013, Adrian Downes joined the Company as our Senior Vice President and Chief Accounting Officer (principal accounting officer), replacing James Cruckshank, whose departure was previously disclosed.
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THE GREENBRIER COMPANIES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is hereby incorporated by reference the information disclosed in Note 14 to Consolidated Financial Statements, Part I of this quarterly report.
Item 1A. Risk Factors
This Form 10-Q should be read in conjunction with the risk factors and information disclosed in our Annual Report on Form 10-K for the year ended August 31, 2012. There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended August 31, 2012.
Item 6. Exhibits
(a) | List of Exhibits: |
10.1 | Amendment No. 1 to The Greenbrier Companies, Inc. 2010 Amended and Restated Stock Incentive Plan. | |
10.2 | Form of Agreement concerning Indemnification and Related Matters (Officers) between Registrant and its officers. | |
10.3 | Amendment No. 1, dated October 7, 2010 [sic], to the Second Amended and Restated Credit Agreement among the Registrant, Bank of America, N.A., as Administrative Agent, Union Bank, National Association, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Sole Book Manager, and the lenders identified therein, dated June 30, 2011. | |
10.4 | Amendment No. 2, dated February 8, 2013, to the Second Amended and Restated Credit Agreement among the Registrant, Bank of America, N.A., as Administrative Agent, Union Bank, National Association, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Sole Book Manager, and the lenders identified therein, dated June 30, 2011. | |
10.5 | Form of Change of Control Agreement for Senior Managers. | |
31.1 | Certification pursuant to Rule 13a 14 (a). | |
31.2 | Certification pursuant to Rule 13a 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. | |
101 | The following financial information from the Companys Quarterly Report on Form 10-Q for the period ended February 28, 2013, formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income (iv) the Consolidated Statements of Equity (v) the Consolidated Statements of Cash Flows; (vi) the Notes to Condensed Consolidated Financial Statements. |
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THE GREENBRIER COMPANIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THE GREENBRIER COMPANIES, INC. | ||||||
Date: April 4, 2013 | By: | /s/ Mark J. Rittenbaum | ||||
Mark J. Rittenbaum | ||||||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
||||||
Date: April 4, 2013 | By: | /s/ Adrian J. Downes | ||||
Adrian J. Downes | ||||||
Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) |
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Exhibit 10.1
THE GREENBRIER COMPANIES, INC.
Amendment No. 1
to
2010 Amended and Restated Stock Incentive Plan
Pursuant to Section 15.2 of the 2010 Amended and Restated Stock Incentive Plan (the Plan) of The Greenbrier Companies, Inc. (the Company), the Board of Directors of the Company has amended the Plan as follows:
1. | Increase in Shares Reserved . Section 3.1 of the Plan is amended to increase the maximum aggregate number of Common Shares reserved for issuance under the Plan from 2,825,000 to 4,325,000. |
2. | Director Restricted Shares . Section 6.1 of the Plan is amended to increase the amount of the annual automatic award of restricted stock to non-employee directors from $60,000 in value of stock to $80,000 per year, effective as of January 2013. |
3. | Effective Date . Except as otherwise provided herein, this Amendment No. 1 shall be effective as of the date of approval by the Board of Directors. Except as hereby amended, the Plan shall remain in full force and effect. |
Approved by the Board of Directors October 30, 2012.
Exhibit 10.2
THE GREENBRIER COMPANIES, INC.
AGREEMENT CONCERNING INDEMNIFICATION AND RELATED MATTERS
(Officers)
This Agreement is made as of , by and between THE GREENBRIER COMPANIES, INC., an Oregon corporation (the Corporation), and (the Officer), an officer of the Corporation.
WHEREAS, it is essential to the Corporation to retain and attract as officers of the Corporation and its subsidiaries and affiliates the most capable persons available and persons who have significant experience in business, corporate and financial matters; and
WHEREAS, the Corporation has identified the Officer as a person possessing the background and abilities desired by the Corporation and desires the Officer to serve as an officer of the Corporation; and
WHEREAS, the substantial increase in corporate litigation may, from time to time, subject corporate officers to burdensome litigation, the risks of which frequently far outweigh the advantages of serving in such capacity; and
WHEREAS, in recent times the cost of liability insurance has increased and the availability of such insurance is, from time to time, severely limited; and
WHEREAS, the Corporation and the Officer recognize that serving as an officer of a corporation or other business entity at times calls for subjective evaluations and judgments upon which reasonable persons may differ and that, in that context, it is anticipated and expected that officers will and do from time to time commit actual or alleged errors or omissions in the good faith exercise of their duties and responsibilities; and
WHEREAS, it is the express policy of the Corporation to indemnify designated officers to the fullest extent permitted by law; and
WHEREAS, the Articles of Incorporation of the Corporation permit, and the Bylaws of the Corporation require, indemnification of the directors and officers of the Corporation to the fullest extent permitted by law, including but not limited to the Oregon Business Corporation Act (the OBCA), and the OBCA expressly provides that the indemnification provisions set forth therein are not exclusive, and thereby contemplates that contracts may be entered into between the Corporation and its officers with respect to indemnification;
WHEREAS, such rights of indemnification may be extended to officers, directors, employees or representatives of subsidiary or affiliated entities; and
WHEREAS, the Corporation and the Officer desire to articulate clearly in contractual form their respective rights and obligations with regard to the Officers service on behalf of the Corporation as an officer and with regard to claims for loss, liability, expense or damage which, directly or indirectly, may arise out of or relate to such service.
NOW THEREFORE, the Corporation and the Officer agree as follows:
1. | Agreement to Serve. |
The Officer shall serve as an officer of the Corporation or one or more of its subsidiaries or affiliates for so long as the Officer is duly elected or until the Officer tenders a resignation in writing. This Agreement creates no obligation on either party to continue the service of the Officer for a particular term or any term.
2. | Definitions. |
As used in this Agreement:
(a) | The term Proceeding shall include any threatened, pending or completed action, suit or proceeding, whether brought in the right of the Corporation or otherwise, and whether of a civil, criminal, administrative or investigative nature, whether formal or informal, in which the Officer may be or may have been involved as a party, witness or otherwise, by reason of the fact that the Officer is or was an officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, trustee, manager, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, whether or not serving in such capacity at the time any liability or expense is incurred for which exculpation, indemnification or reimbursement can be provided under this Agreement. |
(b) | The term Expenses includes, without limitation thereto, expenses of investigations, judicial or administrative proceedings or appeals, attorney, accountant and other professional fees and disbursements and any expenses of establishing a right to indemnification under Section 12 of this Agreement, but shall not include amounts paid in settlement by the Officer or the amount of judgments or fines against the Officer. |
(c) | References to other enterprise include, without limitation, employee benefit plans; references to fines include, without limitation, any excise taxes assessed on a person with respect to any employee benefit plan; references to serving at the request of the Corporation include, without limitation, any service as a director, officer, partner, trustee, manager, employee or agent which imposes duties on, or involves services by, such director, officer, partner, trustee, manager, employee or agent with respect to an employee benefit plan, its participants, or its beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation as referred to in this Agreement. |
(d) |
References to the Corporation shall include, in addition to the resulting entity, any constituent corporation or other entity (including any constituent of a |
2
constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, partners, trustees, managers, employees or agents, so that any person who is or was a director, officer, partner, trustee, manager, employee or agent of such constituent entity, or is or was serving at the request of such constituent entity as a director, officer, partner, trustee, manager, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Agreement with respect to the resulting or surviving entity as such person would have with respect to such constituent entity if its separate existence had continued. |
(e) | For purposes of this Agreement, the meaning of the phrase to the fullest extent permitted by law shall include, but not be limited to: |
(i) | to the fullest extent authorized or permitted by any amendments to or replacements of the OBCA adopted after the date of this Agreement that increase the extent to which a corporation may indemnify or exculpate its officers or directors; and |
(ii) | to the fullest extent permitted by the provision of the OBCA that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the OBCA. |
3. | Limitation of Liability |
To the fullest extent permitted by law, the Officer shall have no monetary liability of any kind or nature whatsoever in respect of the Officers errors or omissions (or alleged errors or omissions) in serving the Corporation or any of its subsidiaries or affiliates, their respective shareholders or any other enterprise at the request of the Corporation, so long as such errors or omissions (or alleged errors or omissions), if any, are not shown by clear and convincing evidence to have involved:
(i) | any breach of the Officers duty of loyalty to such entities, shareholders or enterprises; |
(ii) | any act or omission not in good faith or which involved intentional misconduct or a knowing violation of law; |
(iii) | any transaction from which the Officer derived an improper personal benefit; |
(iv) | any unlawful distribution (including, without limitation, dividends, stock repurchases and stock redemptions) as defined in the OBCA or, as applicable, in the limited liability company act of the state where the Companys subsidiary is organized; or |
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(v) | profits made from the purchase and sale by the Officer of securities of the Corporation within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provision of any state statutory law or common law. |
(b) | Without limiting the generality of subparagraph (a) above and to the fullest extent permitted by law, the Officer shall have no personal liability to the Corporation or any of its subsidiaries or affiliates, their respective shareholders or any other person claiming derivatively through the Corporation, regardless of the theory or principle under which such liability may be asserted, for: |
(i) | punitive, exemplary or consequential damages; |
(ii) | treble or other damages computed based upon any multiple of damages actually and directly proved to have been sustained; |
(iii) | fees of attorneys, accountants, expert witnesses or professional consultants; or |
(iv) | civil fines or penalties of any kind or nature whatsoever. |
4. | Indemnity in Third Party Proceedings. |
The Corporation shall indemnify the Officer in accordance with the provisions of this Section 4 if the Officer was or is a party to, or is threatened to be made a party to, any Proceeding (other than a Proceeding by or in the right of the Corporation or one or more of its subsidiaries or affiliates to procure a judgment in its favor), against all Expenses, judgments, fines and amounts paid in settlement, actually and reasonably incurred by the Officer in connection with such Proceeding if the Officer acted in good faith and in a manner the Officer reasonably believed was in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, the Officer, in addition, had no reasonable cause to believe that the Officers conduct was unlawful. However, the Officer shall not be entitled to indemnification under this Section 4 in connection with any Proceeding charging improper personal benefit to the Officer in which the Officer is adjudged liable on the basis that personal benefit was improperly received by the Officer unless and only to the extent that the court conducting such Proceeding, or any other court of competent jurisdiction, determines upon application that, despite the adjudication of liability, the Officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.
5. | Indemnity in Proceedings by or in the Right of the Corporation. |
The Corporation shall indemnify the Officer in accordance with the provisions of this Section 5 if the Officer was or is a party to, or is threatened to be made a party to, any Proceeding by or in the right of the Corporation or one or more of its subsidiaries or affiliates to procure a judgment in its favor, against all Expenses actually and reasonably incurred by the Officer in connection with the defense or settlement of such Proceeding if the Officer acted in
4
good faith and in a manner the Officer reasonably believed was in or not opposed to the best interests of the Corporation. However, the Officer shall not be entitled to indemnification under this Section 5 in connection with any Proceeding in which the Officer has been adjudged liable to the Corporation unless and only to the extent that the court conducting such Proceeding, or any other court of competent jurisdiction, determines upon application that, despite the adjudication of liability, the Officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.
6. | Indemnification of Expenses of Successful Party. |
Notwithstanding any other provisions of this Agreement other than Section 8, to the extent that the Officer has been successful, on the merits or otherwise, in defense of any Proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, the Corporation shall indemnify the Officer against all Expenses actually and reasonably incurred in connection therewith.
7. | Additional Indemnification. |
Notwithstanding any limitation in Sections 4, 5 or 6, the Corporation shall indemnify the Officer to the fullest extent permitted by law with respect to any Proceeding (including a Proceeding by or in the right of the Corporation or one or more of its subsidiaries or affiliates to procure a judgment in its favor), against all Expenses, judgments, fines and amounts paid in settlement, actually and reasonably incurred by the Officer in connection with such Proceeding.
8. | Exclusions. |
Notwithstanding any provision in this Agreement, the Corporation shall not be obligated under this Agreement to make any indemnification in connection with any claim made against the Officer:
(a) | for which payment is required to be made to or on behalf of the Officer under any insurance policy, except with respect to any excess amount to which the Officer is entitled under this Agreement beyond the amount of payment under such insurance policy; |
(b) | if a court having jurisdiction in the matter finally determines that such indemnification is not lawful under any applicable statute or public policy; |
(c) | in connection with any Proceeding (or part of any Proceeding) initiated by the Officer, or any Proceeding by the Officer against the Corporation or one or more of its subsidiaries or affiliates or their respective directors, managers, officers, employees or other persons entitled to be indemnified by the Corporation or such entity, unless: |
(i) | the Corporation or such entity is expressly required by law to make the indemnification; |
5
(ii) | the Proceeding was authorized by the Board of Directors, governing board or manager of the Corporation or such entity; or |
(iii) | the Officer initiated the Proceeding pursuant to Section 12 of this Agreement and the Officer is successful in whole or in part in such Proceeding; or |
(d) | for an accounting of profits made from the purchase and sale by the Officer of securities of the Corporation or such entity within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provision of any state statutory law or common law; or |
(e) | in connection with any proceeding by an affiliate of the Corporation against the Officer in respect of a breach of the provisions of the Officers employment agreement with such affiliate. |
9. | Advances of Expenses. |
The Corporation shall pay the Expenses incurred by the Officer in any Proceeding (other than a Proceeding brought for an accounting of profits made from the purchase and sale by the Officer of securities of the Corporation within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provision of any state statutory law or common law) in advance of the final disposition of the Proceeding at the written request of the Officer, if the Officer:
(a) | furnishes the Corporation a written affirmation of the Officers good faith belief that the Officer is entitled to be indemnified under this Agreement; and |
(b) | furnishes the Corporation a written undertaking to repay the advance to the extent that it is ultimately determined that the Officer is not entitled to be indemnified by the Corporation. Such undertaking shall be an unlimited general obligation of the Officer but need not be secured. |
Advances pursuant to this Section 9 shall be made no later than 10 days after receipt by the Corporation of the affirmation and undertaking described in Sections 9(a) and 9(b) above, and shall be made without regard to the Officers ability to repay the amount advanced and without regard to the Officers ultimate entitlement to indemnification under this Agreement. The Corporation may establish a trust, escrow account or other secured funding source for the payment of advances made and to be made pursuant to this Section 9 or of other liability incurred by the Officer in connection with any Proceeding.
10. | Nonexclusivity and Continuity of Rights. |
The indemnification, advancement of Expenses, and exculpation from liability provided by this Agreement shall not be deemed exclusive of any other rights to which the Officer may be
6
entitled under any other agreement, any articles of incorporation, bylaws, or vote of shareholders or directors, the OBCA, or otherwise, both as to action in the Officers official capacity and as to action in another capacity while holding such office or occupying such position. The indemnification under this Agreement shall continue as to the Officer even though the Officer may have ceased to be an officer of the Corporation or a director, officer, partner, trustee, manager, employee or agent of an enterprise related to the Corporation and shall inure to the benefit of the heirs, executors, administrators and personal representatives of the Officer.
11. | Procedure Upon Application for Indemnification. |
Any indemnification under Sections 4, 5, 6 or 7 shall be made no later than 45 days after receipt of the written request of the Officer, unless a determination that the Officer is not entitled to indemnification under this Agreement is made within such 45 day period:
(a) | by the Board of Directors by a majority vote of a quorum consisting of directors who are not parties to the applicable Proceeding; |
(b) | if a quorum cannot be obtained under paragraph (a) of this Section 11, then by a majority vote of a committee of the Board of Directors that is (i) duly designated by the Board of Directors, with the participation of directors who are parties to the applicable Proceeding and (ii) consists solely of two or more directors not parties to the applicable Proceeding; |
(c) | by independent legal counsel in a written opinion, which counsel shall be appointed (i) by a majority vote of the Board of Directors or its committee in the manner prescribed by paragraph (a) or paragraph (b) of this Section 11, or (ii) if a quorum of the Board of Directors cannot be obtained under paragraph (a) of this Section 11 or a committee cannot be designated under paragraph (b) of this Section 11, then by a majority vote of the full Board of Directors, including directors who are parties to the applicable Proceeding; or |
(d) | by the shareholders of the Corporation. |
12. | Enforcement. |
The Officer may enforce any right to indemnification, advances or exculpation provided by this Agreement in any court of competent jurisdiction in compliance with Section 23 if:
(a) | the Corporation denies the claim for indemnification or advances, in whole or in part; or |
(b) | the Corporation does not dispose of such claim within the time period required by this Agreement. |
It shall be a defense to any such enforcement action (other than an action brought to enforce a claim for advancement of Expenses pursuant to, and in compliance with, Section 9 of
7
this Agreement) that the Officer is not entitled to indemnification under this Agreement. However, except as provided in Section 13 of this Agreement, the Corporation shall not assert any defense to an action brought to enforce a claim for advancement of Expenses pursuant to Section 9 of this Agreement if the Officer has tendered to the Corporation the affirmation and undertaking required thereunder. The burden of proving by clear and convincing evidence that indemnification is not appropriate shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, a committee thereof, or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification or exculpation is proper in the circumstances because the Officer has met the applicable standard of conduct nor an actual determination by the Corporation (including its Board of Directors, a committee thereof, or independent legal counsel) that indemnification or exculpation is improper because the Officer has not met such applicable standard of conduct, shall be asserted as a defense to the action or create a presumption that the Officer is not entitled to indemnification under this Agreement or otherwise. The Officers expenses incurred in connection with successfully establishing the Officers right to indemnification or advances, in whole or in part, in any Proceeding shall also be paid or reimbursed by the Corporation.
The termination of any Proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that:
i) | the Officer is not entitled to indemnification under Sections 4, 5 or 7 of this Agreement because the Officer did not act in good faith and in a manner which the Officer reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the Officers conduct was unlawful; or |
ii) | the Officer is not entitled to exculpation under Section 3 of this Agreement. |
13. | Notification and Defense of Claim. |
As a condition precedent to indemnification under this Agreement, not later than 30 days after receipt by the Officer of notice of the commencement of any Proceeding the Officer shall, if a claim in respect of the Proceeding is to be made against the Corporation under this Agreement, notify the Corporation in writing of the commencement of the Proceeding. The failure to properly notify the Corporation shall not relieve the Corporation from any liability which it may have to the Officer otherwise than under this Agreement. With respect to any Proceeding as to which the Officer so notifies the Corporation of the commencement:
(a) | The Corporation shall be entitled to participate in the Proceeding at its own expense. |
(b) |
Except as otherwise provided in this Section 13, the Corporation may, at its option and jointly with any other indemnifying party similarly notified and electing to assume such defense, assume the defense of the Proceeding, with legal counsel reasonably satisfactory to the Officer. The Officer shall have the right to use separate legal counsel in the Proceeding, but the Corporation shall not be liable to the Officer under this Agreement, including Section 9 above, for the fees |
8
and expenses of separate legal counsel incurred after notice from the Corporation of its assumption of the defense, unless (i) the Officer reasonably concludes that there may be a conflict of interest between the Corporation and the Officer in the conduct of the defense of the Proceeding, or (ii) the Corporation does not use legal counsel to assume the defense of such Proceeding. The Corporation shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Corporation or as to which the Officer has made the conclusion provided for in (i) above. |
(c) | If two or more persons who may be entitled to indemnification from the Corporation, including the Officer, are parties to any Proceeding, the Corporation may require the Officer to use the same legal counsel as the other parties. The Officer shall have the right to use separate legal counsel in the Proceeding, but the Corporation shall not be liable to the Officer under this Agreement, including Section 9 above, for the fees and expenses of separate legal counsel incurred after notice from the Corporation of the requirement to use the same legal counsel as the other parties, unless the Officer reasonably concludes that there may be a conflict of interest between the Officer and any of the other parties required by the Corporation to be represented by the same legal counsel. |
(d) | The Corporation shall not be liable to indemnify the Officer under this Agreement for any amounts paid in settlement of any Proceeding effected without its written consent, which shall not be unreasonably withheld. The Officer shall permit the Corporation to settle any Proceeding that the Corporation assumes the defense of, except that the Corporation shall not settle any action or claim in any manner that would impose any penalty or limitation on the Officer without the Officers written consent. |
14. | Partial Indemnification. |
If the Officer is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the Expenses, judgments, fines or amounts paid in settlement, actually and reasonably incurred by the Officer in connection with such Proceeding, but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Officer for the portion of such Expenses, judgments, fines or amounts paid in settlement to which the Officer is entitled.
15. | Interpretation and Scope of Agreement. |
Nothing in this Agreement shall be interpreted to constitute a contract of service for any particular period or pursuant to any particular terms or conditions. The Corporation retains the right, in its discretion, to terminate the service relationship of the Officer, with or without cause, or to alter the terms and conditions of the Officers service all without prejudice to any rights of the Officer which may have accrued or vested prior to such action by the Corporation.
9
16. | Severability. |
If this Agreement or any portion thereof shall be invalidated on any ground by any court of competent jurisdiction, the remainder of this Agreement shall continue to be valid and the Corporation shall nevertheless indemnify the Officer as to Expenses, judgments, fines and amounts paid in settlement with respect to any Proceeding to the fullest extent permitted by any applicable portion of this Agreement that shall not have been invalidated.
17. | Subrogation. |
In the event of payment under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the Officer. The Officer shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Corporation effectively to bring suit to enforce such rights.
18. | Notices. |
All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given upon delivery by hand to the party to whom the notice or other communication shall have been directed, or on the third business day after the date on which it is mailed by United States mail with first-class postage prepaid, addressed as follows:
(a) | If to the Officer, to the address indicated on the signature page of this Agreement. |
(b) | If to the Corporation, to |
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035 USA
Attention: President
With a copy to:
General Counsel
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035 USA
or to any other address as either party may designate to the other in writing.
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19. | Counterparts. |
This Agreement may be executed in any number of counterparts, each of which shall constitute the original.
20. | Applicable Law. |
This Agreement shall be governed by and construed in accordance with the internal laws of the state of Oregon without regard to the principles of conflict of laws.
21. | Successors and Assigns. |
This Agreement shall be binding upon the Corporation and its successors and assigns.
22. | Attorney Fees. |
If any suit, action (including, without limitation, any bankruptcy proceeding) or arbitration is instituted to enforce or interpret any provision of this Agreement, the prevailing party shall be entitled to recover from the party not prevailing, in addition to other relief that may be provided by law, an amount determined reasonable as attorney fees at trial and on any appeal of such suit or action.
23. | Jurisdiction and Venue. |
Each party hereto expressly and irrevocably consents and submits to the jurisdiction and venue of any state or federal court sitting in Multnomah County, Oregon, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in such court and to the appellate courts in connection with any appeal. The parties expressly waive all defenses of lack of personal jurisdiction, improper venue and forum non-conveniens with respect to such federal and state courts sitting within Multnomah County, Oregon. The parties expressly consent to (i) service of process being effected upon them by certified mail sent to the addresses set forth in this Agreement and (ii) any final judgment rendered against a party in any action or proceeding being enforceable in other jurisdictions in any manner provided by law.
24. | Entire Agreement. |
This Agreement expresses the entire understanding of the parties hereto with respect to the subject matter hereof and it supersedes and replaces any and all former or contemporaneous agreements, understandings, representations or warranties relating to such subject matter and contains all of the terms, conditions, understandings, representations, warranties, and promises of the parties hereto in connection therewith.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.
CORPORATION: | ||||||
THE GREENBRIER COMPANIES, INC. | OFFICER: | |||||
By: |
|
|
||||
Maren J. Malik | (name) | |||||
Title: |
Vice President, Administration |
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Exhibit 10.3
October 7, 2010
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, OR 97035
Re: | First Amendment to Second Amended and Restated Credit Agreement, dated as of June 30, 2011 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the Credit Agreement ; the terms defined therein being used herein as therein defined), among The Greenbrier Companies, Inc., an Oregon corporation (the Company ), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent. |
Ladies and Gentlemen:
Reference is made to the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement.
The parties hereto agree that Section 7.03(p) of the Credit Agreement is hereby amended to read as follows:
(p) other Indebtedness, on terms reasonably acceptable to the Administrative Agent, in an aggregate principal amount at any one time outstanding not to exceed $150,000,000; provided that if such Indebtedness is secured, the aggregate principal amount of such secured Indebtedness shall not exceed $5,000,000 at any time outstanding and the Liens securing such Indebtedness are permitted by Section 7.01(y) ;
This letter agreement is a Loan Document. All references in the Credit Agreement and the other Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby.
Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Loan Documents shall remain in full force and effect.
This letter agreement shall become effective upon the execution hereof by the Loan Parties, the Required Lenders and the Administrative Agent.
This letter agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of executed counterparts of this Agreement by telecopy or pdf shall be effective as an original.
[The remainder of this page is intentionally left blank.]
This letter agreement shall be governed by and construed in accordance with the laws of the State of New York.
Sincerely, | ||
BANK OF AMERICA, N.A., as Administrative Agent | ||
By: |
/s/ Tiffany Shin |
|
Name: |
Tiffany Shin |
|
Title: |
Assistant Vice President |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
BORROWER: | THE GREENBRIER COMPANIES, INC., | |||||
an Oregon corporation | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: |
Lorie L. Leeson |
|||||
Title: |
Vice President-Corporate Finance & Treasurer |
|||||
SUBSIDIARY | ||||||
GUARANTORS: | GUNDERSON LLC, | |||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: |
Lorie L. Leeson |
|||||
Title: |
Class B Manager |
|||||
By: |
/s/ James W. Cruckshank |
|||||
Name: |
James W. Cruckshank |
|||||
Title: |
Class B Manager |
|||||
GREENBRIER LEASING COMPANY, LLC, | ||||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: |
Lorie L. Leeson |
|||||
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
GREENBRIER RAILCAR LLC, | ||
an Oregon limited liability company | ||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
|
GUNDERSON RAIL SERVICES LLC, | ||
an Oregon limited liability company | ||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
|
GUNDERSON MARINE LLC, | ||
an Oregon limited liability company | ||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
GREENBRIER-CONCARRIL, LLC, a Delaware limited liability company |
||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Class B Manager |
|
By: |
/s/ James W. Cruckshank |
|
Name: |
James W. Cruckshank |
|
Title: |
Class B Manager |
|
GREENBRIER LEASING LIMITED PARTNER, LLC, a Delaware limited liability company |
||
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Vice President |
|
GREENBRIER MANAGEMENT SERVICES, LLC, a Delaware limited liability company |
||
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
BRANDON RAILROAD LLC, | ||
an Oregon limited liability company | ||
By: | Greenbrier Rail Services LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
|
MERIDIAN RAIL HOLDINGS CORP., an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
|
MERIDIAN RAIL ACQUISITION CORP., an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
MERIDIAN RAIL MEXICO CITY CORP. an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
|
GREENBRIER LEASING, L.P., a Delaware limited partnership |
||
By: | Greenbrier Management Services, LLC | |
Its: | General Partner | |
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
GUNDERSON SPECIALTY PRODUCTS, LLC, | ||
a Delaware limited liability company | ||
By: | Gunderson LLC | |
Sole Member | ||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Class B Manager |
|
By: |
/s/ James W. Cruckshank |
|
Name: |
James W. Cruckshank |
|
Title: |
Class B Manager |
|
GREENBRIER RAILCAR LEASING, INC. a Washington corporation |
||
By: |
/s/ Mark J. Rittenbaum |
|
Name: |
Mark J. Rittenbaum |
|
Title: |
Executive Vice President |
|
AUTOSTACK COMPANY LLC, an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: |
Lorie L. Leeson |
|
Title: |
Treasurer |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
LENDERS: |
BANK OF AMERICA, N.A., as a Lender and as L/C Issuer and Swing Line Lender |
|||||
By: |
/s/ Chris Swindell |
|||||
Name: |
Chris Swindell |
|||||
Title: |
SVP |
|||||
UNION BANK, N.A., as a Lender | ||||||
By: |
/s/ Stephen Sloan |
|||||
Name: |
Stephen Sloan |
|||||
Title: |
Vice President |
|||||
FIFTH THIRD BANK, as a Lender | ||||||
By: |
|
|||||
Name: |
|
|||||
Title: |
|
|||||
UMPQUA BANK, as a Lender | ||||||
By: |
/s/ Jeffrey Seiler |
|||||
Name: |
Jeffrey Seiler |
|||||
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
GOLDMAN SACHS LENDING PARTNERS LLC, as a Lender | ||||||
By: |
/s/ Rick Canonico |
|||||
Name: |
Rick Canonico |
|||||
Title: |
Authorized Signatory |
|||||
BANK OF THE WEST, as a Lender | ||||||
By: |
/s/ Brett German |
|||||
Name: |
Brett German |
|||||
Title: |
Vice President |
|||||
CRÉDIT INDUSTRIEL ET COMMERCIAL, NEW YORK BRANCH, as a Lender | ||||||
By: |
|
|||||
Name: |
|
|||||
Title: |
|
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
COLUMBIA BANK, as a Lender | ||
By: |
/s/ Bill Barclay |
|
Name: |
Bill Barclay |
|
Title: |
SVP |
THE GREENBRIER COMPANIES, INC.
FIRST AMENDMENT
Exhibit 10.4
February 8, 2013
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, OR 97035
Re: | Second Amendment to Second Amended and Restated Credit Agreement, dated as of June 30, 2011 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the Credit Agreement ; the terms defined therein being used herein as therein defined), among The Greenbrier Companies, Inc., an Oregon corporation (the Company ), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent. |
Ladies and Gentlemen:
Reference is made to the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned thereto in the Credit Agreement.
The parties hereto agree that:
(i) The following definitions in Section 1.01 of the Credit Agreement are hereby amended to read as follows:
Disposition or Dispose means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith. For purposes of clarification, the use of cash or money in the ordinary course of business or in a manner not otherwise expressly prohibited by the terms of this Agreement, in each case, shall not constitute a Disposition or to Dispose under this Agreement.
Eurocurrency Rate means,
(a) for any Interest Period with respect to a Eurocurrency Rate Loan, (i) the rate per annum equal to the British Bankers Association LIBOR Rate or the successor thereto if the British Bankers Association is no longer making a LIBOR rate available ( LIBOR ), as published by Reuters (or such other commercially available source providing quotations of LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for deposits in the relevant currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (ii) if such published rate is not available at such time for any reason, the rate determined by the Administrative Agent to be the rate at which deposits in the relevant currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Bank of Americas London Branch (or other Bank of America branch or Affiliate) to major banks in the London or other offshore interbank market for such currency at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; and
(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) LIBOR at approximately 11:00 a.m. London time two Business Days prior
to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of Americas London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.
FATCA means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
(ii) Section 2.04(a) of the Credit Agreement is hereby amended to read as follows:
(a) The Swing Line . Subject to the terms and conditions set forth herein, the Swing Line Lender shall, in reliance upon the agreements of the other Lenders set forth in this Section 2.04 , make loans to the Borrower in Dollars (each a Swing Line Loan ) from time to time on any Business Day during the Availability Period in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Applicable Percentage of the Outstanding Amount of Committed Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lenders Commitment; provided , however , that (i) after giving effect to any Swing Line Loan, (A) the Total Outstandings shall not exceed the Revolver Ceiling, and (B) the aggregate Outstanding Amount of the Committed Loans of any Lender, plus such Lenders Applicable Percentage of the Outstanding Amount of all L/C Obligations, plus such Lenders Applicable Percentage of the Outstanding Amount of all Swing Line Loans shall not exceed such Lenders Commitment, (ii) the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan and (iii) the Swing Line Lender shall not be under any obligation to make any Swing Line Loan if it shall determine (which determination shall be conclusive and binding absent manifest error) that it has, or by such Credit Extension may have, Fronting Exposure. Within the foregoing limits, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.04 , prepay under Section 2.06 , and reborrow under this Section 2.04 . Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lenders Applicable Percentage times the amount of such Swing Line Loan.
(iii) Section 3.01 of the Credit Agreement is hereby amended to add a new clause (g) at the end of Section 3.01, immediately following clause (f), to read as follows:
(g) Notwithstanding anything to the contrary contained herein, if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lenders obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 3.01(g) , FATCA shall include any amendments made to FATCA after the Closing Date.
(iv) Section 7.05(h) of the Credit Agreement is hereby amended to read as follows:
(h) sales or other Dispositions of assets having a fair market value (as determined by the Borrower in its reasonable discretion) of less than $50,000,000 in the aggregate during the term of this Agreement;
(v) Schedule 2 to Exhibit D to the Credit Agreement is hereby deleted and replaced with Schedule 2 attached hereto.
This letter agreement is a Loan Document. All references in the Credit Agreement and the other Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as amended hereby.
Except as modified hereby, all of the terms and provisions of the Credit Agreement and the other Loan Documents shall remain in full force and effect.
This letter agreement shall become effective upon the execution hereof by the Loan Parties, the Required Lenders and the Administrative Agent.
This letter agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of executed counterparts of this Agreement by telecopy or pdf shall be effective as an original.
[The remainder of this page is intentionally left blank.]
This letter agreement shall be governed by and construed in accordance with the laws of the State of New York.
Sincerely, | ||
BANK OF AMERICA, N.A., as Administrative Agent | ||
By: |
/s/ Tiffany Shin |
|
Name: |
Tiffany Shin |
|
Title: |
Assistant Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
BORROWER: | THE GREENBRIER COMPANIES, INC., | |||||
an Oregon corporation | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: | Lorie L. Leeson | |||||
Title: | Senior Vice President, Corporate Finance and Treasurer | |||||
SUBSIDIARY | ||||||
GUARANTORS: | GUNDERSON LLC, | |||||
an Oregon limited liability company | ||||||
By: |
/s/ Martin R. Baker |
|||||
Name: | Martin R. Baker | |||||
Title: | Vice President | |||||
GREENBRIER LEASING COMPANY LLC, | ||||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: | Lorie L. Leeson | |||||
Title: | Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
GREENBRIER RAILCAR LLC, | ||||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: | Lorie L. Leeson | |||||
Title: | Treasurer | |||||
GUNDERSON RAIL SERVICES LLC, | ||||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: | Lorie L. Leeson | |||||
Title: | Treasurer | |||||
GUNDERSON MARINE LLC, | ||||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L. Leeson |
|||||
Name: | Lorie L. Leeson | |||||
Title: | Treasurer |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
GREENBRIER-CONCARRIL, LLC, | ||
a Delaware limited liability company | ||
By: |
/s/ Martin R. Baker |
|
Name: | Martin R. Baker | |
Title: | Vice President | |
GREENBRIER LEASING LIMITED PARTNER, LLC, a Delaware limited liability company |
||
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Vice President | |
GREENBRIER MANAGEMENT SERVICES, LLC, a Delaware limited liability company |
||
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
BRANDON RAILROAD LLC, an Oregon limited liability company |
||
By: |
/s/ Martin R. Baker |
|
Name: | Martin R. Baker | |
Title: | Vice President | |
MERIDIAN RAIL HOLDINGS CORP., an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Treasurer | |
MERIDIAN RAIL ACQUISITION CORP., an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Treasurer |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
MERIDIAN RAIL MEXICO CITY CORP. | ||
an Oregon corporation | ||
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Treasurer | |
GREENBRIER LEASING, L.P., a Delaware limited partnership |
||
By: | Greenbrier Management Services, LLC | |
Its: | General Partner | |
By: | Greenbrier Leasing Company LLC | |
Its: | Sole Member | |
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
GUNDERSON SPECIALTY PRODUCTS, LLC, a Delaware limited liability company |
||
By: | Gunderson LLC | |
Sole Member | ||
By: |
/s/ Martin R. Baker |
|
Name: | Martin R. Baker | |
Title: | Vice President | |
GREENBRIER RAILCAR LEASING, INC. a Washington corporation |
||
By: |
/s/ Martin R. Baker |
|
Name: | Martin R. Baker | |
Title: | Vice President | |
AUTOSTACK COMPANY LLC, an Oregon corporation |
||
By: |
/s/ Lorie L. Leeson |
|
Name: | Lorie L. Leeson | |
Title: | Treasurer |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
LENDERS: | BANK OF AMERICA, N.A., as a Lender and as L/C Issuer | |||||
and Swing Line Lender | ||||||
By: |
/s/ Chris Swindell |
|||||
Name: |
Chris Swindell |
|||||
Title: |
SVP |
|||||
UNION BANK, N.A., as a Lender | ||||||
By: | /s/ Stephen Sloan | |||||
Name: |
Stephen Sloan |
|||||
Title: |
Vice President |
|||||
FIFTH THIRD BANK, as a Lender | ||||||
By: | /s/ Mark G. Gerlach | |||||
Name: |
Mark G. Gerlach |
|||||
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
UMPQUA BANK, as a Lender | ||||||
By: |
/s/ Jeffrey Seiler |
|||||
Name: |
Jeffrey Seiler |
|||||
Title: |
Vice President |
|||||
GOLDMAN SACHS LENDING PARTNERS LLC, as a Lender | ||||||
By: |
/s/ Michelle Latzoni |
|||||
Name: |
Michelle Latzoni |
|||||
Title: |
Authorized Signatory |
|||||
BANK OF THE WEST, as a Lender | ||||||
By: |
/s/ Dale Parshall |
|||||
Name: |
Dale Parshall |
|||||
Title: |
Vice President |
|||||
CRÉDIT INDUSTRIEL ET COMMERCIAL, NEW YORK BRANCH, as a Lender | ||||||
By: |
|
|||||
Name: |
|
|||||
Title: |
|
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
COLUMBIA STATE BANK, as a Lender | ||
By: |
/s/ Kevin N. Meabon |
|
Name: |
Kevin N. Meabon |
|
Title: |
Vice President |
|
THE PRIVATEBANK AND TRUST COMPANY, as a Lender | ||
By: |
/s/ Nate Palmer |
|
Name: |
Nate Palmer |
|
Title: |
Managing Director |
|
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender | ||
By: |
/s/ Dawn Moore |
|
Name: |
Dawn Moore |
|
Title: |
Vice President |
THE GREENBRIER COMPANIES, INC.
SECOND AMENDMENT
For the Quarter/Year ended ( Statement Date )
SCHEDULE 2
to the Compliance Certificate
($ in 000s)
I. |
Section 7.11(a) Consolidated Adjusted Interest Coverage Ratio. |
|||||||
A. | Consolidated EBITDA for the period of the four fiscal quarters then ending on the Statement Date: | |||||||
1. | Consolidated Net Income for such period: | $ | ||||||
2. | Consolidated Interest Charges for such period: | $ | ||||||
3. | income tax expense or benefit (net of income tax credits) as reported on the consolidated statement of operations of the Borrower and its Subsidiaries for such period: | $ | ||||||
4. | depreciation and amortization expense: | $ | ||||||
5. | other extraordinary, unusual or non-recurring charges, expenses or losses of the Borrower and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period: | $ | ||||||
6. | non-cash stock compensation expenses for such period which do not represent a cash item in for such period or any future period: | $ | ||||||
7. | consent fees (excluding fees to waive existing defaults) paid to holders of Indebtedness permitted under Section 7.03 of the Credit Agreement: 1 | $ | ||||||
8. | to the extent not already included in Consolidated EBITDA, proceeds of business interruption insurance received by the Borrower or any of its Subsidiaries: | $ | ||||||
9. | costs, fees, expenses, charges and any one-time payments made related to (A) the Loan Parties negotiation and entry into the Loan Documents, or (B) any Permitted Acquisition or any debt or equity offering (whether or not consummated): | $ |
1 | The aggregate amount of consent fees added back to Consolidated Net Income for purposes of calculating Consolidated EBITDA, together with the aggregate amount of prepayment premiums excluded from Consolidated Interest Charges pursuant to the parenthetical in clause (b) of the first sentence of the definition of Consolidated Adjusted Interest Coverage Ratio, shall not exceed 3% of the outstanding principal amount of the applicable Indebtedness permitted under Section 7.03 of the Credit Agreement so repaid or the holders of which have been so compensated |
10. | all unrealized non-cash losses under interest rate Swap Contracts during such period: | $ | ||||||
11. | extraordinary, unusual or non-recurring income or gains of the Borrower and its Subsidiaries increasing such Consolidated Net Income which does not represent a cash item in such period or any future period: | $ | ||||||
12. | all unrealized non-cash gains under interest rate Swap Contracts during such period: | $ | ||||||
13. | Consolidated EBITDA (Lines I.A.1+2+3+4+5+6+7+8+9+10-11-12): | $ | ||||||
B. | rent expense 2 for the period of the four prior fiscal quarters ending on the Statement Date: | $ | ||||||
C. | Consolidated Interest Charges 3 for the period of the four fiscal quarters then ending on the Statement Date: | $ | ||||||
D. | Consolidated Adjusted Interest Coverage Ratio 4 ((Line I.A.13 + Line.I.B) ÷ (Line I.C + Line I.B): |
minimum Consolidated Adjusted Interest Coverage Ratio permitted for Subject Period: see Section 7.11(a) of the Credit Agreement
II. | Section 7.11 (b) Consolidated Capitalization Ratio. | |||||
A. | Consolidated Funded Indebtedness at Statement Date: | $ | ||||
B. | Stockholders Equity at Statement Date: | $ | ||||
C. | Consolidated Capitalization Ratio (Line II.A ÷ (Line II.A + Line II.B)): | $ | ||||
maximum Consolidated Capitalization Ratio permitted for Subject Period: 0.70 to 1.0 |
2 | Solely for purposes of this calculation, rent expense shall include operating lease expense. |
3 | This calculation of Consolidated Interest Charges shall exclude (i) any non-cash impact associated with any equity or equity-linked securities and (ii) any prepayment premiums or penalties associated with the voluntary prepayment or redemption of Indebtedness permitted under Section 7.03 of the Credit Agreement paid in cash by the Borrower or any of its Subsidiaries. Notwithstanding the forgoing, the aggregate amount of prepayment premiums excluded from Consolidated Interest Charges pursuant to the preceding sentence, together with the aggregate amount of consent fees added back to Consolidated Net Income for purposes of calculating Consolidated EBITDA pursuant to Line I.A.7 above, shall not exceed 3% of the outstanding principal amount of the applicable Indebtedness permitted under Section 7.03 of the Credit Agreement so prepaid or redeemed. |
4 | For purposes of calculation the Consolidated Adjusted Interest Coverage Ratio and in the sole discretion of the Borrower, Consolidated EBITDA and Consolidated Interest Charges shall include pro-forma adjustments to incorporate the financial results of any entity acquired during the subject period by the Borrower or its Subsidiaries. |
III. | Section 7.12 Capital Expenditures. | |||||
A. | capital expenditures made during the portion of the fiscal year ended on the Statement Date: | $ | ||||
B. | normal replacements and maintenance which are properly charged to current operations during such period: | $ | ||||
C. | expenditures made during such period with the proceeds of any Disposition of fixed or capital assets within 180 days of the date of such Disposition permitted under Section 7.05 of the Credit Agreement: | $ | ||||
D. | expenditures made during such period as a lessee of real property to improve the leasehold estate, so long as and to the extent that such expenditure has actually been reimbursed in cash by the applicable lessor: | $ | ||||
E. | expenditures to the extent financed with the proceeds of Indebtedness (other than a borrowing of revolving debt or short-term debt), made during such period: | $ | ||||
F. | capital expenditures made for leasing assets: | $ | ||||
G. | capital expenditures made during such fiscal year (Line III.A Line III.B Line III.C Line III.D Line III.E Line III.F): | $ |
maximum capital expenditures permitted in any fiscal year of the Borrower and its Subsidiaries: $50,000,000
Exhibit 10.5
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is entered into by and between The Greenbrier Companies, Inc., an Oregon corporation (the Company), and (the Employee) as of the day of , 20 .
The Board of Directors of the Company (the Board) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Employee, notwithstanding the possibility or occurrence of a Change of Control (as defined in Section 2) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or potential Change of Control and to encourage the Employees full attention and dedication to the Company currently and in the event of any pending or potential Change of Control, and to provide the Employee with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Employee will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. | Intent; Certain Definitions. |
The intent of this Agreement is to entitle the Employee to receive from the Company certain payments and benefits in the event that the Employees employment is terminated following a Change of Control, subject to the terms, conditions and limitations set forth herein.
(a) The Effective Date shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control occurs, subject to Section 1(c), below.
(b) The Change of Control Period shall mean the period commencing on the Effective Date and ending on the second anniversary of such date.
(c) Notwithstanding any other provision of this Agreement to the contrary, if a Change of Control occurs and if the Employees employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Employee that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the Effective Date shall mean the date immediately prior to the date of such termination of employment, and such termination shall be deemed to have occurred during the Change of Control Period.
2. | Change of Control. |
For the purpose of this Agreement, a Change of Control shall mean the occurrence of any of the following:
(a) The acquisition by any individual, entity or group (within the meaning of section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) of beneficial ownership (within the meaning of Rule 13d3 promulgated under the Exchange Act) of 30 percent or more of the stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of the Company (irrespective of whether at the time stock of any class or classes of the Company shall have or might have voting power by reason of the happening of any contingency); provided, however, that for purposes of this subsection (a), the following acquisitions will not constitute a Change of Control: (i) any acquisition directly from the Company; (ii) any acquisition by the Company or a subsidiary of the Company; or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company.
(b) The individuals who, as of the date of this Agreement, are the members of the Board of Directors of the Company (the Incumbent Board) cease for any reason to constitute a majority of the Board, unless the election or appointment, or nomination for election or appointment, of any new member of the Board was approved by a vote of a majority of the Incumbent Board of Directors, then such new member shall be considered as though such individual were a member of the Incumbent Board.
(c) The consummation of a merger or consolidation involving the Company if the stockholders owning the capital and profits (ownership interests) of the Company immediately before such merger or consolidation do not, as a result of such merger or consolidation, own, directly or indirectly, more than 50 percent of the combined voting power or ownership interests of the Company, or the entity resulting from such merger or consolidation, in substantially the same proportion as their ownership of the combined voting power or ownership interests outstanding immediately before such merger or consolidation.
(d) The sale or other disposition of all or substantially all of the assets of the Company.
(e) The dissolution or the complete or partial liquidation of the Company.
3. | Termination of Employment. |
(a) Death or Disability . The Employees employment shall terminate automatically upon the Employees death during the Change of Control Period. If the Company determines in good faith that the Disability of the Employee has occurred during the Change of Control Period (pursuant to the definition of Disability set forth below), it may give to the Employee written notice in accordance with Section 11(b) of its intention to terminate the Employees employment. In such event, the Employees employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Employee (the Disability Effective Date), provided that, within the 30 days after such receipt, the Employee shall not have returned to full-time performance of the Employees duties. For purposes of this Agreement, Disability shall mean the absence of the Employee from the Employees duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness
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which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employees legal representative (such agreement as to acceptability not to be withheld unreasonably).
(b) Cause . The Company may terminate the Employees employment during the Change of Control Period for Cause. For purposes of this Agreement, Cause shall mean (i) a willful and continued failure to perform substantially the Employees duties with the Company, other than such failure (A) resulting from Employees Disability or incapacity due to bodily injury or physical or mental illness; or (B) for which a demand for substantial performance is delivered to Employee which specifically identifies the manner in which Employee has not substantially performed Employees duties and provides a 30-day period during which time Employee may take corrective actions, which period of time has not yet expired; or (ii) the conviction of the Employee (including a plea of nolo contendere) of a felony or gross misdemeanor under federal or state law which is materially and demonstrably injurious to the Company or which impairs the Employees ability to perform substantially the Employees duties for the Company.
(c) Good Reason . The Employees employment may be terminated during the Change of Control Period by the Employee for Good Reason. For purposes of this Agreement, Good Reason shall mean:
(A) A material change in Employees status, positions, duties or responsibility as an employee of the Company as in effect immediately prior to the Effective Date which may reasonably be considered to be an adverse change, except in connection with the termination of Employees employment for Cause or due to Disability or death, or resulting from Employees decision for any reason other than for Good Reason;
(B) A reduction by the Company of Employees base salary exceeding 5 percent of Employees prior years base salary (or an adverse change in the form or timing of the payment thereof) as in effect immediately prior to the Effective Date;
(C) A reduction by the Company of Employees annual bonus exceeding 20 percent of Employees prior years annual bonus (unless such reduction relates to the amount of annual bonus payable to Employee for the achievement of specified performance goals or to the attainment of profitability levels of the Company or certain of its subsidiaries, and the non-achievement of such goals and/or the non-attainment of profitability levels of the Company or certain of its subsidiaries is the reason for the reduction in Employees annual bonus compared to the prior years bonus);
(D) the Companys requiring the Employee to be based at any office more than 35 miles from where Employees office is located immediately prior to the Effective Date;
(E) any purported termination by the Company of the Employees employment otherwise than as expressly permitted by this Agreement; or
(F) any failure by the Company to comply with and satisfy Section 10(c), provided that such successor has received at least ten days prior written notice from the Company or the Employee of the requirements of Section 10(c).
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For purposes of this Section 3(c), any good faith determination of Good Reason made by the Employee shall be conclusive.
(d) Notice of Termination . Any termination by the Company for Cause, or by the Employee for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 11(b). For purposes of this Agreement, a Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employees employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date of such notice. The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Employee or the Company hereunder or preclude the Employee or the Company from asserting such fact or circumstance in enforcing the Employees or the Companys rights hereunder.
(e) Date of Termination . Date of Termination means (i) if the Employees employment is terminated by the Company for Cause, or by the Employee for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Employees employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (iii) if the Employees employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be.
4. | Obligations of the Company upon Termination. |
(a) Good Reason; Other than for Cause, or Disability . If, during the Change of Control Period, the Company shall terminate the Employees employment other than for Cause or Disability, or the Employee shall terminate employment for Good Reason:
(i) Subject to Section 4(e) below, the Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
(A) the Employees Base Salary through the Date of Termination and any accrued vacation pay, in each case to the extent not previously paid (the sum of such amounts shall be hereinafter referred to as the Accrued Obligations); and
(B) the amount equal to one and one-half times the amount of the sum of (x) the Employees Base Salary and (y) the Average Bonus (such amount shall be hereinafter referred to as the Severance Amount).
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(ii) Base Salary shall mean Employees current annual base salary in effect at the time a Change in Control occurs. Average Bonus shall mean the average of the two most recent annual bonuses received by the Employee prior to the year in which a Change of Control occurs, or, if the Employee shall not have been employed by the Company for a sufficient tenure as to have been eligible to receive two annual bonuses, an amount equal to the most recent annual bonus, if any, received by the Employee.
(iii) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Employee and/or the Employees family any other amounts or benefits required to be paid or provided or which the Employee and/or the Employees family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer Employees of the Company and its affiliated companies and their families during the 90day period immediately preceding the Effective Date or, if more favorable to the Employee, as in effect generally thereafter with respect to other peer Employees of the Company and its affiliated companies and their families (such other amounts and benefits shall be hereinafter referred to as the Other Benefits).
(iv) All unvested stock options and restricted stock grants held by Employee shall become fully vested and exercisable as of the Date of Termination.
(v) For a period of one and one-half years following the Date of Termination (the Employee Benefit Continuation Period), the Company shall continue to provide all insured and self-insured employee benefits (including, without limitation, medical, life, dental, vision and disability plans) to the Employee and/or the Employees family reasonably similar to those which would have been provided to them in accordance with the plans, programs, practices and policies if the Employees employment had not been terminated (such continuation of benefits shall be referred to as Employee Benefit Continuation). If the Employee becomes reemployed with another employer during the Employee Benefit Continuation Period and is eligible to receive medical or other employee benefits under another employer provided plan, the Company shall not be obligated to continue to provide the medical and other employee benefits described herein, to the extent that reasonably similar medical or other benefits are available to the Employee pursuant to such employer-provided plan. For purposes of Employees rights to continuation coverage pursuant to COBRA, Employee shall be considered to have remained employed until, and Employees COBRA rights shall be triggered by, the end of the Employee Benefit Continuation Period. COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985.
(b) Death . If the Employees employment is terminated by reason of the Employees death during the Change of Control Period, this Agreement shall terminate without further obligations to the Employees legal representatives under this Agreement, other than for (i) payment of Accrued Obligations (which shall be paid to the Employees estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination); and (ii) the timely payment or provision of the Employee Benefit Continuation and Other Benefits.
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(c) Disability . If the Employees employment is terminated by reason of the Employees Disability during the Change of Control Period, this Agreement shall terminate without further obligations to the Employee, other than for (i) payment of Accrued Obligations (which shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination); and (ii) the timely payment of provision of the Employee Benefit Continuation and Other Benefits.
(d) Cause; Other than for Good Reason . If the Employees employment shall be terminated for Cause during the Change of Control Period, this Agreement shall terminate without further obligations to the Employee other than the obligation to pay to the Employee Annual Base Salary through the Date of Termination to the extent previously unpaid. If the Employee terminates employment during the Change of Control Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Employee, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination.
(e) Six-Month Payment Delay for Specified Employees . Notwithstanding any other provision of this Agreement to the contrary, in the event that the Employee is determined to be a specified employee within the meaning of Treas. Reg. §1.409A-1(i), then no payments shall be made to the Employee pursuant to this Agreement before the date that is six months after the date of the Employees separation from service, as that term is defined in Treas. Reg. §1.409A-1(h).
5. | Non-Exclusivity of Rights. |
Except as provided in Sections 4(a)(v), 4(b) and 4(c), nothing in this Agreement shall prevent or limit the Employees continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
6. | Full Settlement; Resolution of Disputes. |
(a) The Companys obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. In no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement and, except as provided in Section 4(a)(v), such amounts shall not be reduced whether or not the Employee obtains other employment. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any
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contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in section 7872(f)(2)(A) of the Internal Revenue Code (the Code).
(b) If there shall be any dispute between the Company and the Employee (i) in the event of any termination of the Employees employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Employee, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Employee of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Employee and/or the Employees family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 4(a) as though such termination were by the Company without Cause, or by the Employee with Good Reason; provided, however, that the Company shall not be required to pay any disputed amount pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Employee to repay all such amounts to which the Employee is ultimately adjudged by such court not to be entitled.
7. | Limitation on Payments and Benefits. |
Notwithstanding anything in this Agreement to the contrary, if any of the payments or benefits to be made or provided in connection with the Agreement, together with any other payments or benefits which the Employee has the right to receive from the Company or any entity which is a member of an affiliated group (as defined in section 1504(a) of the Code without regard to section 1504(b) of the Code) of which the Company is a member constitute an excess parachute payment (as defined in section 280G(b) of the Code), the payments or benefits to be made or provided in connection with this Agreement will be reduced to the extent necessary to prevent any portion of such payments or benefits from becoming nondeductible by the Company pursuant to section 280G of the Code or subject to the excise tax imposed under section 4999 of the Code. The determination as to whether any such decrease in the payments or benefits to be made or provided in connection with this Agreement is necessary must be made in good faith by a nationally recognized accounting firm (the Accounting Firm), and such determination will be conclusive and binding upon Employee and the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. In the event that such a reduction is necessary, Employee will have the right to designate the particular payments or benefits that are to be reduced or eliminated so that no portion of the payments or benefits to be made or provided to Employee in connection with the Agreement will be excess parachute payments subject to the deduction limitations under section 280G of the Code and the excise tax under section 4999 of the Code.
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8. | Confidential Information. |
The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Employee during the Employees employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Employee or representatives of the Employee in violation of this Agreement). After termination of the Employees employment with the Company, the Employee shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Employee under this Agreement.
9. | Nondisparagement; Cooperation. |
(a) Employee agrees not to disparage the Company or its officers, directors, employees, shareholders or agents, in any manner likely to be harmful to them or their business, business reputations or personal reputations. Employee shall respond accurately and fully to any question, inquiry or request for information when required by legal process, notwithstanding the foregoing.
(b) During the Change of Control Period and during the twelve month period following the Date of Termination, Employee will cooperate with the Company in responding to the reasonable requests of the Board, the Companys or its General Counsel, in connection with any and all existing or future litigation, arbitrations, mediations or investigations brought by or against the Company, or its affiliates, agents, officers, directors or employees, whether administrative, civil or criminal in nature, in which the Company reasonably deems Employees cooperation necessary or desirable. In such matters, Employee agrees to provide the Company with reasonable advice, assistance and information, including offering and explaining evidence, providing sworn statements, and participating in discovery and trial preparation and testimony. Employee also agrees to promptly send the Company copies of all correspondence (for example, but not limited to, subpoenas) received by Employee in connection with any such legal proceedings, unless Employee is expressly prohibited by law from so doing. The Company will reimburse Employee for reasonable out-of-pocket expenses incurred by Employee as a result of Employees cooperation with the obligations described in this Section 9(b), within 30 days of the presentation of appropriate documentation thereof, in accordance with the Companys standard reimbursement policies and procedures.
10. | Successors. |
(a) This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employees legal representatives.
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(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, Company shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
11. | Miscellaneous. |
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee :
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If to the Company :
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035 USA
Attention: President
With a copy to:
General Counsel
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035 USA
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
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(d) The Company may withhold from any amounts payable under this Agreement such Federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Employees or the Companys failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder, including, without limitation, the right of the Employee to terminate employment for Good Reason pursuant to Section 3(c)(A)(F), shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f) The Employee and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Employee and the Company, the employment of the Employee by the Company is at will and, prior to the Effective Date, may be terminated by either the Employee or the Company at any time. Moreover, if prior to the Effective Date, the Employees employment with the Company terminates, then the Employee shall have no further rights under this Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.
THE GREENBRIER COMPANIES, INC. | EMPLOYEE: | |||||||
By: |
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Its: |
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THE GREENBRIER COMPANIES, INC.
Exhibit 31.1
CERTIFICATIONS
I, William A. Furman, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of The Greenbrier Companies, Inc. for the quarterly period ended February 28, 2013; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 4, 2013
/s/ William A. Furman |
William A. Furman |
President and Chief Executive Officer |
THE GREENBRIER COMPANIES, INC.
Exhibit 31.2
CERTIFICATIONS (contd)
I, Mark J. Rittenbaum, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of The Greenbrier Companies, Inc. for the quarterly period ended February 28, 2013; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 4, 2013
/s/ Mark J. Rittenbaum |
Mark J. Rittenbaum |
Executive Vice President and Chief Financial Officer |
THE GREENBRIER COMPANIES, INC.
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of The Greenbrier Companies, Inc. (the Company) on Form 10-Q for the quarterly period ended February 28, 2013 as filed with the Securities and Exchange Commission on the date therein specified (the Report), I, William A. Furman, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 4, 2013
/s/ William A. Furman |
William A. Furman |
President and Chief Executive Officer |
THE GREENBRIER COMPANIES, INC.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of The Greenbrier Companies, Inc. (the Company) on Form 10-Q for the quarterly period ended February 28, 2013 as filed with the Securities and Exchange Commission on the date therein specified (the Report), I, Mark J. Rittenbaum, Executive Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 4, 2013
/s/ Mark J. Rittenbaum |
Mark J. Rittenbaum |
Executive Vice President and Chief Financial Officer |