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 29, 2016
¨ | 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.) |
|
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 | x | Accelerated filer | ¨ | |||
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 30, 2016 was 28,094,347 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 Quarterly Report 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:
| 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); |
| ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms; |
| ability to utilize beneficial tax strategies; |
| ability to grow our businesses; |
| ability to obtain lease and sales contracts which provide adequate protection against attempted modifications or cancellations, changes in interest rates and increased costs of materials and components; |
| ability to obtain adequate insurance coverage at acceptable rates; |
| ability to convert backlog of railcar orders and lease syndication commitments; |
| ability to obtain adequate certification and licensing of products; and |
| 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:
| fluctuations in demand for newly manufactured railcars or marine barges; |
| fluctuations in demand for wheels, repair services and parts; |
| delays in receipt of orders, risks that contracts may be canceled or modified during their term, not renewed, unenforceable or breached by the customer and that customers may not purchase the amount of products or services under the contracts as anticipated; |
| ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants under various credit agreements; |
| domestic and global economic conditions including such matters as embargoes or quotas; |
| global political or security conditions in the U.S., Europe, Latin America and the Middle East including such matters as terrorism, war, civil disruption and crime; |
| sovereign risk related to international governments that includes, but is not limited to, governments stopping payments, repudiating their contracts, nationalizing private businesses and assets or altering foreign exchange regulations; |
| growth or reduction in the surface transportation industry; |
| ability to maintain good relationships with our labor force, third party labor providers and collective bargaining units representing our direct and indirect labor force; |
| ability to maintain good relationships with our customers and suppliers; |
| ability to renew or replace expiring customer contracts on satisfactory terms; |
| ability to obtain and execute suitable lease contracts for leased railcars for syndication; |
| steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and availability and their impact on product demand and margin; |
| delay or failure of acquired businesses or joint ventures, assets, start-up operations, or new products or services to compete successfully; |
| changes in product mix and the mix of revenue levels among reporting segments; |
2
THE GREENBRIER COMPANIES, INC.
| labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo; |
| production difficulties and product delivery delays as a result of, among other matters, costs or inefficiencies associated with expansion, start-up, or changing of production lines or changes in production rates, equipment failures, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors or suppliers; |
| lower than anticipated lease renewal rates, earnings on utilization based leases or residual values for leased equipment; |
| discovery of defects in railcars or services resulting in increased warranty costs or litigation; |
| physical damage, business interruption or product or service liability claims that exceed our insurance coverage; |
| commencement of and ultimate resolution or outcome of pending or future litigation and investigations; |
| natural disasters or severe weather patterns that may affect either us, our suppliers or our customers; |
| loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues; |
| competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base, and competitiveness of our manufacturing facilities and products; |
| industry overcapacity and our manufacturing capacity utilization; |
| decreases or write-downs in carrying value of inventory, goodwill, intangibles or other assets due to impairment; |
| severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations; |
| changes in future maintenance or warranty requirements; |
| ability to adjust to the cyclical nature of the industries in which we operate; |
| changes in interest rates and financial impacts from interest rates; |
| ability and cost to maintain and renew operating permits; |
| actions or failures to act by various regulatory agencies including changing tank car or other rail car regulations; |
| potential environmental remediation obligations; |
| changes in commodity prices, including oil and gas; |
| risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement and continued use of such rights; |
| expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry; |
| availability of a trained work force at a reasonable cost and with reasonable terms of employment; |
| availability and/or price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order; |
| failure to successfully integrate joint ventures or acquired businesses; |
| discovery of previously unknown liabilities associated with acquired businesses; |
| failure of or delay in implementing and using new software or other technologies; |
| the impact of cybersecurity risks and the costs of mitigating and responding to a data security breach; |
| ability to replace maturing lease and management services revenue and earnings with revenue and earnings from new commercial transactions, including new railcar leases, additions to the lease fleet and new management services contracts; |
| credit limitations upon our ability to maintain effective hedging programs; |
| financial impacts from currency fluctuations and currency hedging activities in our worldwide operations; |
| increased costs or other impacts due to changes in legislation, regulations or accounting pronouncements; and |
| fraud, misconduct by employees and potential exposure to liabilities under the Foreign Corrupt Practices Act and other anti-corruption laws and regulations. |
3
THE GREENBRIER COMPANIES, INC.
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, strategy, could, would, should, likely, will, may, can, designed to, future, 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.
4
THE GREENBRIER COMPANIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. | Condensed Financial Statements |
Consolidated Balance Sheets
(In thousands, unaudited)
February 29,
2016 |
August 31,
2015 |
|||||||
Assets |
||||||||
Cash and cash equivalents |
$ | 283,541 | $ | 172,930 | ||||
Restricted cash |
8,877 | 8,869 | ||||||
Accounts receivable, net |
228,072 | 196,029 | ||||||
Inventories |
421,243 | 445,535 | ||||||
Leased railcars for syndication |
179,975 | 212,534 | ||||||
Equipment on operating leases, net |
235,171 | 255,391 | ||||||
Property, plant and equipment, net |
310,019 | 303,135 | ||||||
Investment in unconsolidated affiliates |
86,850 | 87,270 | ||||||
Intangibles and other assets, net |
73,296 | 65,554 | ||||||
Goodwill |
43,265 | 43,265 | ||||||
|
|
|
|
|||||
$ | 1,870,309 | $ | 1,790,512 | |||||
|
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|
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Liabilities and Equity |
||||||||
Revolving notes |
$ | 75,000 | $ | 50,888 | ||||
Accounts payable and accrued liabilities |
401,010 | 455,213 | ||||||
Deferred income taxes |
55,204 | 60,657 | ||||||
Deferred revenue |
84,362 | 33,836 | ||||||
Notes payable |
322,539 | 326,429 | ||||||
Commitments and contingencies (Note 12) |
||||||||
Equity: |
||||||||
Greenbrier |
||||||||
Preferred stockwithout par value; 25,000 shares authorized; none outstanding |
| | ||||||
Common stockwithout par value; 50,000 shares authorized; 28,094 and 28,907 shares outstanding at February 29, 2016 and August 31, 2015 |
| | ||||||
Additional paid-in capital |
272,502 | 295,444 | ||||||
Retained earnings |
561,198 | 458,599 | ||||||
Accumulated other comprehensive loss |
(32,760 | ) | (21,205 | ) | ||||
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|
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|
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Total equity Greenbrier |
800,940 | 732,838 | ||||||
Noncontrolling interest |
131,254 | 130,651 | ||||||
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|
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Total equity |
932,194 | 863,489 | ||||||
|
|
|
|
|||||
$ | 1,870,309 | $ | 1,790,512 | |||||
|
|
|
|
The accompanying notes are an integral part of these financial statements
5
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Income
(In thousands, except per share amounts, unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
|||||||||||||
Revenue |
||||||||||||||||
Manufacturing |
$ | 454,531 | $ | 505,241 | $ | 1,153,192 | $ | 885,190 | ||||||||
Wheels & Parts |
90,458 | 102,640 | 169,187 | 189,264 | ||||||||||||
Leasing & Services |
124,090 | 22,268 | 149,089 | 50,753 | ||||||||||||
|
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|
|||||||||
669,079 | 630,149 | 1,471,468 | 1,125,207 | |||||||||||||
Cost of revenue |
||||||||||||||||
Manufacturing |
361,827 | 403,227 | 894,860 | 719,264 | ||||||||||||
Wheels & Parts |
81,388 | 92,768 | 154,390 | 169,640 | ||||||||||||
Leasing & Services |
105,973 | 8,844 | 117,562 | 22,925 | ||||||||||||
|
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|
|||||||||
549,188 | 504,839 | 1,166,812 | 911,829 | |||||||||||||
Margin |
119,891 | 125,310 | 304,656 | 213,378 | ||||||||||||
Selling and administrative expense |
38,244 | 32,899 | 74,793 | 66,628 | ||||||||||||
Net gain on disposition of equipment |
(10,746 | ) | (121 | ) | (11,015 | ) | (204 | ) | ||||||||
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|
|||||||||
Earnings from operations |
92,393 | 92,532 | 240,878 | 146,954 | ||||||||||||
Other costs |
||||||||||||||||
Interest and foreign exchange |
1,417 | 1,929 | 6,853 | 5,070 | ||||||||||||
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|
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Earnings before income taxes and earnings
|
90,976 | 90,603 | 234,025 | 141,884 | ||||||||||||
Income tax expense |
(25,734 | ) | (29,372 | ) | (70,453 | ) | (45,426 | ) | ||||||||
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|
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Earnings before earnings (loss) from
|
65,242 | 61,231 | 163,572 | 96,458 | ||||||||||||
Earnings (loss) from unconsolidated affiliates |
974 | (185 | ) | 1,357 | 570 | |||||||||||
|
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|
|
|
|
|
|
|||||||||
Net earnings |
66,216 | 61,046 | 164,929 | 97,028 | ||||||||||||
Net earnings attributable to
|
(21,348 | ) | (10,695 | ) | (50,628 | ) | (13,891 | ) | ||||||||
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|
|
|
|||||||||
Net earnings attributable to Greenbrier |
$ | 44,868 | $ | 50,351 | $ | 114,301 | $ | 83,137 | ||||||||
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|
|||||||||
Basic earnings per common share |
$ | 1.54 | $ | 1.86 | $ | 3.91 | $ | 3.04 | ||||||||
Diluted earnings per common share |
$ | 1.41 | $ | 1.57 | $ | 3.55 | $ | 2.57 | ||||||||
Weighted average common shares: |
||||||||||||||||
Basic |
29,098 | 27,028 | 29,244 | 27,348 | ||||||||||||
Diluted |
32,360 | 33,073 | 32,542 | 33,395 | ||||||||||||
Dividends declared per common share |
$ | 0.20 | $ | 0.15 | $ | 0.40 | $ | 0.30 |
The accompanying notes are an integral part of these financial statements
6
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Comprehensive Income
(In thousands, unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
|||||||||||||
Net earnings |
$ | 66,216 | $ | 61,046 | $ | 164,929 | $ | 97,028 | ||||||||
Other comprehensive income |
||||||||||||||||
Translation adjustment |
(1,165 | ) | (6,241 | ) | (5,132 | ) | (9,691 | ) | ||||||||
Reclassification of derivative financial instruments recognized in net earnings 1 |
559 | 382 | 1,051 | 671 | ||||||||||||
Unrealized gain (loss) on derivative financial instruments 2 |
(1,478 | ) | 192 | (7,530 | ) | (114 | ) | |||||||||
Other (net of tax effect) |
(6 | ) | 8 | (6 | ) | 6 | ||||||||||
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|
|||||||||
(2,090 | ) | (5,659 | ) | (11,617 | ) | (9,128 | ) | |||||||||
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|
|||||||||
Comprehensive income |
64,126 | 55,387 | 153,312 | 87,900 | ||||||||||||
Comprehensive income attributable to noncontrolling interest |
(21,359 | ) | (10,608 | ) | (50,566 | ) | (13,756 | ) | ||||||||
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|
|||||||||
Comprehensive income attributable to Greenbrier |
$ | 42,767 | $ | 44,779 | $ | 102,746 | $ | 74,144 | ||||||||
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|
1 | Net of tax effect of $0.2 million and $0.2 million for the three months ended February 29, 2016 and February |
28, 2015 and $0.5 million and $0.4 million for the six months ended February 29, 2016 and February 28, 2015.
2 | Net of tax effect of $0.9 million and $0.1 million for the three months ended February 29, 2016 and February |
28, 2015 and $2.4 million and $0.5 million for the six months ended February 29, 2016 and February 28, 2015.
The accompanying notes are an integral part of these financial statements
7
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Equity
(In thousands, unaudited)
Attributable to Greenbrier | ||||||||||||||||||||||||||||
Common
Stock Shares |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Loss |
Total
Attributable to Greenbrier |
Attributable to
Noncontrolling Interest |
Total Equity | ||||||||||||||||||||||
Balance September 1, 2015 |
28,907 | $ | 295,444 | $ | 458,599 | $ | (21,205 | ) | $ | 732,838 | $ | 130,651 | $ | 863,489 | ||||||||||||||
Net earnings |
| | 114,301 | | 114,301 | 50,628 | 164,929 | |||||||||||||||||||||
Other comprehensive loss, net |
| | | (11,555 | ) | (11,555 | ) | (62 | ) | (11,617 | ) | |||||||||||||||||
Noncontrolling interest adjustments |
| | | | | 2,815 | 2,815 | |||||||||||||||||||||
Purchase of noncontrolling interest |
| | | | | (4 | ) | (4 | ) | |||||||||||||||||||
Joint venture partner distribution declared |
| | | | | (52,774 | ) | (52,774 | ) | |||||||||||||||||||
Restricted stock awards (net of cancellations) |
242 | (3,306 | ) | | | (3,306 | ) | | (3,306 | ) | ||||||||||||||||||
Unamortized restricted stock |
| (789 | ) | | | (789 | ) | | (789 | ) | ||||||||||||||||||
Restricted stock amortization |
| 10,740 | | | 10,740 | | 10,740 | |||||||||||||||||||||
Excess tax benefit from restricted
|
| 2,786 | | | 2,786 | | 2,786 | |||||||||||||||||||||
Cash dividends |
| | (11,702 | ) | | (11,702 | ) | | (11,702 | ) | ||||||||||||||||||
Repurchase of stock |
(1,055 | ) | (32,373 | ) | | | (32,373 | ) | | (32,373 | ) | |||||||||||||||||
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Balance February 29, 2016 |
28,094 | $ | 272,502 | $ | 561,198 | $ | (32,760 | ) | $ | 800,940 | $ | 131,254 | $ | 932,194 | ||||||||||||||
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Attributable to Greenbrier | ||||||||||||||||||||||||||||
Common
Stock Shares |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Loss |
Total
Attributable to Greenbrier |
Attributable to
Noncontrolling Interest |
Total Equity | ||||||||||||||||||||||
Balance September 1, 2014 |
27,364 | $ | 235,763 | $ | 282,559 | $ | (6,932 | ) | $ | 511,390 | $ | 62,331 | $ | 573,721 | ||||||||||||||
Net earnings |
| | 83,137 | | 83,137 | 13,891 | 97,028 | |||||||||||||||||||||
Other comprehensive income, net |
| | | (8,993 | ) | (8,993 | ) | (135 | ) | (9,128 | ) | |||||||||||||||||
Noncontrolling interest adjustments |
| | | | | 21,824 | 21,824 | |||||||||||||||||||||
Purchase of noncontrolling interest |
| | | | | (80 | ) | (80 | ) | |||||||||||||||||||
Joint venture partner distribution declared |
| | | | | (4,565 | ) | (4,565 | ) | |||||||||||||||||||
Restricted stock awards (net of cancellations) |
(82 | ) | (1,298 | ) | | | (1,298 | ) | | (1,298 | ) | |||||||||||||||||
Unamortized restricted stock |
| 1,298 | | | 1,298 | | 1,298 | |||||||||||||||||||||
Restricted stock amortization |
| 7,193 | | | 7,193 | | 7,193 | |||||||||||||||||||||
Excess tax benefit from restricted stock awards |
| 3,858 | | | 3,858 | | 3,858 | |||||||||||||||||||||
Conversion of convertible notes |
1 | 25 | | | 25 | | 25 | |||||||||||||||||||||
Cash dividends |
| | (8,173 | ) | | (8,173 | ) | | (8,173 | ) | ||||||||||||||||||
Repurchase of stock |
(863 | ) | (46,946 | ) | | | (46,946 | ) | | (46,946 | ) | |||||||||||||||||
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Balance February 28, 2015 |
26,420 | $ | 199,893 | $ | 357,523 | $ | (15,925 | ) | $ | 541,491 | $ | 93,266 | $ | 634,757 | ||||||||||||||
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The accompanying notes are an integral part of these financial statements
8
THE GREENBRIER COMPANIES, INC.
Consolidated Statements of Cash Flows
(In thousands, unaudited)
Six Months Ended | ||||||||
February 29,
2016 |
February 28,
2015 |
|||||||
Cash flows from operating activities |
||||||||
Net earnings |
$ | 164,929 | $ | 97,028 | ||||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
||||||||
Deferred income taxes |
(5,287 | ) | (3,245 | ) | ||||
Depreciation and amortization |
27,842 | 22,398 | ||||||
Net gain on disposition of equipment |
(11,015 | ) | (204 | ) | ||||
Stock based compensation expense |
10,740 | 7,193 | ||||||
Noncontrolling interest adjustments |
2,815 | 21,824 | ||||||
Other |
491 | 549 | ||||||
Decrease (increase) in assets: |
||||||||
Accounts receivable, net |
(30,356 | ) | (6,256 | ) | ||||
Inventories |
21,922 | (116,432 | ) | |||||
Leased railcars for syndication |
(15,391 | ) | (75,564 | ) | ||||
Other |
(3,717 | ) | (355 | ) | ||||
Increase (decrease) in liabilities: |
||||||||
Accounts payable and accrued liabilities |
(55,448 | ) | 37,521 | |||||
Deferred revenue |
41,790 | 7,750 | ||||||
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|
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Net cash provided by (used in) operating activities |
149,315 | (7,793 | ) | |||||
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|
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Cash flows from investing activities |
||||||||
Proceeds from sales of assets |
80,541 | 3,019 | ||||||
Capital expenditures |
(27,974 | ) | (53,856 | ) | ||||
Investment in and advances to unconsolidated affiliates |
(5,140 | ) | (5,715 | ) | ||||
Decrease (increase) in restricted cash |
(8 | ) | 418 | |||||
Other |
2,640 | 467 | ||||||
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|
|||||
Net cash provided by (used in) investing activities |
50,059 | (55,667 | ) | |||||
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|
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Cash flows from financing activities |
||||||||
Net change in revolving notes with maturities of 90 days or less |
26,000 | 53,000 | ||||||
Proceeds from revolving notes with maturities longer than 90 days |
| 42,563 | ||||||
Repayments of revolving notes with maturities longer than 90 days |
(1,888 | ) | (18,081 | ) | ||||
Repayments of notes payable |
(3,730 | ) | (3,740 | ) | ||||
Debt issuance costs |
(4,149 | ) | | |||||
Decrease in restricted cash |
| 11,000 | ||||||
Repurchase of stock |
(33,246 | ) | (46,946 | ) | ||||
Dividends |
(11,575 | ) | (8,016 | ) | ||||
Cash distribution to joint venture partner |
(53,543 | ) | (4,422 | ) | ||||
Excess tax benefit from restricted stock awards |
2,786 | 3,858 | ||||||
Other |
(6 | ) | | |||||
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|
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Net cash provided by (used in) financing activities |
(79,351 | ) | 29,216 | |||||
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|
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Effect of exchange rate changes |
(9,412 | ) | (5,160 | ) | ||||
Increase (decrease) in cash and cash equivalents |
110,611 | (39,404 | ) | |||||
Cash and cash equivalents |
||||||||
Beginning of period |
172,930 | 184,916 | ||||||
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End of period |
$ | 283,541 | $ | 145,512 | ||||
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Cash paid during the period for |
||||||||
Interest |
$ | 6,928 | $ | 7,439 | ||||
Income taxes, net |
$ | 63,050 | $ | 50,570 | ||||
Non-cash activity |
||||||||
Transfer from Leased railcars for syndication to Equipment on operating leases, net |
$ | 45,615 | $ | 3,313 | ||||
Capital expenditures accrued in Accounts payable and accrued liabilities |
$ | 6,430 | $ | 4,451 | ||||
Change in Accounts payable and accrued liabilities associated with repurchase of stock |
$ | 873 | $ | | ||||
Change in Accounts payable and accrued liabilities associated with cash distributions to joint venture partner |
$ | 769 | $ | | ||||
Change in Accounts payable and accrued liabilities associated with dividends declared |
$ | (127 | ) | $ | 157 |
The accompanying notes are an integral part of these financial statements
9
THE GREENBRIER COMPANIES, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Interim Financial Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of February 29, 2016, for the three and six months ended February 29, 2016 and for the three and six months ended February 28, 2015 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals) that, in the opinion of management, are necessary for a fair presentation of the financial position, operating results and cash flows for the periods indicated. The results of operations for the three and six months ended February 29, 2016 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2016.
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 2015 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.
Prospective Accounting Changes In May 2014, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) jointly issued a converged standard on the recognition of revenue from contracts with customers. The issued guidance converges the criteria for reporting revenue, and requires disclosures sufficient to describe the nature, amount, timing, and uncertainty of revenue and cash flows arising from these contracts. Companies can transition to the standard either retrospectively or as a cumulative effect adjustment as of the date of adoption. The FASB issued a one year deferral and the new standard is effective for fiscal years and interim periods within those years beginning after December 15, 2017. The Company plans to adopt this guidance beginning September 1, 2018. The Company is evaluating the impact of this standard as well as its method of adoption on its consolidated financial statements and disclosures.
In April 2015, the FASB issued Accounting Standards Update 2015-03, Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). The FASB issued this update to simplify the presentation of debt issuance costs related to a recognized debt liability to present the debt issuance costs as a direct deduction from the carrying value of the debt liability rather than showing the debt issuance costs as an asset. The guidance is limited to the presentation of debt issuance costs and does not impact its recognition and measurement. The new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015, with early adoption permitted, and is required to be applied on a retrospective basis. The Company plans to adopt ASU 2015-03 beginning September 1, 2016. As the adoption of this new accounting standard will only amend presentation and disclosure requirements, the adoption will not affect the Companys financial position, results of operations or cash flows.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02). The new guidance supersedes existing guidance on accounting for leases in Topic 840 and is intended to increase the transparency and comparability of accounting for lease transactions. ASU 2016-02 requires most leases to be recognized on the balance sheet. Lessees will need to recognize a right-of-use asset and a lease liability for virtually all leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting remains similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. The ASU will require both quantitative and qualitative disclosures regarding key information about leasing arrangements. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a
10
THE GREENBRIER COMPANIES, INC.
modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. The Company plans to adopt this guidance beginning September 1, 2019. The Company is evaluating the impact of this standard on its consolidated financial statements and disclosures.
Share Repurchase Program Since October 2013, the Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the Companys common stock. The program may be modified, suspended or discontinued at any time without prior notice. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.
During the three and six months ended February 29, 2016, the Company purchased a total of 533,061 and 1,054,687 shares for approximately $13.3 million and $32.4 million, respectively. As of February 29, 2016 the Company had cumulatively repurchased 3,206,226 shares for approximately $137.0 million and had $88.0 million available under the share repurchase program with an expiration date of January 1, 2018.
Note 2 Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Work-in-process includes material, labor and overhead. The following table summarizes the Companys inventory balance:
(In thousands) |
February 29,
2016 |
August 31,
2015 |
||||||
Manufacturing supplies and raw materials |
$ | 253,289 | $ | 311,880 | ||||
Work-in-process |
59,737 | 75,032 | ||||||
Finished goods |
111,208 | 61,302 | ||||||
Excess and obsolete adjustment |
(2,991 | ) | (2,679 | ) | ||||
|
|
|
|
|||||
$ | 421,243 | $ | 445,535 | |||||
|
|
|
|
Note 3 Intangibles and Other Assets, net
Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment.
The following table summarizes the Companys identifiable intangible and other assets balance:
(In thousands) |
February 29,
2016 |
August 31,
2015 |
||||||
Intangible assets subject to amortization: |
||||||||
Customer relationships |
$ | 64,504 | $ | 65,023 | ||||
Accumulated amortization |
(35,020 | ) | (33,828 | ) | ||||
Other intangibles |
6,035 | 3,422 | ||||||
Accumulated amortization |
(4,883 | ) | (3,121 | ) | ||||
|
|
|
|
|||||
30,636 | 31,496 | |||||||
Intangible assets not subject to amortization |
912 | 912 | ||||||
Prepaid and other assets |
16,920 | 13,111 | ||||||
Nonqualified savings plan investments |
13,988 | 11,815 | ||||||
Debt issuance costs, net |
6,443 | 3,823 | ||||||
Assets held for sale |
4,397 | 4,397 | ||||||
|
|
|
|
|||||
Total Intangible and other assets, net |
$ | 73,296 | $ | 65,554 | ||||
|
|
|
|
Amortization expense for the three and six months ended February 29, 2016 was $2.5 million and $3.8 million and for the three and six months ended February 28, 2015 was $0.9 million and $1.8 million. Amortization expense for the years ending August 31, 2016, 2017, 2018, 2019 and 2020 is expected to be $5.9 million, $4.1 million, $3.4 million, $3.4 million and $3.4 million.
11
THE GREENBRIER COMPANIES, INC.
Note 4 Revolving Notes
Senior secured credit facilities, consisting of three components, aggregated to $625.3 million as of February 29, 2016.
As of February 29, 2016, a $550.0 million revolving line of credit, maturing October 2020, secured by substantially all the Companys assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.75% or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of February 29, 2016, lines of credit totaling $15.3 million secured by certain of the Companys European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3%, were available for working capital needs of the European manufacturing operation. European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from February 2017 through June 2017.
As of February 29, 2016, the Companys Mexican joint venture has three lines of credit totaling $60.0 million. The first line of credit provides up to $10.0 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 June 2016. The second line of credit provides up to $30.0 million and is fully guaranteed by the Company and its joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through January 2019. The third line of credit provides up to $20.0 million, of which the Company and its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw amounts available under this facility through August 2017.
As of February 29, 2016, outstanding commitments under the senior secured credit facilities consisted of $81.3 million in letters of credit and $75.0 million in revolving notes under the North American credit facility.
As of August 31, 2015, outstanding commitments under the senior secured credit facilities consisted of $47.2 million in letters of credit and $49.0 million in revolving notes under the North American credit facility and $1.9 million outstanding in revolving notes under the Mexican joint venture credit facilities.
12
THE GREENBRIER COMPANIES, INC.
Note 5 Accounts Payable and Accrued Liabilities
(In thousands) |
February 29,
2016 |
August 31,
2015 |
||||||
Trade payables |
$ | 186,965 | $ | 263,665 | ||||
Other accrued liabilities |
82,766 | 64,584 | ||||||
Accrued payroll and related liabilities |
63,451 | 70,836 | ||||||
Income taxes payable |
31,330 | 22,465 | ||||||
Accrued maintenance |
18,458 | 18,642 | ||||||
Accrued warranty |
12,147 | 11,512 | ||||||
Other |
5,893 | 3,509 | ||||||
|
|
|
|
|||||
$ | 401,010 | $ | 455,213 | |||||
|
|
|
|
Note 6 Warranty Accruals
Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based on the history of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. The warranty accruals, included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets, are reviewed periodically and updated based on warranty trends and expirations of warranty periods.
Warranty accrual activity:
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
||||||||||||
Balance at beginning of period |
$ | 11,609 | $ | 8,896 | $ | 11,512 | $ | 9,340 | ||||||||
Charged to cost of revenue, net |
1,463 | 1,299 | 2,884 | 1,946 | ||||||||||||
Payments |
(952 | ) | (829 | ) | (2,181 | ) | (1,803 | ) | ||||||||
Currency translation effect |
27 | (178 | ) | (68 | ) | (295 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at end of period |
$ | 12,147 | $ | 9,188 | $ | 12,147 | $ | 9,188 | ||||||||
|
|
|
|
|
|
|
|
13
THE GREENBRIER COMPANIES, INC.
Note 7 Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
(In thousands) |
Unrealized
Loss on Derivative Financial Instruments |
Foreign
Currency Translation Adjustment |
Other |
Accumulated
Other Comprehensive Loss |
||||||||||||
Balance, August 31, 2015 |
$ | (2,194 | ) | $ | (18,666 | ) | $ | (345 | ) | $ | (21,205 | ) | ||||
Other comprehensive loss before reclassifications |
(7,530 | ) | (5,070 | ) | (6 | ) | (12,606 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss |
1,051 | | | 1,051 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance, February 29, 2016 |
$ | (8,673 | ) | $ | (23,736 | ) | $ | (351 | ) | $ | (32,760 | ) | ||||
|
|
|
|
|
|
|
|
The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income, with presentation location, were as follows:
Three Months Ended | ||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
Financial Statement Location | |||||||
Loss on derivative financial instruments: |
||||||||||
Foreign exchange contracts |
$ | 420 | $ | 127 | Revenue and cost of revenue | |||||
Interest rate swap contracts |
387 | 450 | Interest and foreign exchange | |||||||
|
|
|
|
|||||||
807 | 577 | Total before tax | ||||||||
(248 | ) | (195 | ) | Tax expense | ||||||
|
|
|
|
|||||||
$ | 559 | $ | 382 | Net of tax | ||||||
|
|
|
|
Six Months Ended | ||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
Financial Statement Location | |||||||
Loss on derivative financial instruments: |
||||||||||
Foreign exchange contracts |
$ | 686 | $ | 134 | Revenue and cost of revenue | |||||
Interest rate swap contracts |
833 | 907 | Interest and foreign exchange | |||||||
|
|
|
|
|||||||
1,519 | 1,041 | Total before tax | ||||||||
(468 | ) | (370 | ) | Tax expense | ||||||
|
|
|
|
|||||||
$ | 1,051 | $ | 671 | Net of tax | ||||||
|
|
|
|
14
THE GREENBRIER COMPANIES, INC.
Note 8 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 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
||||||||||||
Weighted average basic common shares outstanding (1) |
29,098 | 27,028 | 29,244 | 27,348 | ||||||||||||
Dilutive effect of 2018 Convertible notes (2) |
3,203 | 6,044 | 3,190 | 6,044 | ||||||||||||
Dilutive effect of 2026 Convertible notes (3) |
| 1 | | 3 | ||||||||||||
Dilutive effect of performance based restricted stock units (4) |
59 | | 108 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares outstanding |
32,360 | 33,073 | 32,542 | 33,395 | ||||||||||||
|
|
|
|
|
|
|
|
(1) | Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position. |
(2) | The dilutive effect of the 2018 Convertible notes was included for the three and six months ended February 29, 2016 and the three and six months ended February 28, 2015 as they were considered dilutive under the if converted method as further discussed below. |
(3) | The dilutive effect of the 2026 Convertible notes was excluded for the three and six months ended February 29, 2016 as the average stock price was less than the conversion price of $47.33 and therefore was considered anti-dilutive. The effect of the 2026 Convertible notes was included for the three and six months ended February 28, 2015 as the average stock price was greater than the applicable conversion price, as further described below. |
(4) | Restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position. |
Dilutive EPS is calculated using the more dilutive of two approaches. The first approach includes the dilutive effect, using the treasury stock method, associated with shares underlying the 2026 Convertible notes and performance based restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved. The second approach supplements the first by including the if converted effect of the 2018 Convertible notes 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 are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable conversion price.
Three Months Ended | Six Months Ended | |||||||||||||||
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
|||||||||||||
Net earnings attributable to Greenbrier |
$ | 44,868 | $ | 50,351 | $ | 114,301 | $ | 83,137 | ||||||||
Add back: |
||||||||||||||||
Interest and debt issuance costs on the 2018
|
733 | 1,416 | 1,229 | 2,832 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings before interest and debt issuance
|
$ | 45,601 | $ | 51,767 | $ | 115,530 | $ | 85,969 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average diluted common shares
|
32,360 | 33,073 | 32,542 | 33,395 | ||||||||||||
Diluted earnings per share (1) |
$ | 1.41 | $ | 1.57 | $ | 3.55 | $ | 2.57 |
(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
15
THE GREENBRIER COMPANIES, INC.
Note 9 Stock Based Compensation
The value of restricted stock and restricted stock unit awards is amortized as compensation expense from the date of grant through the earlier of the vesting period or the recipients eligible retirement date. Awards are expensed upon grant when the recipients eligible retirement date precedes the grant date.
Compensation expense for restricted stock and restricted stock unit grants was $5.4 million and $10.7 million for the three and six months ended February 29, 2016, respectively and $3.8 million and $7.2 million for the three and six months ended February 28, 2015, respectively. Compensation expense related to restricted stock and restricted stock unit grants is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income.
Note 10 Derivative Instruments
Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are used to reduce the impact of changes in interest rates on certain debt. The Companys foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.
At February 29, 2016 exchange rates, forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros and U.S. Dollars; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $430.6 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there is a loss, or as Accounts receivable, net when there is a gain. As the contracts mature at various dates through September 2018, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest and foreign exchange at the time of occurrence.
At February 29, 2016, an interest rate swap agreement maturing in March 2020 had a notional amount of $93.9 million. The fair value of the contract is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At February 29, 2016 interest rates, approximately $1.4 million would be reclassified to interest expense in the next 12 months.
Fair Values of Derivative Instruments
Asset Derivatives | Liability Derivatives | |||||||||||||||||||
February 29,
2016 |
August 31,
2015 |
February 29,
2016 |
August 31,
2015 |
|||||||||||||||||
(In thousands) |
Balance sheet
location |
Fair
Value |
Fair
Value |
Balance sheet location |
Fair
Value |
Fair
Value |
||||||||||||||
Derivatives designated as hedging instruments |
||||||||||||||||||||
Foreign forward exchange contracts |
Accounts
receivable, net |
$ | 4,699 | $ | 1,820 |
Accounts payable
and accrued liabilities |
$ | 7,128 | $ | 737 | ||||||||||
Interest rate swap contracts |
Intangibles and
other assets, net |
| |
Accounts payable
and accrued liabilities |
3,761 | 2,393 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
$ | 4,699 | $ | 1,820 | $ | 10,889 | $ | 3,130 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Derivatives not designated as hedging instruments |
||||||||||||||||||||
Foreign forward exchange contracts |
Accounts
receivable, net |
$ | | $ | 93 |
Accounts payable
and accrued liabilities |
$ | 108 | $ | 76 |
16
THE GREENBRIER COMPANIES, INC.
The Effect of Derivative Instruments on the Statements of Income
Derivatives in cash flow hedging relationships |
Location of gain (loss) recognized in
income on derivatives |
Gain (loss) recognized in income on
derivatives six months ended |
||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||
Foreign forward exchange contract |
Interest and foreign exchange | $ | (436 | ) | $ | 81 | ||||||
Interest rate swap contracts |
Interest and foreign exchange | 138 | 69 | |||||||||
|
|
|
|
|||||||||
$ | (298 | ) | $ | 150 | ||||||||
|
|
|
|
Derivatives in cash flow hedging relationships |
Gain (loss) recognized
in OCI on derivatives (effective portion) six months ended |
Location of loss reclassified from accumulated OCI into income |
Loss reclassified from
accumulated OCI into income (effective portion) six months ended |
Location of gain 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 |
|||||||||||||||||||||||
2/29/16 | 2/28/15 | 2/29/16 | 2/28/15 | 2/29/16 | 2/28/15 | |||||||||||||||||||||||
Foreign forward exchange contracts |
$ | (6,756 | ) | $ | 1,204 | Revenue | $ | (491 | ) | $ | (134 | ) | Revenue | $ | 3,795 | $ | 792 | |||||||||||
Foreign forward exchange contracts |
(982 | ) | | Cost of revenue | (195 | ) | | Cost of revenue | 23 | | ||||||||||||||||||
Interest rate swap contracts |
(2,278 | ) | (1,925 | ) | Interest and foreign exchange | (833 | ) | (907 | ) | Interest and foreign exchange | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | (10,016 | ) | $ | (721 | ) | $ | (1,519 | ) | $ | (1,041 | ) | $ | 3,818 | $ | 792 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Note 11 Segment Information
Greenbrier operates in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture. The results of GBW Joint Venture are included as part of Earnings from unconsolidated affiliates as the Company accounts for its interest in GBW Railcar Services LLC (GBW) under the equity method of accounting.
The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Companys 2015 Annual Report on Form 10-K. Performance is evaluated based on Earnings from operations. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes. Intersegment sales and transfers are valued as if the sales or transfers were to third parties. Related revenue and margin are eliminated in consolidation and therefore are not included in consolidated results in the Companys Consolidated Financial Statements.
The information in the following table is derived directly from the segments internal financial reports used for corporate management purposes. The results of operations for the GBW Joint Venture are not reflected in the tables below as the investment is accounted for under the equity method of accounting.
17
THE GREENBRIER COMPANIES, INC.
For the three months ended February 29, 2016:
Total assets | ||||||||
(In thousands) |
February 29,
2016 |
August 31,
2015 |
||||||
Manufacturing |
$ | 624,961 | $ | 675,409 | ||||
Wheels & Parts |
307,724 | 291,798 | ||||||
Leasing & Services |
551,763 | 549,073 | ||||||
Unallocated |
385,861 | 274,232 | ||||||
|
|
|
|
|||||
$ | 1,870,309 | $ | 1,790,512 | |||||
|
|
|
|
18
THE GREENBRIER COMPANIES, INC.
Reconciliation of Earnings from operations to Earnings before income tax and earnings (loss) from unconsolidated affiliates:
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
||||||||||||
Earnings from operations |
$ | 92,393 | $ | 92,532 | $ | 240,878 | $ | 146,954 | ||||||||
Interest and foreign exchange |
1,417 | 1,929 | 6,853 | 5,070 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Earnings before income tax and earnings from unconsolidated affiliates |
$ | 90,976 | $ | 90,603 | $ | 234,025 | $ | 141,884 | ||||||||
|
|
|
|
|
|
|
|
The results of operations for the GBW Joint Venture are accounted for under the equity method of accounting. The GBW Joint Venture is the Companys fourth reportable segment and information as of February 29, 2016 and August 31, 2015, for the three and six months ended February 29, 2016 and for the three and six months ended February 28, 2015 are included in the tables below.
Three Months Ended | Six Months Ended | |||||||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
February 29,
2016 |
February 28,
2015 |
||||||||||||
Revenue |
$ | 97,700 | $ | 83,315 | $ | 193,682 | $ | 165,857 | ||||||||
Earnings (loss) from operations |
$ | 3,626 | $ | (1,992 | ) | $ | 6,034 | $ | (1,734 | ) |
Total Assets | ||||||||
February 29,
2016 |
August 31,
2015 |
|||||||
GBW (1) |
$ | 247,707 | $ | 239,871 |
(1) | Includes goodwill and intangible assets of $95.2 million and $96.9 million as of February 29, 2016 and August 31, 2015. |
19
THE GREENBRIER COMPANIES, INC.
Note 12 Commitments and Contingencies
The Companys Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The Company has entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (DEQ) in which the Company agreed to conduct an investigation of whether, and to what extent, past or present operations at the Portland property may have released hazardous substances into the environment.
In December 2000, the U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as the Portland Harbor, including the portion fronting the Companys manufacturing facility, as a federal National Priority List or Superfund site due to sediment contamination (the Portland Harbor Site). The Company and more than 140 other parties have received a General Notice of potential liability from the EPA relating to the Portland Harbor Site. The letter advised the Company that it may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including the Company (the Lower Willamette Group or LWG), have signed an Administrative Order on Consent (AOC) to perform a remedial investigation/feasibility study (RI/FS) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but are nevertheless contributing money to the effort. The EPA-mandated RI/FS is being produced by the LWG and has cost over $110 million during a 15-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 during the 15-year period. Some or all of any such outlay may be recoverable from other responsible parties. The EPA expects the investigation to continue until 2017.
Eighty-three parties, including the State of Oregon and the federal government, have entered into a non-judicial mediation process to try to allocate costs associated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On April 23, 2009, the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A & C Foundry Products, Inc. et al , U.S. District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreements and be dismissed without prejudice, and the case has now been stayed by the court, 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 2016.
A draft of the remedial investigation study was submitted by the LWG to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30, 2012. That 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. In August 2015, the EPA released its own draft feasibility study that suggests a significantly higher range of site-wide costs (from $790 million to $2.4 billion) and clean-up durations ranging from 4 to 18 years. The EPA study does not break those costs down by sub-area. The EPA is currently revising its draft feasibility study.
Neither draft feasibility study addresses responsibility for the costs of clean-up, allocates such costs among the potentially responsible parties, or defines 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, currently scheduled by the EPA for 2017. Based on the investigation to date, the Company believes that it did not contribute in any material way to contamination in the river sediments or the damage of natural resources in the Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland, Oregon manufacturing facility. Because these environmental investigations are still underway, sufficient information is currently not available to determine the Companys liability, if any, for the cost of any required remediation or restoration of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance
20
THE GREENBRIER COMPANIES, INC.
dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the rivers classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Companys business and Consolidated Financial Statements, or the value of its Portland property.
The Company has also signed an Order on Consent with the DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathway to the Willamette River. Interim precautionary measures are also required in the order and the Company is currently discussing with the DEQ potential remedial actions which may be required. Our aggregate expenditure has not been material, however the Company could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.
From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted with certainty. 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 $3.8 million in third party warranty guarantee facilities. To date no amounts have been drawn under these guarantee facilities.
As of February 29, 2016, the Mexican joint venture had $0.9 million of third party debt outstanding, for which the Company and its joint venture partner had each guaranteed approximately $0.4 million.
As of February 29, 2016, the Company had outstanding letters of credit aggregating $81.3 million associated with performance guarantees, facility leases and workers compensation insurance.
The Company made $2.6 million in cash contributions and $2.5 million in loans to GBW, an unconsolidated 50/50 joint venture, for the six months ended February 29, 2016. The Company expects to loan additional amounts of approximately $2.5 million during 2016. The Company is likely to make additional capital contributions or loans to GBW in the future. As of February 29, 2016, the Company had a $34.0 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net.
21
THE GREENBRIER COMPANIES, INC.
Note 13 Fair Value Measures
Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1 | - | observable inputs such as unadjusted quoted prices in active markets for identical instruments; | ||
Level 2 | - | inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and | ||
Level 3 | - | unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions. |
Assets and liabilities measured at fair value on a recurring basis as of February 29, 2016 were:
(In thousands) | Total | Level 1 | Level 2 (1) | Level 3 | ||||||||||||
Assets: |
||||||||||||||||
Derivative financial instruments |
$ | 4,699 | $ | | $ | 4,699 | $ | | ||||||||
Nonqualified savings plan investments |
13,988 | 13,988 | | | ||||||||||||
Cash equivalents |
5,076 | 5,076 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 23,763 | $ | 19,064 | $ | 4,699 | $ | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative financial instruments |
$ | 10,997 | $ | | $ | 10,997 | $ | |
(1) | Level 2 assets and liabilities include derivative financial instruments that are valued based on observable inputs. See Note 10 Derivative Instruments for further discussion. |
Assets and liabilities measured at fair value on a recurring basis as of August 31, 2015 were:
(In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: |
||||||||||||||||
Derivative financial instruments |
$ | 1,913 | $ | | $ | 1,913 | $ | | ||||||||
Nonqualified savings plan investments |
11,815 | 11,815 | | | ||||||||||||
Cash equivalents |
5,071 | 5,071 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 18,799 | $ | 16,886 | $ | 1,913 | $ | | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Derivative financial instruments |
$ | 3,206 | $ | | $ | 3,206 | $ | |
22
THE GREENBRIER COMPANIES, INC.
Note 14 Related Party Transactions
In April 2010, WLRGreenbrier Rail Inc. (WLR-GBX) was formed and acquired a lease fleet of nearly 4,000 railcars valued at approximately $256.0 million. WLR-GBX is wholly owned by affiliates of WL Ross & Co, LLC (WL Ross) and a member of the Companys board of directors, Wendy Teramoto, is also an affiliate of WL Ross. In September 2015, the Company purchased the entire remaining WLR-GBX lease fleet of 3,885 railcars for approximately $148.0 million plus a $1.0 million fee. The transaction was approved by the Companys disinterested, independent directors. The Company intends to sell the railcars and underlying attached leases to third parties in the short-term and therefore has classified these railcars as Leased railcars for syndication on the Companys Consolidated Balance Sheet. During the three months ended February 29, 2016, the Company sold to third parties 2,567 of these railcars with the underlying leases attached for $123.8 million. The Company recognized revenue on 1,979 of these railcars for $100.3 million and deferred revenue recognition on 588 of these railcars for $23.5 million due to the Companys continuing involvement.
The Company and WL Ross have agreed that the Company will receive a preferred return on the proceeds of the sale of the portfolio, after which it will share a portion of the profits with WL Ross up to certain defined levels. The Company is first entitled to recoup its total investment plus a rate of return of 25%. The Company and WL Ross will then share in the profits up to certain defined levels. Once those defined levels have been met, the Company is entitled to receive 100% of the remaining profits. As of February 29, 2016, the Company has accrued $14.1 million which represents the portion of the profits for sales through February 29, 2016 that it anticipates will be paid to WL Ross pursuant to this agreement.
23
THE GREENBRIER COMPANIES, INC.
Note 15 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; Greenbrier Railcar Leasing, Inc. and Greenbrier Rail Services Holdings, LLC. No other subsidiaries guarantee the Notes including Greenbrier Union Holdings I LLC; Greenbrier MUL Holdings I LLC; Greenbrier Leasing Limited; Greenbrier Europe B.V.; Greenbrier Europe Holdings B.V.; Greenbrier International Holdings II, LLC; 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.; 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 do Brasil Participações Ltda; Greenbrier Tank Components, LLC; Gunderson-GIMSA S.A. de C.V.; Greenbrier; S.A. de C.V.; Greenbrier Industries, S.A. de C.V. and Greenbrier-GIMSA, LLC.
The following represents the supplemental consolidating condensed financial information of Greenbrier and its guarantor and non-guarantor subsidiaries, as of February 29, 2016 and August 31, 2015, for the three and six months ended February 29, 2016 and for the three and six months ended February 28, 2015. 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.
24
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 128,078 | $ | 1,073 | $ | 154,390 | $ | | $ | 283,541 | ||||||||||
Restricted cash |
| 1,973 | 6,904 | | 8,877 | |||||||||||||||
Accounts receivable, net |
4,677 | 580,026 | 21,066 | (377,697 | ) | 228,072 | ||||||||||||||
Inventories |
| 243,198 | 190,272 | (12,227 | ) | 421,243 | ||||||||||||||
Leased railcars for syndication |
| 185,410 | | (5,435 | ) | 179,975 | ||||||||||||||
Equipment on operating leases, net |
| 235,311 | 2,703 | (2,843 | ) | 235,171 | ||||||||||||||
Property, plant and equipment, net |
9,019 | 101,754 | 199,246 | | 310,019 | |||||||||||||||
Goodwill |
| 43,265 | | | 43,265 | |||||||||||||||
Investment in unconsolidated affiliates |
1,313,934 | 183,369 | 19,857 | (1,430,310 | ) | 86,850 | ||||||||||||||
Intangibles and other assets, net |
20,878 | 46,181 | 16,346 | (10,109 | ) | 73,296 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,476,586 | $ | 1,621,560 | $ | 610,784 | $ | (1,838,621 | ) | $ | 1,870,309 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Revolving notes |
$ | 75,000 | $ | | $ | | $ | | $ | 75,000 | ||||||||||
Accounts payable and accrued liabilities |
419,016 | 232,014 | 177,737 | (427,757 | ) | 401,010 | ||||||||||||||
Deferred income taxes |
14,984 | 60,162 | | (19,942 | ) | 55,204 | ||||||||||||||
Deferred revenue |
32,732 | 47,113 | | 4,517 | 84,362 | |||||||||||||||
Notes payable |
133,914 | 187,750 | 875 | | 322,539 | |||||||||||||||
Total equityGreenbrier |
800,940 | 1,094,521 | 301,227 | (1,395,748 | ) | 800,940 | ||||||||||||||
Noncontrolling interest |
| | 130,945 | 309 | 131,254 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
800,940 | 1,094,521 | 432,172 | (1,395,439 | ) | 932,194 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,476,586 | $ | 1,621,560 | $ | 610,784 | $ | (1,838,621 | ) | $ | 1,870,309 | ||||||||||
|
|
|
|
|
|
|
|
|
|
25
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Income
For the three months ended February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | (2,096 | ) | $ | 255,398 | $ | 404,793 | $ | (203,564 | ) | $ | 454,531 | ||||||||
Wheels & Parts |
| 91,371 | | (913 | ) | 90,458 | ||||||||||||||
Leasing & Services |
(784 | ) | 124,833 | 1 | 40 | 124,090 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(2,880 | ) | 471,602 | 404,794 | (204,437 | ) | 669,079 | ||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 231,052 | 329,639 | (198,864 | ) | 361,827 | ||||||||||||||
Wheels & Parts |
| 82,152 | | (764 | ) | 81,388 | ||||||||||||||
Leasing & Services |
| 106,000 | | (27 | ) | 105,973 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 419,204 | 329,639 | (199,655 | ) | 549,188 | |||||||||||||||
Margin |
(2,880 | ) | 52,398 | 75,155 | (4,782 | ) | 119,891 | |||||||||||||
Selling and administrative |
17,477 | 10,759 | 9,799 | 209 | 38,244 | |||||||||||||||
Net gain on disposition of equipment |
| (10,486 | ) | 1 | (261 | ) | (10,746 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(20,357 | ) | 52,125 | 65,355 | (4,730 | ) | 92,393 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
3,106 | 1,899 | (3,302 | ) | (286 | ) | 1,417 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(23,463 | ) | 50,226 | 68,657 | (4,444 | ) | 90,976 | |||||||||||||
Income tax (expense) benefit |
1,220 | (17,830 | ) | (10,344 | ) | 1,220 | (25,734 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(22,243 | ) | 32,396 | 58,313 | (3,224 | ) | 65,242 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
67,111 | 12,132 | (2 | ) | (78,267 | ) | 974 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
44,868 | 44,528 | 58,311 | (81,491 | ) | 66,216 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (23,901 | ) | 2,553 | (21,348 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 44,868 | $ | 44,528 | $ | 34,410 | $ | (78,938 | ) | $ | 44,868 | |||||||||
|
|
|
|
|
|
|
|
|
|
26
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Income
For the six months ended February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | 3,047 | $ | 627,243 | $ | 916,785 | $ | (393,883 | ) | $ | 1,153,192 | |||||||||
Wheels & Parts |
| 170,452 | | (1,265 | ) | 169,187 | ||||||||||||||
Leasing & Services |
60 | 149,015 | 1 | 13 | 149,089 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
3,107 | 946,710 | 916,786 | (395,135 | ) | 1,471,468 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 528,590 | 755,105 | (388,835 | ) | 894,860 | ||||||||||||||
Wheels & Parts |
| 155,494 | | (1,104 | ) | 154,390 | ||||||||||||||
Leasing & Services |
| 117,613 | | (51 | ) | 117,562 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 801,697 | 755,105 | (389,990 | ) | 1,166,812 | |||||||||||||||
Margin |
3,107 | 145,013 | 161,681 | (5,145 | ) | 304,656 | ||||||||||||||
Selling and administrative |
33,892 | 19,845 | 20,722 | 334 | 74,793 | |||||||||||||||
Net gain on disposition of equipment |
| (10,642 | ) | 2 | (375 | ) | (11,015 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(30,785 | ) | 135,810 | 140,957 | (5,104 | ) | 240,878 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
6,340 | 3,272 | (2,473 | ) | (286 | ) | 6,853 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(37,125 | ) | 132,538 | 143,430 | (4,818 | ) | 234,025 | |||||||||||||
Income tax (expense) benefit |
(3,523 | ) | (45,150 | ) | (22,927 | ) | 1,147 | (70,453 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(40,648 | ) | 87,388 | 120,503 | (3,671 | ) | 163,572 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
154,949 | 14,106 | (364 | ) | (167,334 | ) | 1,357 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
114,301 | 101,494 | 120,139 | (171,005 | ) | 164,929 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (53,443 | ) | 2,815 | (50,628 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 114,301 | $ | 101,494 | $ | 66,696 | $ | (168,190 | ) | $ | 114,301 | |||||||||
|
|
|
|
|
|
|
|
|
|
27
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net earnings (loss) |
$ | 44,868 | $ | 44,528 | $ | 58,311 | $ | (81,491 | ) | $ | 66,216 | |||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Translation adjustment |
1,527 | | (1,165 | ) | (1,527 | ) | (1,165 | ) | ||||||||||||
Reclassification of derivative financial instruments recognized in net earnings (loss) |
| 240 | 319 | | 559 | |||||||||||||||
Unrealized loss on derivative financial instruments |
(96 | ) | (1,046 | ) | (336 | ) | | (1,478 | ) | |||||||||||
Other (net of tax effect) |
| | (6 | ) | | (6 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
1,431 | (806 | ) | (1,188 | ) | (1,527 | ) | (2,090 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
46,299 | 43,722 | 57,123 | (83,018 | ) | 64,126 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest |
| | (23,912 | ) | 2,553 | (21,359 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to Greenbrier |
$ | 46,299 | $ | 43,722 | $ | 33,211 | $ | (80,465 | ) | $ | 42,767 | |||||||||
|
|
|
|
|
|
|
|
|
|
28
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the six months ended February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net earnings (loss) |
$ | 114,301 | $ | 101,494 | $ | 120,139 | $ | (171,005 | ) | $ | 164,929 | |||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Translation adjustment |
1,527 | | (5,132 | ) | (1,527 | ) | (5,132 | ) | ||||||||||||
Reclassification of derivative financial instruments recognized in net earnings (loss) |
| 516 | 535 | | 1,051 | |||||||||||||||
Unrealized loss on derivative financial instruments |
(28 | ) | (1,412 | ) | (6,090 | ) | | (7,530 | ) | |||||||||||
Other (net of tax effect) |
| | (6 | ) | | (6 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
1,499 | (896 | ) | (10,693 | ) | (1,527 | ) | (11,617 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
115,800 | 100,598 | 109,446 | (172,532 | ) | 153,312 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest |
| | (53,381 | ) | 2,815 | (50,566 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to Greenbrier |
$ | 115,800 | $ | 100,598 | $ | 56,065 | $ | (169,717 | ) | $ | 102,746 | |||||||||
|
|
|
|
|
|
|
|
|
|
29
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Cash Flows
For the six months ended February 29, 2016
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net earnings (loss) |
$ | 114,301 | $ | 101,494 | $ | 120,139 | $ | (171,005 | ) | $ | 164,929 | |||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Deferred income taxes |
15,569 | (12,164 | ) | 435 | (9,127 | ) | (5,287 | ) | ||||||||||||
Depreciation and amortization |
1,344 | 15,713 | 10,836 | (51 | ) | 27,842 | ||||||||||||||
Net (gain) loss on disposition of equipment |
| (10,642 | ) | 2 | (375 | ) | (11,015 | ) | ||||||||||||
Stock based compensation expense |
10,740 | | | | 10,740 | |||||||||||||||
Noncontrolling interest adjustments |
| | | 2,815 | 2,815 | |||||||||||||||
Other |
| (54 | ) | 544 | 1 | 491 | ||||||||||||||
Decrease (increase) in assets: |
||||||||||||||||||||
Accounts receivable, net |
44,794 | (15,521 | ) | 842 | (60,471 | ) | (30,356 | ) | ||||||||||||
Inventories |
| (52,405 | ) | 65,809 | 8,518 | 21,922 | ||||||||||||||
Leased railcars for syndication |
| (9,817 | ) | | (5,574 | ) | (15,391 | ) | ||||||||||||
Other |
(1,419 | ) | (1,199 | ) | (54,642 | ) | 53,543 | (3,717 | ) | |||||||||||
Increase (decrease) in liabilities: |
||||||||||||||||||||
Accounts payable and accrued liabilities |
(29,978 | ) | (50,920 | ) | (27,894 | ) | 53,344 | (55,448 | ) | |||||||||||
Deferred revenue |
32,732 | 9,058 | | | 41,790 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) operating activities |
188,083 | (26,457 | ) | 116,071 | (128,382 | ) | 149,315 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Proceeds from sales of assets |
| 80,541 | | | 80,541 | |||||||||||||||
Capital expenditures |
(1,961 | ) | (6,423 | ) | (19,590 | ) | | (27,974 | ) | |||||||||||
Investment in and net advances to unconsolidated affiliates |
(122,431 | ) | (12,618 | ) | | 129,909 | (5,140 | ) | ||||||||||||
Increase in restricted cash |
| (7 | ) | (1 | ) | | (8 | ) | ||||||||||||
Other |
2,640 | | | | 2,640 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
(121,752 | ) | 61,493 | (19,591 | ) | 129,909 | 50,059 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Net changes in revolving notes with maturities of 90 days or less |
26,000 | | | | 26,000 | |||||||||||||||
Proceeds from revolving notes with maturities longer than 90 days |
| | | | | |||||||||||||||
Repayment of revolving notes with maturities longer than 90 days |
| | (1,888 | ) | | (1,888 | ) | |||||||||||||
Repayments of notes payable |
| (3,511 | ) | (219 | ) | | (3,730 | ) | ||||||||||||
Debt issuance costs |
(4,149 | ) | | | | (4,149 | ) | |||||||||||||
Intercompany advances |
26,896 | (28,589 | ) | 1,693 | | | ||||||||||||||
Repurchase of stock |
(33,246 | ) | | | | (33,246 | ) | |||||||||||||
Dividends |
(11,575 | ) | | | | (11,575 | ) | |||||||||||||
Cash distribution to joint venture |
| | (53,543 | ) | | (53,543 | ) | |||||||||||||
Excess tax benefit from restricted stock awards |
2,786 | | | | 2,786 | |||||||||||||||
Other |
| | (6 | ) | | (6 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
6,712 | (32,100 | ) | (53,963 | ) | | (79,351 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate changes |
1,500 | (1,982 | ) | (7,403 | ) | (1,527 | ) | (9,412 | ) | |||||||||||
Increase in cash and cash equivalents |
74,543 | 954 | 35,114 | | 110,611 | |||||||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Beginning of period |
53,535 | 119 | 119,276 | | 172,930 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
End of period |
$ | 128,078 | $ | 1,073 | $ | 154,390 | $ | | $ | 283,541 | ||||||||||
|
|
|
|
|
|
|
|
|
|
30
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Balance Sheet
August 31, 2015
(In thousands)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 53,535 | $ | 119 | $ | 119,276 | $ | | $ | 172,930 | ||||||||||
Restricted cash |
| 1,966 | 6,903 | | 8,869 | |||||||||||||||
Accounts receivable, net |
49,471 | 535,916 | 24,415 | (413,773 | ) | 196,029 | ||||||||||||||
Inventories |
| 191,625 | 257,619 | (3,709 | ) | 445,535 | ||||||||||||||
Leased railcars for syndication |
| 228,646 | | (16,112 | ) | 212,534 | ||||||||||||||
Equipment on operating leases, net |
| 255,130 | 2,901 | (2,640 | ) | 255,391 | ||||||||||||||
Property, plant and equipment, net |
8,402 | 102,738 | 191,995 | | 303,135 | |||||||||||||||
Investment in unconsolidated affiliates |
1,209,698 | 169,659 | 21,369 | (1,313,456 | ) | 87,270 | ||||||||||||||
Intangibles and other assets, net |
15,895 | 46,387 | 14,235 | (10,963 | ) | 65,554 | ||||||||||||||
Goodwill |
| 43,265 | | | 43,265 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,337,001 | $ | 1,575,451 | $ | 638,713 | $ | (1,760,653 | ) | $ | 1,790,512 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Equity |
||||||||||||||||||||
Revolving notes |
$ | 49,000 | $ | | $ | 1,888 | $ | | $ | 50,888 | ||||||||||
Accounts payable and accrued liabilities |
421,249 | 282,662 | 208,538 | (457,236 | ) | 455,213 | ||||||||||||||
Deferred income taxes |
| 72,326 | | (11,669 | ) | 60,657 | ||||||||||||||
Deferred revenue |
| 33,792 | | 44 | 33,836 | |||||||||||||||
Notes payable |
133,914 | 191,422 | 1,093 | | 326,429 | |||||||||||||||
Total equity Greenbrier |
732,838 | 995,249 | 296,852 | (1,292,101 | ) | 732,838 | ||||||||||||||
Noncontrolling interest |
| | 130,342 | 309 | 130,651 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total equity |
732,838 | 995,249 | 427,194 | (1,291,792 | ) | 863,489 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 1,337,001 | $ | 1,575,451 | $ | 638,713 | $ | (1,760,653 | ) | $ | 1,790,512 | ||||||||||
|
|
|
|
|
|
|
|
|
|
31
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Income
For the three months ended February 28, 2015
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 322,665 | $ | 427,555 | $ | (244,979 | ) | $ | 505,241 | |||||||||
Wheels & Parts |
| 103,706 | | (1,066 | ) | 102,640 | ||||||||||||||
Leasing & Services |
295 | 21,836 | 1 | 136 | 22,268 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
295 | 448,207 | 427,556 | (245,909 | ) | 630,149 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 269,619 | 359,452 | (225,844 | ) | 403,227 | ||||||||||||||
Wheels & Parts |
| 93,966 | | (1,198 | ) | 92,768 | ||||||||||||||
Leasing & Services |
| 8,868 | | (24 | ) | 8,844 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 372,453 | 359,452 | (227,066 | ) | 504,839 | |||||||||||||||
Margin |
295 | 75,754 | 68,104 | (18,843 | ) | 125,310 | ||||||||||||||
Selling and administrative |
14,477 | 8,522 | 10,146 | (246 | ) | 32,899 | ||||||||||||||
Net gain on disposition of equipment |
| (120 | ) | | (1 | ) | (121 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(14,182 | ) | 67,352 | 57,958 | (18,596 | ) | 92,532 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
3,120 | 1,743 | (2,934 | ) | | 1,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(17,302 | ) | 65,609 | 60,892 | (18,596 | ) | 90,603 | |||||||||||||
Income tax (expense) benefit |
(7,481 | ) | (16,420 | ) | (9,846 | ) | 4,375 | (29,372 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(24,783 | ) | 49,189 | 51,046 | (14,221 | ) | 61,231 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
75,134 | 10,852 | 48 | (86,219 | ) | (185 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
50,351 | 60,041 | 51,094 | (100,440 | ) | 61,046 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (19,429 | ) | 8,734 | (10,695 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 50,351 | $ | 60,041 | $ | 31,665 | $ | (91,706 | ) | $ | 50,351 | |||||||||
|
|
|
|
|
|
|
|
|
|
32
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Income
For the six months ended February 28, 2015
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Revenue |
||||||||||||||||||||
Manufacturing |
$ | | $ | 596,477 | $ | 793,301 | $ | (504,588 | ) | $ | 885,190 | |||||||||
Wheels & Parts |
| 192,171 | | (2,907 | ) | 189,264 | ||||||||||||||
Leasing & Services |
173 | 50,302 | 1 | 277 | 50,753 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
173 | 838,950 | 793,302 | (507,218 | ) | 1,125,207 | |||||||||||||||
Cost of revenue |
||||||||||||||||||||
Manufacturing |
| 505,271 | 673,225 | (459,232 | ) | 719,264 | ||||||||||||||
Wheels & Parts |
| 172,624 | | (2,984 | ) | 169,640 | ||||||||||||||
Leasing & Services |
| 22,973 | | (48 | ) | 22,925 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 700,868 | 673,225 | (462,264 | ) | 911,829 | |||||||||||||||
Margin |
173 | 138,082 | 120,077 | (44,954 | ) | 213,378 | ||||||||||||||
Selling and administrative |
30,265 | 16,217 | 20,257 | (111 | ) | 66,628 | ||||||||||||||
Net gain on disposition of equipment |
| (203 | ) | | (1 | ) | (204 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) from operations |
(30,092 | ) | 122,068 | 99,820 | (44,842 | ) | 146,954 | |||||||||||||
Other costs |
||||||||||||||||||||
Interest and foreign exchange |
6,105 | 3,349 | (4,384 | ) | | 5,070 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates |
(36,197 | ) | 118,719 | 104,204 | (44,842 | ) | 141,884 | |||||||||||||
Income tax (expense) benefit |
(8,691 | ) | (36,413 | ) | (14,671 | ) | 14,349 | (45,426 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Earnings (loss) before earnings (loss) from unconsolidated affiliates |
(44,888 | ) | 82,306 | 89,533 | (30,493 | ) | 96,458 | |||||||||||||
Earnings (loss) from unconsolidated affiliates |
128,025 | 16,235 | 95 | (143,785 | ) | 570 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) |
83,137 | 98,541 | 89,628 | (174,278 | ) | 97,028 | ||||||||||||||
Net (earnings) loss attributable to noncontrolling interest |
| | (35,577 | ) | 21,686 | (13,891 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings (loss) attributable to Greenbrier |
$ | 83,137 | $ | 98,541 | $ | 54,051 | $ | (152,592 | ) | $ | 83,137 | |||||||||
|
|
|
|
|
|
|
|
|
|
33
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the three months ended February 28, 2015
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net earnings (loss) |
$ | 50,351 | $ | 60,041 | $ | 51,094 | $ | (100,440 | ) | $ | 61,046 | |||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Translation adjustment |
| (71 | ) | (6,170 | ) | | (6,241 | ) | ||||||||||||
Reclassification of derivative financial instruments recognized in net earnings (loss) |
| 103 | 279 | | 382 | |||||||||||||||
Unrealized gain on derivative financial instruments |
| (366 | ) | 558 | | 192 | ||||||||||||||
Other (net of tax effect) |
| | 8 | | 8 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (334 | ) | (5,325 | ) | | (5,659 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
50,351 | 59,707 | 45,769 | (100,440 | ) | 55,387 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest |
| | (19,342 | ) | 8,734 | (10,608 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to Greenbrier |
$ | 50,351 | $ | 59,707 | $ | 26,427 | $ | (91,706 | ) | $ | 44,779 | |||||||||
|
|
|
|
|
|
|
|
|
|
34
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Comprehensive Income (Loss)
For the six months ended February 28, 2015
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Net earnings (loss) |
$ | 83,137 | $ | 98,541 | $ | 89,628 | $ | (174,278 | ) | $ | 97,028 | |||||||||
Other comprehensive income (loss) |
||||||||||||||||||||
Translation adjustment |
| (119 | ) | (9,572 | ) | | (9,691 | ) | ||||||||||||
Reclassification of derivative financial instruments recognized in net earnings (loss) |
| 562 | 109 | | 671 | |||||||||||||||
Unrealized gain on derivative financial instruments |
| (1,197 | ) | 1,083 | | (114 | ) | |||||||||||||
Other (net of tax effect) |
| | 6 | | 6 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (754 | ) | (8,374 | ) | | (9,128 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) |
83,137 | 97,787 | 81,254 | (174,278 | ) | 87,900 | ||||||||||||||
Comprehensive (income) loss attributable to noncontrolling interest |
| | (35,442 | ) | 21,686 | (13,756 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive income (loss) attributable to Greenbrier |
$ | 83,137 | $ | 97,787 | $ | 45,812 | $ | (152,592 | ) | $ | 74,144 | |||||||||
|
|
|
|
|
|
|
|
|
|
35
THE GREENBRIER COMPANIES, INC.
The Greenbrier Companies, Inc.
Condensed Consolidating Statement of Cash Flows
For the six months ended February 28, 2015
(In thousands, unaudited)
Parent |
Combined
Guarantor Subsidiaries |
Combined
Non- Guarantor Subsidiaries |
Eliminations | Consolidated | ||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||
Net earnings (loss) |
$ | 83,137 | $ | 98,541 | $ | 89,628 | $ | (174,278 | ) | $ | 97,028 | |||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||
Deferred income taxes |
2,846 | (8,417 | ) | 2,326 | | (3,245 | ) | |||||||||||||
Depreciation and amortization |
955 | 13,179 | 8,312 | (48 | ) | 22,398 | ||||||||||||||
Net gain on disposition of equipment |
| (203 | ) | | (1 | ) | (204 | ) | ||||||||||||
Stock based compensation expense |
7,193 | | | | 7,193 | |||||||||||||||
Noncontrolling interest adjustments |
| | | 21,824 | 21,824 | |||||||||||||||
Other |
43 | 6 | 501 | (1 | ) | 549 | ||||||||||||||
Decrease (increase) in assets: |
||||||||||||||||||||
Accounts receivable, net |
(19 | ) | 19,260 | 7,687 | (33,184 | ) | (6,256 | ) | ||||||||||||
Inventories |
| (16,186 | ) | (100,168 | ) | (78 | ) | (116,432 | ) | |||||||||||
Leased railcars for syndication |
| (96,990 | ) | | 21,426 | (75,564 | ) | |||||||||||||
Other |
1,542 | 1,726 | (6,347 | ) | 2,724 | (355 | ) | |||||||||||||
Increase (decrease) in liabilities: |
||||||||||||||||||||
Accounts payable and accrued liabilities |
25,397 | (16,725 | ) | 41,013 | (12,164 | ) | 37,521 | |||||||||||||
Deferred revenue |
| 8,171 | (421 | ) | | 7,750 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) operating activities |
121,094 | 2,362 | 42,531 | (173,780 | ) | (7,793 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from investing activities: |
||||||||||||||||||||
Proceeds from sales of assets |
| 3,019 | | | 3,019 | |||||||||||||||
Capital expenditures |
(4,618 | ) | (14,709 | ) | (34,927 | ) | 398 | (53,856 | ) | |||||||||||
Investment in and net advances to unconsolidated affiliates |
(163,337 | ) | (15,760 | ) | | 173,382 | (5,715 | ) | ||||||||||||
Decrease (increase) in restricted cash |
| 419 | (1 | ) | | 418 | ||||||||||||||
Other |
467 | | | | 467 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) investing activities |
(167,488 | ) | (27,031 | ) | (34,928 | ) | 173,780 | (55,667 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash flows from financing activities: |
||||||||||||||||||||
Net changes in revolving notes with maturities of 90 days or less |
53,000 | | | | 53,000 | |||||||||||||||
Proceeds from revolving notes with maturities longer than 90 days |
| | 42,563 | | 42,563 | |||||||||||||||
Repayment of revolving notes with maturities longer than 90 days |
| | (18,081 | ) | | (18,081 | ) | |||||||||||||
Repayments of notes payable |
(5 | ) | (3,516 | ) | (219 | ) | | (3,740 | ) | |||||||||||
Intercompany advances |
(20,716 | ) | 21,269 | (553 | ) | | | |||||||||||||
Decrease in restricted cash |
| 11,000 | | | 11,000 | |||||||||||||||
Repurchase of stock |
(46,946 | ) | | | | (46,946 | ) | |||||||||||||
Dividends |
(8,016 | ) | | | | (8,016 | ) | |||||||||||||
Cash distribution to joint venture partner |
| | (4,422 | ) | | (4,422 | ) | |||||||||||||
Excess tax benefit from restricted stock awards |
3,858 | | | | 3,858 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net cash provided by (used in) financing activities |
(18,825 | ) | 28,753 | 19,288 | | 29,216 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Effect of exchange rate changes |
| (1,867 | ) | (3,293 | ) | | (5,160 | ) | ||||||||||||
Increase (decrease) in cash and cash equivalents |
(65,219 | ) | 2,217 | 23,598 | | (39,404 | ) | |||||||||||||
Cash and cash equivalents |
||||||||||||||||||||
Beginning of period |
149,747 | 112 | 35,057 | | 184,916 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
End of period |
$ | 84,528 | $ | 2,329 | $ | 58,655 | $ | | $ | 145,512 | ||||||||||
|
|
|
|
|
|
|
|
|
|
36
THE GREENBRIER COMPANIES, INC.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We operate in four reportable segments: Manufacturing; Wheels & Parts; Leasing & Services; and GBW Joint Venture. Our segments are operationally integrated. The Manufacturing segment, operating from facilities in the United States, Mexico and Poland, produces double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar products and marine vessels. The Wheels & Parts segment performs wheel and axle servicing, as well as production of a variety of parts for the railroad industry in North America. The Leasing & Services segment owns approximately 9,400 railcars (5,900 railcars held as equipment on operating leases, 2,900 held as leased railcars for syndication and 600 held as finished goods inventory) and provides management services for approximately 257,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America. The GBW Joint Venture segment provides repair services at over 30 locations across North America, including more than 10 tank car repair and maintenance facilities certified by the Association of American Railroads (AAR). The results of these operations were included as part of Earnings (loss) from unconsolidated affiliates as we account for our interest in GBW under the equity method of accounting. We also produce rail castings and tank heads through unconsolidated joint ventures and have a 19.5% ownership stake in a railcar manufacturer in Brazil with an option to acquire an additional 40.5% ownership interest, which can be exercised no later than December 30, 2017.
Our total manufacturing backlog of railcar units as of February 29, 2016 was approximately 34,100 units with an estimated value of $3.96 billion, of which 29,700 units with a value of $3.57 billion are for direct sales and 4,400 units with a value of $0.39 billion are intended for syndications to third parties with a lease attached. Backlog as of February 28, 2015 was approximately 46,000 units with an estimated value of $4.78 billion. Currently, no orders in our February 29, 2016 backlog are intended to be placed into our owned lease fleet. Multi-year supply agreements are a part of rail industry practice. A portion of the orders included in backlog reflects an assumed product mix. Under terms of the orders, the exact mix will be determined in the future, which may impact the dollar amount of backlog. Marine backlog as of February 29, 2016 was $18 million compared to $78 million as of February 28, 2015.
Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Certain orders in backlog are subject to customary documentation and completion of terms. Customer orders contain terms and conditions customary in the industry. Customers may attempt to cancel or modify orders in backlog. In most cases, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time to time. We cannot guarantee that our reported railcar backlog will convert to revenue in any particular period, if at all.
In September 2015, we purchased a portfolio of 3,885 railcars from a related party for approximately $148.0 million plus a $1.0 million fee. We intend to resell the railcars and underlying attached leases to third parties in the short-term and therefore have classified these railcars as Leased railcars for syndication on our Consolidated Balance Sheet. During the three months ended February 29, 2016, we sold to third parties 2,567 of these railcars with the underlying leases attached for $123.8 million. We recognized revenue on 1,979 of these railcars for $100.3 million and deferred revenue recognition on 588 of these railcars for $23.5 million due to our continuing involvement. The gross proceeds from the sale of these railcars with leases attached were recorded as revenue and the cost of purchasing these railcars was recorded in cost of revenue within our Leasing & Services segment.
37
THE GREENBRIER COMPANIES, INC.
Three Months Ended February 29, 2016 Compared to Three Months Ended February 28, 2015
Overview
Revenue, cost of revenue, margin and operating profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
Three Months Ended | ||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||
Revenue: |
||||||||
Manufacturing |
$ | 454,531 | $ | 505,241 | ||||
Wheels & Parts |
90,458 | 102,640 | ||||||
Leasing & Services |
124,090 | 22,268 | ||||||
|
|
|
|
|||||
669,079 | 630,149 | |||||||
Cost of revenue: |
||||||||
Manufacturing |
361,827 | 403,227 | ||||||
Wheels & Parts |
81,388 | 92,768 | ||||||
Leasing & Services |
105,973 | 8,844 | ||||||
|
|
|
|
|||||
549,188 | 504,839 | |||||||
Margin: |
||||||||
Manufacturing |
92,704 | 102,014 | ||||||
Wheels & Parts |
9,070 | 9,872 | ||||||
Leasing & Services |
18,117 | 13,424 | ||||||
|
|
|
|
|||||
119,891 | 125,310 | |||||||
Selling and administrative |
38,244 | 32,899 | ||||||
Net gain on disposition of equipment |
(10,746 | ) | (121 | ) | ||||
|
|
|
|
|||||
Earnings from operations |
92,393 | 92,532 | ||||||
Interest and foreign exchange |
1,417 | 1,929 | ||||||
|
|
|
|
|||||
Earnings before income taxes and earnings (loss) from unconsolidated affiliates |
90,976 | 90,603 | ||||||
Income tax expense |
(25,734 | ) | (29,372 | ) | ||||
|
|
|
|
|||||
Earnings before earnings (loss) from unconsolidated affiliates |
65,242 | 61,231 | ||||||
Earnings (loss) from unconsolidated affiliates |
974 | (185) | ||||||
|
|
|
|
|||||
Net earnings |
66,216 | 61,046 | ||||||
Net earnings attributable to noncontrolling interest |
(21,348 | ) | (10,695 | ) | ||||
|
|
|
|
|||||
Net earnings attributable to Greenbrier |
$ | 44,868 | $ | 50,351 | ||||
|
|
|
|
|||||
Diluted earnings per common share |
$ | 1.41 | $ | 1.57 |
Performance for our segments is evaluated based on operating profit. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.
Three Months Ended | ||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||
Operating profit (loss): |
||||||||
Manufacturing |
$ | 78,798 | $ | 90,876 | ||||
Wheels & Parts |
6,506 | 7,976 | ||||||
Leasing & Services |
24,412 | 9,811 | ||||||
Corporate |
(17,323 | ) | (16,131 | ) | ||||
|
|
|
|
|||||
$ | 92,393 | $ | 92,532 | |||||
|
|
|
|
38
THE GREENBRIER COMPANIES, INC.
Consolidated Results
(In thousands) | Three Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 669,079 | $ | 630,149 | $ | 38,930 | 6.2 | % | ||||||||
Cost of revenue |
$ | 549,188 | $ | 504,839 | $ | 44,349 | 8.8 | % | ||||||||
Margin (%) |
17.9 | % | 19.9 | % | (2.0 | %) | * | |||||||||
Net earnings attributable to Greenbrier |
$ | 44,868 | $ | 50,351 | $ | (5,483 | ) | (10.9 | %) |
* | Not meaningful |
Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various average selling prices and margins. The demand for and mix of products and services delivered changes from period to period which causes fluctuations in our results of operations.
The 6.2% increase in revenue for the three months ended February 29, 2016 as compared to the three months ended February 28, 2015 was primarily due to a 457.3% increase in Leasing & Services revenue which was primarily the result of the sale of railcars that we purchased from a related third party. This was partially offset by a 10.0% decrease in Manufacturing revenue primarily due to a 14% decrease in the volume of railcar deliveries. In addition, the increase in Leasing & Services revenue was partially offset by an 11.9% decrease in Wheels & Parts revenue as a result of lower wheel set, component and parts volumes due to a decrease in demand and a decrease in scrap metal pricing.
The 8.8% increase in cost of revenue for the three months ended February 29, 2016 as compared to the three months ended February 28, 2015 was due to an increase in Leasing & Services cost of revenue which was the result of costs associated with the sale of railcars that we purchased from a related third party. This was partially offset by a 10.3% decrease in Manufacturing cost of revenue primarily due to a decrease of 14% in the volume of railcar deliveries. In addition, the increase in Leasing & Services cost of revenue was partially offset by a 12.3% decrease in Wheels & Parts cost of revenue due to lower wheel set, component and parts costs associated with decreased volumes.
Margin as a percentage of revenue was 17.9% and 19.9% for the three months ended February 29, 2016 and February 28, 2015, respectively. The overall 2.0% decrease in margin percentage was due to a decrease in Leasing & Services margin. Leasing & Services margin decreased to 14.6% from 60.3% primarily as a result of a lower margin percentage on the syndication of railcars purchased from a related third party. This was partially offset by an increase in Manufacturing margin to 20.4% from 20.2% due to a change in product mix. In addition, the decrease in Leasing & Services margin was partially offset by an increase in Wheels & Parts margin to 10.0% from 9.6% primarily due to a more favorable parts product mix.
The $5.5 million decrease in net earnings for the three months ended February 29, 2016 as compared to the three months ended February 28, 2015 was primarily attributable to a decrease in margin due to lower railcar deliveries and an increase in net earnings attributable to noncontrolling interest. These were partially offset by an increase in net gain on disposition of equipment as compared to the prior comparable period.
39
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
(In thousands) | Three Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 454,531 | $ | 505,241 | $ | (50,710 | ) | (10.0 | %) | |||||||
Cost of revenue |
$ | 361,827 | $ | 403,227 | $ | (41,400 | ) | (10.3 | %) | |||||||
Margin (%) |
20.4 | % | 20.2 | % | 0.2 | % | * | |||||||||
Operating profit ($) |
$ | 78,798 | $ | 90,876 | $ | (12,078 | ) | (13.3 | %) | |||||||
Operating profit (%) |
17.3 | % | 18.0 | % | (0.7 | %) | * | |||||||||
Deliveries |
4,500 | 5,200 | (700 | ) | (13.5 | %) |
* | Not meaningful |
Manufacturing revenue was $454.5 million and $505.2 million for the three months ended February 29, 2016 and February 28, 2015, respectively. Manufacturing revenue decreased $50.7 million or 10.0% primarily due to a 14% decrease in the volume of railcar deliveries. This was partially offset by a mix which had a higher average selling price as compared to the prior comparable period as a result of a change in product mix.
Manufacturing cost of revenue was $361.8 million and $403.2 million for the three months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue decreased $41.4 million or 10.3% due to a decrease of 14% in the volume of railcar deliveries. This was partially offset by an increase in cost of revenue associated with a mix which had a higher average labor and material content.
Manufacturing margin as a percentage of revenue for the three months ended February 29, 2016 was 20.4% compared to 20.2% for the three months ended February 28, 2015. The 0.2% increase in margin was primarily due to a change in product mix partially offset by lower volumes of new railcar sales with leases attached which typically result in higher sales prices and margins.
Manufacturing operating profit was $78.8 million or 17.3% of revenue for the three months ended February 29, 2016 and $90.9 million or 18.0% of revenue for the three months ended February 28, 2015. The $12.1 million or 13.3% decrease in operating profit was primarily attributed to a decrease in margin due to lower railcar deliveries.
40
THE GREENBRIER COMPANIES, INC.
Wheels & Parts Segment
(In thousands) | Three Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 90,458 | $ | 102,640 | $ | (12,182 | ) | (11.9 | %) | |||||||
Cost of revenue |
$ | 81,388 | $ | 92,768 | $ | (11,380 | ) | (12.3 | %) | |||||||
Margin (%) |
10.0 | % | 9.6 | % | 0.4 | % | * | |||||||||
Operating profit ($) |
$ | 6,506 | $ | 7,976 | $ | (1,470 | ) | (18.4 | %) | |||||||
Operating profit (%) |
7.2 | % | 7.8 | % | (0.6 | %) | * |
* | Not meaningful |
Wheels & Parts revenue was $90.5 million and $102.6 million for the three months ended February 29, 2016 and February 28, 2015, respectively. The $12.2 million or 11.9% decrease in revenue was primarily a result of lower wheel set, component and parts volumes due to a decrease in demand and a decrease in scrap metal pricing.
Wheels & Parts cost of revenue was $81.4 million and $92.8 million for the three months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue decreased $11.4 million or 12.3% primarily due to lower wheel set, component and parts costs associated with decreased volumes.
Wheels & Parts margin as a percentage of revenue for the three months ended February 29, 2016 was 10.0% compared to 9.6% for the three months ended February 28, 2015. The increase in margin was primarily due to a more favorable parts product mix partially offset by a decrease in scrap metal pricing.
Wheels & Parts operating profit was $6.5 million or 7.2% of revenue for the three months ended February 29, 2016 and $8.0 million or 7.8% of revenue for the three months ended February 28, 2015. The $1.5 million or 18.4% decrease in operating profit was primarily attributed to a decrease in margin due to a decrease in volumes.
41
THE GREENBRIER COMPANIES, INC.
Leasing & Services Segment
(In thousands) | Three Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 124,090 | $ | 22,268 | $ | 101,822 | 457.3 | % | ||||||||
Cost of revenue |
$ | 105,973 | $ | 8,844 | $ | 97,129 | 1,098.2 | % | ||||||||
Margin (%) |
14.6 | % | 60.3 | % | (45.7 | %) | * | |||||||||
Operating profit ($) |
$ | 24,412 | $ | 9,811 | $ | 14,601 | 148.8 | % | ||||||||
Operating profit (%) |
19.7 | % | 44.1 | % | (24.4 | %) | * |
* | Not meaningful |
Leasing & Services revenue was $124.1 million and $22.3 million for the three months ended February 29, 2016 and February 28, 2015, respectively. The $101.8 million or 457.3% increase in revenue was primarily the result of the sale of railcars for $100.3 million that we purchased from a related third party with the intent to resell them. The gross proceeds from the sale of these railcars with leases attached were recorded as revenue and the cost of purchasing these railcars was recorded in cost of revenue. The increase in revenue was also attributed to a higher average volume of rent-producing leased railcars for syndication, which are held short term and classified as Leased railcars for syndication on our Consolidated Balance Sheet.
Leasing & Services cost of revenue was $106.0 million and $8.8 million for the three months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue increased $97.1 million primarily due to costs associated with the sale of railcars that we purchased from a related third party.
Leasing & Services margin as a percentage of revenue for the three months ended February 29, 2016 was 14.6% compared to 60.3% for the three months ended February 28, 2015. The 45.7% decrease was primarily as a result of a lower margin percentage on the syndication of railcars purchased from a related third party. This was partially offset by a higher average volume of rent-producing leased railcars for syndication.
Leasing & Services operating profit was $24.4 million or 19.7% of revenue for the three months ended February 29, 2016 and $9.8 million or 44.1% of revenue for the three months ended February 28, 2015. The $14.6 million or 148.8% increase in operating profit was primarily attributed to an increase in net gain on disposition of equipment and an increase in margin due to the sale of railcars that we purchased from a related third party.
The percentage of owned units on lease at February 29, 2016 was 86.0% compared to 99.5% at February 28, 2015.
42
THE GREENBRIER COMPANIES, INC.
GBW Joint Venture Segment
GBW, an unconsolidated 50/50 joint venture, generated total revenue of $97.7 million and $83.3 million for the three months ended February 29, 2016 and February 28, 2015, respectively. The increase in revenue of $14.4 million was primarily due to a favorable change in mix, an increase in volume and favorable pricing.
GBW margin as a percentage of revenue for the three months ended February 29, 2016 was 10.3% compared to 4.5% for the three months ended February 28, 2015. The increase was primarily attributed to an increase in labor efficiencies in the current year.
To reflect our 50% share of GBWs results, we recorded earnings of $1.3 million and a loss of $0.3 million in Earnings (loss) from unconsolidated affiliates for the three months ended February 29, 2016 and February 28, 2015, respectively.
Selling and Administrative Expense
(In thousands) | Three Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Selling and administrative expense |
$ | 38,244 | $ | 32,899 | $ | 5,345 | 16.2 | % |
Selling and administrative expense was $38.2 million or 5.7% of revenue for the three months ended February 29, 2016 compared to $32.9 million or 5.2% of revenue for the prior comparable period. The $5.3 million increase was primarily attributed to a $3.9 million increase in employee-related costs including long-term and short-term incentive compensation and additional headcount. The increase was also attributed to a $1.4 million increase in consulting costs primarily associated with strategic business development and IT initiatives.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment was $10.7 million for the three months ended February 29, 2016, compared to $0.1 million for the prior comparable period. Assets from our lease fleet (Equipment on operating leases, net) are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity.
43
THE GREENBRIER COMPANIES, INC.
Other Costs
Interest and foreign exchange expense was composed of the following:
(In thousands) | Three Months Ended |
Increase
(Decrease) |
||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||
Interest and foreign exchange: |
||||||||||||
Interest and other expense |
$ | 4,691 | $ | 4,965 | $ | (274 | ) | |||||
Foreign exchange gain |
(3,274 | ) | (3,036 | ) | (238 | ) | ||||||
|
|
|
|
|
|
|||||||
$ | 1,417 | $ | 1,929 | $ | (512 | ) | ||||||
|
|
|
|
|
|
The $0.5 million decrease in interest and foreign exchange expense from the prior comparable period was primarily attributed to a $0.3 million decrease in interest expense as a result of lower average borrowings as compared to the prior year. In addition, the decrease in interest and foreign exchange expense was attributed to a $0.2 million increase in foreign exchange gain as compared to the prior comparable period primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.
Income Tax
The tax rate for the three months ended February 29, 2016 was 28.3%, compared to 32.4% for the three months ended February 28, 2015. The decrease in the tax rate was primarily attributable to a change in the proportion of projected pre-tax earnings attributable to our Mexican railcar manufacturing joint venture.
The tax rate can fluctuate period-to-period due to changes in the projected mix of foreign and domestic pre-tax earnings and due to discrete tax items booked within the interim period. It can also fluctuate with changes in the proportion of projected pre-tax earnings attributable to our Mexican railcar manufacturing joint venture because the joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnerships entire pre-tax earnings are included in Earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
Earnings (Loss) From Unconsolidated Affiliates
Earnings from unconsolidated affiliates was $1.0 million for the three months ended February 29, 2016 compared to a loss from unconsolidated affiliates of $0.2 million for the three months ended February 28, 2015. Earnings (loss) from unconsolidated affiliates primarily included our share of after-tax results from our castings joint venture and our share of after-tax results from our GBW Joint Venture including eliminations associated with GBW transactions with other Greenbrier entities. In addition, the three months ended February 29, 2016 included our share of after-tax results from our 19.5% ownership stake in a railcar manufacturer in Brazil.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $21.3 million for the three months ended February 29, 2016 compared to $10.7 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 increase of $10.6 million from the prior year is primarily a result of higher margins and lower volumes of intercompany activity.
44
THE GREENBRIER COMPANIES, INC.
Six Months Ended February 29, 2016 Compared to Six Months Ended February 28, 2015
Overview
Revenue, cost of revenue, margin and operating profit presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
(In thousands) | Six Months Ended | |||||||
February 29,
2016 |
February 28,
2015 |
|||||||
Revenue: |
||||||||
Manufacturing |
$ | 1,153,192 | $ | 885,190 | ||||
Wheels & Parts |
169,187 | 189,264 | ||||||
Leasing & Services |
149,089 | 50,753 | ||||||
|
|
|
|
|||||
1,471,468 | 1,125,207 | |||||||
Cost of revenue: |
||||||||
Manufacturing |
894,860 | 719,264 | ||||||
Wheels & Parts |
154,390 | 169,640 | ||||||
Leasing & Services |
117,562 | 22,925 | ||||||
|
|
|
|
|||||
1,166,812 | 911,829 | |||||||
Margin: |
||||||||
Manufacturing |
258,332 | 165,926 | ||||||
Wheels & Parts |
14,797 | 19,624 | ||||||
Leasing & Services |
31,527 | 27,828 | ||||||
|
|
|
|
|||||
304,656 | 213,378 | |||||||
Selling and administrative |
74,793 | 66,628 | ||||||
Net gain on disposition of equipment |
(11,015 | ) | (204 | ) | ||||
|
|
|
|
|||||
Earnings from operations |
240,878 | 146,954 | ||||||
Interest and foreign exchange |
6,853 | 5,070 | ||||||
|
|
|
|
|||||
Earnings before income taxes and earnings from unconsolidated affiliates |
234,025 | 141,884 | ||||||
Income tax expense |
(70,453 | ) | (45,426 | ) | ||||
|
|
|
|
|||||
Earnings before earnings from unconsolidated affiliates |
163,572 | 96,458 | ||||||
Earnings from unconsolidated affiliates |
1,357 | 570 | ||||||
|
|
|
|
|||||
Net earnings |
164,929 | 97,028 | ||||||
Net earnings attributable to noncontrolling interest |
(50,628 | ) | (13,891 | ) | ||||
|
|
|
|
|||||
Net earnings attributable to Greenbrier |
$ | 114,301 | $ | 83,137 | ||||
|
|
|
|
|||||
Diluted earnings per common share |
$ | 3.55 | $ | 2.57 |
Performance for our segments is evaluated based on operating profit. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.
Six Months Ended | ||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||
Operating profit (loss): |
||||||||
Manufacturing |
$ | 232,502 | $ | 142,927 | ||||
Wheels & Parts |
9,909 | 15,908 | ||||||
Leasing & Services |
34,370 | 20,853 | ||||||
Corporate |
(35,903 | ) | (32,734 | ) | ||||
|
|
|
|
|||||
$ | 240,878 | $ | 146,954 | |||||
|
|
|
|
45
THE GREENBRIER COMPANIES, INC.
Consolidated Results
(In thousands) | Six Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 1,471,468 | $ | 1,125,207 | $ | 346,261 | 30.8 | % | ||||||||
Cost of revenue |
$ | 1,166,812 | $ | 911,829 | $ | 254,983 | 28.0 | % | ||||||||
Margin (%) |
20.7 | % | 19.0 | % | 1.7 | % | * | |||||||||
Net earnings attributable to Greenbrier |
$ | 114,301 | $ | 83,137 | $ | 31,164 | 37.5 | % |
* | Not meaningful |
Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various average selling prices and margins. The demand for and mix of products and services delivered changes from period to period which causes fluctuations in our results of operations.
The 30.8% increase in revenue for the six months ended February 29, 2016 as compared to the six months ended February 28, 2015 was primarily due to a 30.3% increase in Manufacturing revenue. The increase in Manufacturing revenue was primarily due to a 25% increase in the volume of railcar deliveries with a mix that had a higher average selling price. In addition, the increase in revenue was due a 193.8% increase in Leasing & Services revenue which was primarily the result of an increase in the sale of railcars that we purchased from a related third party. These were partially offset by a 10.6% decrease in Wheels & Parts revenue as a result of lower wheel set, component and parts volumes due to a decrease in demand and a decrease in scrap metal pricing.
The 28.0% increase in cost of revenue for the six months ended February 29, 2016 as compared to the six months ended February 28, 2015 was due to a 24.4% increase in Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was due to an increase of 25% in the volume of railcar deliveries with a mix that had a higher average labor and material content. This was partially offset by improved production efficiencies. In addition, the increase in revenue was due a 412.8% increase in Leasing & Services cost of revenue which was primarily the result of an increase in the costs associated with the sale of railcars that we purchased from a related third party. These were partially offset by a 9.0% decrease in Wheels & Parts cost of revenue as a result of lower wheel set, component and parts costs associated with decreased volumes.
Margin as a percentage of revenue was 20.7% and 19.0% for the six months ended February 29, 2016 and February 28, 2015, respectively. The overall 1.7% increase in margin percentage was due to an increase in Manufacturing margin which increased to 22.4% from 18.7% primarily due to a change in product mix and improved production efficiencies. This was partially offset by a decrease in Leasing & Services margin to 21.1% from 54.8% primarily as a result of a lower margin percentage on the syndication of railcars purchased from a related third party. In addition, the increase in Manufacturing margin was partially offset by a decrease in Wheels & Parts margin to 8.7% from 10.4% due to lower wheel set and component volumes and a decrease in scrap metal pricing.
The $31.2 million increase in net earnings for the six months ended February 29, 2016 as compared to the six months ended February 28, 2015 was primarily attributable to an increase in margin due to higher railcar deliveries.
46
THE GREENBRIER COMPANIES, INC.
Manufacturing Segment
(In thousands) | Six Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 1,153,192 | $ | 885,190 | $ | 268,002 | 30.3 | % | ||||||||
Cost of revenue |
$ | 894,860 | $ | 719,264 | $ | 175,596 | 24.4 | % | ||||||||
Margin (%) |
22.4 | % | 18.7 | % | 3.7 | % | * | |||||||||
Operating profit ($) |
$ | 232,502 | $ | 142,927 | $ | 89,575 | 62.7 | % | ||||||||
Operating profit (%) |
20.2 | % | 16.1 | % | 4.1 | % | * | |||||||||
Deliveries |
11,500 | 9,200 | 2,300 | 25.0 | % |
* | Not meaningful |
Manufacturing revenue was $1.2 billion and $0.9 billion for the six months ended February 29, 2016 and February 28, 2015, respectively. Manufacturing revenue increased $0.3 billion or 30.3% primarily due to a 25% increase in the volume of railcar deliveries with a mix which had a higher average selling price as compared to the prior comparable period as a result of a change in product mix.
Manufacturing cost of revenue was $894.9 million and $719.3 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue increased $175.6 million or 24.4% due to an increase of 25% in the volume of railcar deliveries with a mix which had a higher average labor and material content. This was partially offset by improved production efficiencies.
Manufacturing margin as a percentage of revenue for the six months ended February 29, 2016 was 22.4% compared to 18.7% for the six months ended February 28, 2015. The 3.7% increase in margin was primarily due to a change in product mix and improved production efficiencies. This was partially offset by lower volumes of new railcar sales with leases attached which typically result in higher sales prices and margins.
Manufacturing operating profit was $232.5 million or 20.2% of revenue for the six months ended February 29, 2016 and $142.9 million or 16.1% of revenue for the six months ended February 28, 2015. The $89.6 million or 62.7% increase in operating profit was primarily attributed to an increase in margin due to higher railcar deliveries.
47
THE GREENBRIER COMPANIES, INC.
Wheels & Parts Segment
(In thousands) | Six Months Ended |
Increase
(Decrease) |
%
Change |
|||||||||||||
February 29,
2016 |
February 28,
2015 |
|||||||||||||||
Revenue |
$ | 169,187 | $ | 189,264 | $ | (20,077 | ) | (10.6 | %) | |||||||
Cost of revenue |
$ | 154,390 | $ | 169,640 | $ | (15,250 | ) | (9.0 | %) | |||||||
Margin (%) |
8.7 | % | 10.4 | % | (1.7 | %) | * | |||||||||
Operating profit ($) |
$ | 9,909 | $ | 15,908 | $ | (5,999 | ) | (37.7 | %) | |||||||
Operating profit (%) |
5.9 | % | 8.4 | % | (2.5 | %) | * |
* Not meaningful
Wheels & Parts revenue was $169.2 million and $189.3 million for the six months ended February 29, 2016 and February 28, 2015, respectively. The $20.1 million or 10.6% decrease in revenue was primarily a result of lower wheel set, component and parts volumes due to a decrease in demand and a decrease in scrap metal pricing.
Wheels & Parts cost of revenue was $154.4 million and $169.6 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue decreased $15.3 million or 9.0% primarily due to lower wheel set, component and parts costs associated with decreased volumes.
Wheels & Parts margin as a percentage of revenue for the six months ended February 29, 2016 was 8.7% compared to 10.4% for the six months ended February 28, 2015. The 1.7% decrease in margin was due to lower wheel set and component volumes and a decrease in scrap metal pricing. These were partially offset by a more favorable parts product mix.
Wheels & Parts operating profit was $9.9 million or 5.9% of revenue for the six months ended February 29, 2016 and $15.9 million or 8.4% of revenue for the six months ended February 28, 2015. The $6.0 million or 37.7% decrease in operating profit was primarily attributed to a decrease in margin due to a decrease in volumes.
48
THE GREENBRIER COMPANIES, INC.
Leasing & Services Segment
Six Months Ended |
Increase
(Decrease) |
%
Change |
||||||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||||||||||
Revenue |
$ | 149,089 | $ | 50,753 | $ | 98,336 | 193.8 | % | ||||||||
Cost of revenue |
$ | 117,562 | $ | 22,925 | $ | 94,637 | 412.8 | % | ||||||||
Margin (%) |
21.1 | % | 54.8 | % | (33.7 | %) | * | |||||||||
Operating profit ($) |
$ | 34,370 | $ | 20,853 | $ | 13,517 | 64.8 | % | ||||||||
Operating profit (%) |
23.1 | % | 41.1 | % | (18.0 | %) | * |
* Not meaningful
Leasing & Services revenue was $149.1 million and $50.8 million for the six months ended February 29, 2016 and February 28, 2015, respectively. The $98.3 million or 193.8% increase in revenue was primarily the result of the sale of railcars for $100.3 million that we purchased from a related third party with the intent to resell them. The gross proceeds from the sale of these railcars with leases attached were recorded as revenue and the cost of purchasing these railcars was recorded in cost of revenue. The increase in revenue was also attributed to a higher average volume of rent-producing leased railcars for syndication, which are held short term and classified as Leased railcars for syndication on our Consolidated Balance Sheet.
Leasing & Services cost of revenue was $117.6 million and $22.9 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Cost of revenue increased $94.6 million or 412.8% primarily due to an increase in costs associated with the sale of railcars that we purchased from a related third party.
Leasing & Services margin as a percentage of revenue for the six months ended February 29, 2016 was 21.1% compared to 54.8% for the six months ended February 28, 2015. The 33.7% decrease was primarily as a result of a lower margin percentage on the syndication of railcars purchased from a related third party. This was partially offset by a higher average volume of rent-producing leased railcars for syndication.
Leasing & Services operating profit was $34.4 million or 23.1% of revenue for the six months ended February 29, 2016 and $20.9 million or 41.1% of revenue for the six months ended February 28, 2015. The $13.5 million or 64.8% increase in operating profit was primarily attributed to an increase in net gain on disposition of equipment and an increase in margin due to the sale of railcars that we purchased from a related third party.
49
THE GREENBRIER COMPANIES, INC.
GBW Joint Venture Segment
GBW, an unconsolidated 50/50 joint venture, generated total revenue of $193.7 million and $165.9 million for the six months ended February 29, 2016 and February 28, 2015, respectively. The increase in revenue of $27.8 million was primarily due to a favorable change in mix, an increase in volume and favorable pricing.
GBW margin as a percentage of revenue for the six months ended February 29, 2016 was 9.8% compared to 5.3% for the six months ended February 28, 2015. The increase was primarily attributed to an increase in labor efficiencies in the current year. In addition, the prior year included integration and startup costs.
To reflect our 50% share of GBWs results, we recorded earnings of $2.1 million and $0.1 million in Earnings (loss) from unconsolidated affiliates for the six months ended February 29, 2016 and February 28, 2015, respectively.
Selling and Administrative Expense
Six Months Ended |
Increase
(Decrease) |
%
Change |
||||||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||||||||||
Selling and administrative expense |
$ | 74,793 | $ | 66,628 | $ | 8,165 | 12.3 | % |
Selling and administrative expense was $74.8 million or 5.1% of revenue for the six months ended February 29, 2016 compared to $66.6 million or 5.9% of revenue for the prior comparable period. The $8.2 million increase was primarily attributed to a $9.0 million increase in employee-related costs including long-term and short-term incentive compensation and additional headcount. The increase was also attributed to a $2.2 million increase in consulting costs primarily associated with strategic business development and IT initiatives. This was partially offset by the prior year including $1.9 million in legal, accounting and consulting costs associated with the previously disclosed investigation at our Concarril manufacturing facility.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment was $11.0 million for the six months ended February 29, 2016, compared to $0.2 million for the prior comparable period. Assets from our lease fleet (Equipment on operating leases, net) are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity.
50
THE GREENBRIER COMPANIES, INC.
Other Costs
Interest and foreign exchange expense was composed of the following:
Six Months Ended |
Increase
(Decrease) |
|||||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||||||
Interest and foreign exchange: |
||||||||||||
Interest and other expense |
$ | 9,549 | $ | 9,765 | $ | (216 | ) | |||||
Foreign exchange gain |
(2,696 | ) | (4,695 | ) | 1,999 | |||||||
|
|
|
|
|
|
|||||||
$ | 6,853 | $ | 5,070 | $ | 1,783 | |||||||
|
|
|
|
|
|
The $1.8 million increase in interest and foreign exchange expense was primarily attributed to a $2.0 million decrease in foreign exchange gain from the prior comparable period primarily attributed to the change in the Mexican Peso relative to the U.S. Dollar.
Income Tax
The tax rate for the six months ended February 29, 2016 was 30.1%, compared to 32.0% for the six months ended February 28, 2015.
The tax rate can fluctuate period-to-period due to changes in the projected mix of foreign and domestic pre-tax earnings and due to discrete tax items booked within the interim period. It can also fluctuate with changes in the proportion of projected pre-tax earnings attributable to our Mexican railcar manufacturing joint venture because the joint venture is predominantly treated as a partnership for tax purposes and, as a result, the partnerships entire pre-tax earnings are included in Earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.
Earnings (Loss) From Unconsolidated Affiliates
Earnings from unconsolidated affiliates was $1.4 million and $0.6 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Earnings from unconsolidated affiliates primarily included our share of after-tax results from our castings joint venture and our share of after-tax results from our GBW Joint Venture including eliminations associated with GBW transactions with other Greenbrier entities. In addition, the six months ended February 29, 2016 included our share of after-tax results from our 19.5% ownership stake in a railcar manufacturer in Brazil.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $50.6 million for the six months ended February 29, 2016 compared to $13.9 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 increase of $36.7 million from the prior year is primarily a result of the joint venture operating at higher production rates with higher margins and lower volumes of intercompany activity.
51
THE GREENBRIER COMPANIES, INC.
Liquidity and Capital Resources
Six Months Ended | ||||||||
(In thousands) |
February 29,
2016 |
February 28,
2015 |
||||||
Net cash provided by (used in) operating activities |
$ | 149,315 | $ | (7,793 | ) | |||
Net cash provided by (used in) investing activities |
50,059 | (55,667 | ) | |||||
Net cash provided by (used in) financing activities |
(79,351 | ) | 29,216 | |||||
Effect of exchange rate changes |
(9,412 | ) | (5,160 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash and cash equivalents |
$ | 110,611 | $ | (39,404 | ) | |||
|
|
|
|
We have been financed through cash generated from operations and borrowings. At February 29, 2016, cash and cash equivalents were $283.5 million, an increase of $110.6 million from $172.9 million at August 31, 2015.
Cash provided by operating activities was $149.3 million for the six months ended February 29, 2016 compared to cash used in operating activities of $7.8 million for the six months ended February 28, 2015. The change from the prior year was primarily due to higher earnings, a change in working capital needs, an increase in leased railcars for syndication and an increase in deferred revenue primarily associated with advanced payments received and transactions for which revenue recognition has been deferred due to continuing involvement.
Cash provided by and used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets. Cash provided by investing activities for the six months ended February 29, 2016 was $50.1 million compared to cash used in investing activities of $55.7 million for the six months ended February 28, 2015. The change was attributed to higher proceeds from the sale of assets and lower capital expenditures for the six months ended February 29, 2016 compared to the prior year.
Capital expenditures totaled $28.0 million and $53.9 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Proceeds from the sale of assets, which primarily related to sales of railcars from our lease fleet within Leasing & Services, were approximately $80.5 million and $3.0 million for the six months ended February 29, 2016 and February 28, 2015, respectively. Proceeds from the sale of assets for the six months ended February 29, 2016 included approximately $31.6 million of equipment that was transferred from Leased railcars for syndication to Equipment on operating leases, net and sold pursuant to a sale and leaseback.
Approximately $22.7 million and $41.0 million of capital expenditures for the six months ended February 29, 2016 and February 28, 2015, respectively were attributable to Manufacturing operations. Capital expenditures for Manufacturing are expected to be approximately $55.0 million in 2016 and primarily relate to maintenance and enhancements of our existing manufacturing facilities.
Approximately $2.9 million and $9.4 million of capital expenditures for the six months ended February 29, 2016 and February 28, 2015, respectively were attributable to Leasing & Services operations and corporate. Leasing & Services and corporate capital expenditures for 2016 are expected to be approximately $30.0 million. Proceeds from sales of leased railcar equipment are expected to be approximately $81.0 million for 2016. Assets from our lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and to manage risk and liquidity.
Approximately $2.4 million and $3.5 million of capital expenditures for the six months ended February 29, 2016 and February 28, 2015, respectively were attributable to Wheels & Parts operations. Capital expenditures for Wheels & Parts are expected to be approximately $8.0 million in 2016 for maintenance and enhancements of our existing facilities.
Cash used in financing activities was $79.4 million for the six months ended February 29, 2016 compared to cash provided by financing activities of $29.2 million for the six months ended February 28, 2015. The change from the prior year was primarily attributed to a decrease in proceeds from debt, net of repayments and an increase in cash distributions to our joint venture partner.
52
THE GREENBRIER COMPANIES, INC.
A quarterly dividend of $0.20 per share was declared on March 30, 2016.
Since October 2013, the Board of Directors has authorized our company to repurchase in aggregate up to $225 million of our common stock. During the three and six months ended February 29, 2016, we purchased a total of 533,061 and 1,054,687 shares for approximately $13.3 million and $32.4 million, respectively. As of February 29, 2016 we had cumulatively repurchased 3,206,226 shares for approximately $137.0 million and had $88.0 million available under the share repurchase program with an expiration date of January 1, 2018.
Senior secured credit facilities, consisting of three components, aggregated to $625.3 million as of February 29, 2016. We had an aggregate of $297.4 million available to draw down under committed credit facilities as of February 29, 2016. This amount consists of $222.1 million available on the North American credit facility, $15.3 million on the European credit facilities and $60.0 million on the Mexican joint venture credit facilities.
As of February 29, 2016, a $550.0 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 October 2020, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances under this facility bear interest at LIBOR plus 1.75% or Prime plus 0.75% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of February 29, 2016, lines of credit totaling $15.3 million secured by certain of our European assets, with various variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.3%, were available for working capital needs of the European manufacturing operation. European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from February 2017 through June 2017.
As of February 29, 2016 our Mexican joint venture had three lines of credit totaling $60.0 million. The first line of credit provides up to $10.0 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 June 2016. The second line of credit provides up to $30.0 million and is fully guaranteed by us and our joint venture partner. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through January 2019. The third line of credit provides up to $20.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw amounts available under this facility through August 2017.
As of February 29, 2016, outstanding commitments under the senior secured credit facilities consisted of $81.3 million in letters of credit and $75.0 million in revolving notes under the North American credit facility.
The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into 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. As of February 29, 2016, we were in compliance with all such restrictive covenants.
We may from time to time seek to repurchase or otherwise retire or exchange securities, including outstanding 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.
53
THE GREENBRIER COMPANIES, INC.
We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency, we enter into foreign currency forward exchange contracts with established financial institutions to protect the margin on a portion of foreign currency sales in firm backlog. Given the strong credit standing of the counterparties, no provision has been made for credit loss due to counterparty non-performance.
As of February 29, 2016, the Mexican joint venture had $0.9 million of third party debt, of which we and our joint venture partner have each guaranteed approximately $0.4 million.
In accordance with customary business practices in Europe, we have $3.8 million in third party warranty guarantee facilities as of February 29, 2016. To date no amounts have been drawn under these guarantee facilities.
We made $2.6 million in cash contributions and $2.5 million in loans to GBW, an unconsolidated 50/50 joint venture, for the six months ended February 29, 2016. We expect to loan additional amounts of approximately $2.5 million during 2016. We are likely to make additional capital contributions or loans to GBW in the future. As of February 29, 2016, we had a $34.0 million note receivable balance from GBW which is included on the Consolidated Balance Sheet in Accounts receivable, net.
We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit facilities and long-term financings, to be sufficient to fund dividends, working capital needs, additional investments in GBW, planned capital expenditures and expected debt repayments during the next twelve months.
Off Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are likely to have a material current or future effect on our Consolidated Financial Statements.
54
THE GREENBRIER COMPANIES, INC.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.
Income taxes - For financial reporting purposes, income tax expense is estimated based on amounts anticipated to be reported on tax return filings. Those anticipated amounts may change from when the financial statements are prepared to when the tax returns are filed. Further, because tax filings are subject to review by taxing authorities, there is risk that a position taken in preparation of a tax return may be challenged by a taxing authority. If a challenge is successful, differences in tax expense or between current and deferred tax items may arise in future periods. Any material effect of such differences would be reflected in the financial statements when management considers the effect probable of occurring and the amount reasonably estimable. Valuation allowances reduce deferred tax assets to amounts more likely than not that will be realized based on information available when the financial statements are prepared. This information may include estimates of future income and other assumptions that are inherently uncertain.
Maintenance obligations - We are responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance obligations defined in the underlying lease or management agreement. The estimated maintenance liability is based on maintenance histories for each type and age of railcar. These estimates involve judgment as to the future costs of repairs and the types and timing of repairs required over the lease term. As we cannot predict with certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could be materially different from maintenance requirements. The liability is periodically reviewed and updated based on maintenance trends and known future repair or refurbishment requirements. These adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements.
Warranty accruals - Warranty costs to cover a defined warranty period are estimated and charged to operations. The estimated warranty cost is based on historical warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historical information for similar product types. These estimates are inherently uncertain as they are based on historical data for existing products and judgment for new products. If warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken into consideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may exceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we cannot predict future claims, the potential exists for the difference in any one reporting period to be material.
Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information. If further developments in or resolution of an environmental matter result in facts and circumstances that are significantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made. Due to the uncertain nature of environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us.
55
THE GREENBRIER COMPANIES, INC.
Revenue recognition - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is reasonably assured.
Railcars are generally manufactured, repaired or refurbished and wheels and parts produced under firm orders from third parties. Revenue is recognized when these products or services are completed, accepted by an unaffiliated customer and contractual contingencies removed. Certain leases are operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from a third party source two months in arrears; however, such revenue is accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported. These estimates are inherently uncertain as they involve judgment as to the estimated use of each railcar. Adjustments to actual have historically not been significant. Revenues from construction of marine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on the terms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towards completion can be measured to determine timing of revenue recognition. Under the percentage of completion method, revenue is recognized based on the progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. Under the completed contract method, revenue is not recognized until the project has been fully completed.
We will periodically sell railcars with leases attached to financial investors. Revenue and cost of revenue associated with railcars that the Company has manufactured are recognized in Manufacturing once sold. Revenue and cost of revenue associated with railcars which were obtained from a third party with the intent to resell them and subsequently sold are recognized in Leasing & Services. In addition we will often perform management or maintenance services at market rates for these railcars. Pursuant to the guidance in Accounting Standards Codification (ASC) 840-20-40, we evaluate the terms of any remarketing agreements and any contractual provisions that represent retained risk and the level of retained risk based on those provisions. We determine whether the level of retained risk exceeds 10% of the individual fair value of the railcars with leases attached that are delivered. For any contracts with multiple elements (i.e. railcars, maintenance, management services, etc.) we allocate revenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, we will use the elements estimated selling price for purposes of allocating the total arrangement consideration among the elements.
Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assets are evaluated for impairment. If the forecast undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying value of the assets to fair value is recognized in the current period. These estimates are based on the best information available at the time of the impairment and could be materially different if circumstances change. If the forecast undiscounted future cash flows exceeded the carrying amount of the assets it would indicate that the assets were not impaired.
Goodwill and acquired intangible assets - We periodically acquire businesses in purchase transactions in which the allocation of the purchase price may result in the recognition of goodwill and other intangible assets. The determination of the value of such intangible assets requires management to make estimates and assumptions. These estimates affect the amount of future period amortization and possible impairment charges.
Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill and indefinite-lived intangible assets are also tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in the market price of our common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be recoverable, the assets are evaluated for impairment. Among other things, our assumptions used in the valuation of goodwill include growth of revenue and margins, market multiples, discount rates and increased cash flows over time. If actual operating results were to differ from these assumptions, it may result in an impairment of our goodwill.
56
THE GREENBRIER COMPANIES, INC.
The provisions of ASC 350, Intangibles - Goodwill and Other, require that we perform a two-step impairment test on goodwill. In the first step, we compare the fair value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows. Under the market approach, we estimate the fair value based on observed market multiples for comparable businesses. The second step of the goodwill impairment test is required only in situations where the carrying value of the reporting unit exceeds its fair value as determined in the first step. In the second step, we would compare the implied fair value of goodwill to its carrying value. The implied fair value of goodwill is determined by allocating the fair value of a reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. An impairment loss is recorded to the extent that the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill. The goodwill balance relates to the Wheels & Parts segment.
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THE GREENBRIER COMPANIES, INC.
Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Foreign Currency Exchange Risk
We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protect revenue or margin on a portion of forecast foreign currency sales and expenses. At February 29, 2016 exchange rates, forward exchange contracts the purchase of Polish Zlotys and the sale of Euros and U.S. Dollars; the purchase of Mexican Pesos and the sale of U.S. Dollars; and for the purchase of U.S. Dollars and the sale of Saudi Riyals aggregated to $430.6 million. Because of the variety of currencies in which purchases and sales are transacted and the interaction between currency rates, it is not possible to predict the impact a movement in a single foreign currency exchange rate would have on future operating results.
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 29, 2016, net assets of foreign subsidiaries aggregated $52.9 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $5.3 million, or 0.7% of Total equityGreenbrier. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. Dollar.
Interest Rate Risk
We have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $93.9 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 29, 2016, 57% of our outstanding debt had fixed rates and 43% had variable rates. At February 29, 2016, a uniform 10% increase in variable interest rates would result in approximately $0.4 million of additional annual interest expense.
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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 our 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 our 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 29, 2016 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
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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 12 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, 2015. 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, 2015.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Since October 2013, the Board of Directors has authorized the Company to repurchase in aggregate up to $225 million of the Companys common stock. The program may be modified, suspended or discontinued at any time without prior notice and currently has an expiration date of January 1, 2018. Under the share repurchase program, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing and amount of purchases will be based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period.
Shares repurchased under the share repurchase program during the three months ended February 29, 2016 were as follows:
Period |
Total Number of
Shares Purchased |
Average Price
Paid Per Share (Including Commissions) |
Total Number of
Shares Purchased as Part of Publically Announced Plans or Programs |
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
||||||||||||
December 1, 2015December 31, 2015 |
| | | $ | 101,284,774 | |||||||||||
January 1, 2016January 31, 2016 |
283,869 | $ | 24.68 | 283,869 | $ | 94,279,182 | ||||||||||
February 1, 2016February 29, 2016 |
249,192 | $ | 25.24 | 249,192 | $ | 87,989,491 | ||||||||||
|
|
|
|
|||||||||||||
533,061 | 533,061 | |||||||||||||||
|
|
|
|
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THE GREENBRIER COMPANIES, INC.
Item 6. Exhibits
(a) List of Exhibits:
10.1 | Amendment No. 1 to the Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement for Directors, dated December 15, 2015. | |
10.2 | Amendment No. 5 to the Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement, dated December 8, 2015. | |
10.3 | Consulting Services Agreement between Greenbrier Leasing Company LLC and Charles J. Swindells, dated January 7, 2016. | |
10.4 | Separation and Consulting Agreement between the Registrant and William G. Glenn, dated February 26, 2016. | |
10.5 | First Amendment to Credit Agreement, dated February 29, 2016, among Greenbrier Leasing Company LLC, Bank of America, N.A., as Administrative Agent, and the lenders identified therein. | |
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 29, 2016 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; and (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 5, 2016 | By: | /s/ Lorie L. Tekorius | ||||
Lorie L. Tekorius | ||||||
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
Date: April 5, 2016 | 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
NONQUALIFIED DEFERRED COMPENSATION PLAN FOR DIRECTORS
Amendment No. 1
WHEREAS, The Greenbrier Companies, Inc. (the Company) has adopted The Greenbrier Companies Nonqualified Deferred Compensation Plan for Directors (Plan) which became effective July 1, 2012; and
WHEREAS, the Company has the authority to amend the Plan and desires to do so;
NOW, THEREFORE, the Plan is amended as follows:
1. Elimination of Continuing Deferral Elections . Section 2.02(D) of the Adoption Agreement is amended to read as follows, in order to eliminate continuing deferral elections and require that Participants make new elections with respect to each Taxable Year:
2.02(D) Election Duration . A Participants Elective Deferral election (choose one of (a) or (b)) :
[X] (a) Taxable Year(s) only. Applies only to the Participants cash Compensation earned and/or equity awarded for the Taxable Year or Taxable Years for which the Participant makes the election.
[ ] (b) Continuing. Applies to the Participants Compensation for all Taxable Years, commencing with the Taxable Year for which the Participant makes the election, unless the Participant makes a new election or revokes or modifies an existing election.
2. Installment Payment Elections . Section 4.02(b)(ii) of the Adoption Agreement is amended to read as follows:
[X] (ii) Installments. In installments as follows: Annual installments over a period not to exceed ten years.
3. Effective Date . This Amendment shall be effective December 15, 2015. Except as hereby amended, the Plan shall remain in full force and effect.
THE GREENBRIER COMPANIES, INC. | ||
By: |
/s/ Martin R. Baker |
|
(Signature) | ||
Martin R. Baker, Senior Vice President |
||
(Print or Type Name and Title) |
1
Exhibit 10.2
THE GREENBRIER COMPANIES NONQUALIFIED DEFERRED COMPENSATION PLAN
Amendment No. 5
WHEREAS, The Greenbrier Companies, Inc. (Employer) has adopted The Greenbrier Companies Nonqualified Deferred Compensation Plan (Plan) which became effective March 1, 1994, and which was most recently restated effective January 1, 2010; and
WHEREAS, the Employer has the authority to amend the Plan and desires to do so;
NOW, THEREFORE, the Plan is amended as follows:
1. Definition of Compensation . Section 1.15(e) of the Adoption Agreement, as previously amended, is deleted in its entirety and replaced with the following language:
(e) Eligible Compensation shall include only Base Salary (which for non-salaried Employees means regularly recurring base wages, including over-time and shift differential), annual bonus, and equity-based compensation (but excluding dividends or dividend-equivalent payments), and shall exclude all other forms of compensation.
2. Participation . Section 2.01 of the Adoption Agreement is amended by deleting the selection of subsection (c) and selecting subsection (a), in order to designate as Participants in the Plan all top-hat Employees whom the Employer designates in writing as part of a select group of management or highly compensated employees. The Employer designates as Participants in the Plan: (1) All Employees who currently have an Account balance (regardless of level of base compensation); and (2) all Employees with base compensation of $150,000 or greater.
3. Elimination of Continuing Deferral Elections . Section 2.02(D) of the Adoption Agreement is amended to read as follows, in order to eliminate continuing deferral elections and require that Participants make new elections with respect to each Taxable Year:
2.02(D) Election Duration . A Participants Elective Deferral election (choose one of (a) or (b)) :
[X] (a) Taxable Year(s) only. Applies only to the Participants cash Compensation earned and/or equity awarded for the Taxable Year or Taxable Years for which the Participant makes the election.
[ ] (b) Continuing. Applies to the Participants Compensation for all Taxable Years, commencing with the Taxable Year for which the Participant makes the election, unless the Participant makes a new election or revokes or modifies an existing election.
4. Installment Payment Elections . Section 4.02(b)(ii) of the Adoption Agreement is amended to read as follows:
[X] (ii) Installments. In installments as follows: Annual installments over a period not to exceed ten years.
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5. Effective Date . This Amendment shall be effective December 8, 2015. Except as hereby amended, the Plan shall remain in full force and effect.
THE GREENBRIER COMPANIES, INC. | ||
By: |
/s/ Martin R. Baker |
|
(Signature) | ||
Martin R. Baker, Senior Vice President |
||
(Print or Type Name and Title) |
2
Exhibit 10.3
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (this Agreement) is entered into effective as of January 7, 2016 (the Effective Date), by and between Greenbrier Leasing Company LLC, an Oregon limited liability company (Client), and Charles J. Swindells, an individual (Consultant).
WHEREAS, Client desires to retain Consultant to provide certain consulting services to Client on the terms and conditions contained in this Agreement;
NOW THEREFORE, Client and Consultant hereby agree as follows:
SECTION 1 | DUTIES OF CONSULTANT. |
1.1. Consultant shall render advice and consultation to Client with respect to strategic matters, new business development and government relations, and other matters pertaining to the rail supply industry, all as assigned by William A. Furman, President of The Greenbrier Companies, Inc. Consultant shall provide independent advisory and consulting services to Client, rendering such services in order to maintain, improve and extend the business of Client and further its reputation and business interests. Consultant shall devote such time and effort to the performance of his or her duties as shall be reasonably necessary. Consultant agrees to fulfill Consultants obligations herein in a businesslike manner, acting always in accordance with applicable laws and customs.
1.2. Consultant shall provide advice and recommendations to Client; all decisions will be made solely by Client. Consultant shall have no authority to contractually bind or obligate Client.
SECTION 2 | TERM AND RENEWAL. |
2.1. The term of this Agreement shall commence as of the Effective Date and shall continue for a period of one year from that date, subject to automatic renewal as provided for in Section 2.2 and early termination as provided for in Section 7.
2.2. The term of this Agreement shall automatically renew for an additional one year period on the first and each subsequent anniversary of the Effective Date (each, an Anniversary Date), unless either Client or Consultant notifies the other party not less than 30 days prior to the Anniversary Date of such partys intent not to renew the Agreement, or this Agreement is earlier terminated in accordance with Section 7.
SECTION 3 | CONSIDERATION. |
Consideration for all services performed by Consultant pursuant to this Agreement shall be paid promptly by Client as follows:
3.1. Client agrees to pay, and Consultant agrees to accept, as full compensation for Consultants services hereunder, the sum of $120,000 per year, to be paid by direct deposit to Consultants bank account in equal monthly installments, in advance, on or about the eleventh day of each month during the engagement; provided, however, notwithstanding anything to the contrary herein, in no event shall Consultant be paid any amount of direct compensation during any 12-month period within the last three years that would exceed the limitation on compensation set forth in Section 303A.02(b)(ii) of the NYSE Listed Company Manual and result in Consultant no longer being considered an independent director thereunder.
Consulting Services Agreement
Page 1
3.2. Client shall reimburse Consultant for all actual out-of-pocket expenses reasonably incurred by Consultant on behalf of, and approved by, Client in accord with Clients normal expense reimbursement policies, including but not limited to air fare or transportation costs; food and lodging costs; long-distance telephone charges; and postage and express mail charges. Such agreed-upon expenses and travel allowances shall be due and payable to Consultant ten (10) days following the receipt by Client of a properly prepared expense report in a form provided by Client and supporting documentation in a form reasonably acceptable to Client.
3.3. Consultant is furnishing the services herein set forth as an independent contractor and not as an employee. This Agreement is not intended to create a partnership, joint venture, or any other entity or business association between Client and Consultant. Consultant shall be responsible for his or her own acts, and Client shall not be required to make provision for withholdings, taxes, unemployment insurance, workers compensation insurance, or similar benefits. Consultant is solely responsible for determining the methods and means used in performing the services rendered to Client hereunder.
SECTION 4 | COMPETITION. |
During the term of Consultants engagement hereunder, and for a period of one year thereafter, Consultant shall not, directly or indirectly:
4.1. Associate with (either as a stockholder, director, officer, manager, consultant, advisor, employee, member, partner or otherwise, of or through any corporation, partnership, limited liability company, association, firm or otherwise), or engage in, participate in, or be connected in any manner with, any enterprise or business that is engaged in the design, manufacture, purchase, sale, lease, marketing or refurbishing of railroad freight cars or components thereof in competition with Client or Clients affiliates in any geographic location in which Client or Clients affiliates are engaged in business or seeking to engage in business;
4.2. Employ (including retaining as a consultant), solicit for employment, or advise or recommend to any other person, firm or entity that it employ or solicit for employment, any current or future employee or consultant of Client or any of its affiliates; or
4.3. Induce or attempt to persuade any current or future client, customer, supplier, officer, employee, agent, manager, consultant, director or other participant in Client or any of its affiliates to terminate such employment or other relationship.
SECTION 5 | CONFIDENTIAL INFORMATION. |
During and after the term of the engagement, Consultant shall not use or disclose to any person, firm or entity any Confidential Information (as defined herein), except with the prior written consent of Client. Confidential Information means all of Clients proprietary information, including, without limitation, financial data, documentation, trade secrets, information concerning the operation, design and marketing of products, services or processes, know-how, improvements, techniques, business plans and procedures, customer and supplier lists and information, files and profiles, needs analyses, calculations, data, manuals, specifications, performance standards, instructions and inventions. The
Consulting Services Agreement
Page 2
obligations imposed by this covenant shall not apply with respect to (a) disclosure required by law, regulation or judicial process; provided that Client shall have been given reasonable advance notice of the required disclosure and Consultant shall cooperate with Client in limiting such disclosure and in obtaining protective orders where appropriate; or (b) information that is in the public domain.
SECTION 6 | INDEMNIFICATION. |
During the term of the engagement and thereafter, Consultant shall indemnify, defend and hold Client harmless from and against all claims and actions and all expenses incidental to such claims or actions, based upon or arising out of damage to property or injuries to persons or other tortious acts caused or contributed to by Consultant or anyone acting under his or her direction or control or on his or her behalf in the course of performance under this Agreement, provided Consultants aforesaid indemnity and hold-harmless agreement shall not be applicable to any liability based upon the sole negligence of Client. Consultant further indemnifies Client with respect to any and all income tax, social security contributions and the like which may be found due from Client on any payments or arrangements made under this Agreement together with any interest, penalty or gross-up thereon.
SECTION 7 | TERMINATION. |
7.1. Notwithstanding any other provision herein, Consultants services may be terminated by Client upon written notice to Consultant, effective immediately, if Consultant shall have engaged in conduct which, in the opinion of the President of Client, has brought or is likely to bring either Consultant or Client into disrepute or has or is likely to impair Consultants ability to provide services to Client or to do so in a manner or at a time reasonably required by Client.
7.2. Notwithstanding anything herein to the contrary, either party may terminate Consultants services under this Agreement, with or without cause, upon the giving of ninety (90) days advance written notice to the other.
SECTION 8 | ASSIGNMENT AND SUBCONTRACTING. |
Consultant may not assign or transfer his interests or claims under this Agreement, or subcontract his services hereunder, without the prior written consent of Client.
SECTION 9 | ATTORNEY FEES. |
If suit or action is instituted in connection with any controversy arising out of this Agreement, the prevailing party shall be entitled to recover, in addition to costs, such sum as the court may adjudge reasonable as attorney fees for services rendered before trial, during trial and in any appeals.
SECTION 10 | APPLICABLE LAW AND VENUE. |
10.1. This Agreement shall be binding on and shall be for the benefit of the parties hereto and shall be governed by the laws of the State of Oregon.
10.2. Consultant hereby consents to the exclusive jurisdiction of, and venue in, federal and/or state courts located in the State of Oregon, Multnomah County, for any action arising out of or in connection with this Agreement.
Consulting Services Agreement
Page 3
SECTION 11 | NOTICES. |
All notices required or permitted to be given under this Agreement shall be given by certified or express mail to the parties at the addresses given herein.
SECTION 12 | SEVERABILITY. |
Any provision of this Agreement prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in one jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
SECTION 13 | COMPLETE AGREEMENT. |
This Agreement replaces and supersedes the Prior Agreement and constitutes the complete agreement between Consultant and Client. No representation or promise, either oral or written, has been made except as specifically set forth herein.
CLIENT: | CONSULTANT: | |||||||||
Greenbrier Leasing Company LLC | Charles J. Swindells | |||||||||
One Centerpointe Drive, Suite 200 | 500 NW Hilltop Road | |||||||||
Lake Oswego OR 97035 | Portland, OR 97210 | |||||||||
Telephone: (503) 684-7000 | Telephone: (503) 803-7129 | |||||||||
Facsimile: (503) 684-7553 | Facsimile: (503) 227-2428 | |||||||||
GREENBRIER LEASING COMPANY LLC | CHARLES J. SWINDELLS | |||||||||
By: |
/s/ Martin R. Baker |
|||||||||
Title: |
Senior Vice President |
Signature: |
/s/ Charles J. Swindells |
|||||||
Date: |
January 15, 2016 |
Date: |
January 8, 2016 |
Consulting Services Agreement
Page 4
Exhibit 10.4
SEPARATION AND CONSULTING AGREEMENT
This Separation and Consulting Agreement (Agreement) is made effective as of February 26, 2016 (Effective Date), by and between The Greenbrier Companies, Inc. (the Company) and William G. Glenn (Glenn).
RECITAL
The Company and Glenn desire to enter into this Agreement, setting forth the terms and conditions relating to Glenns transition from his current position with the Company and his potential engagement as a consultant to the Company following the cessation of his employment with the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Company and Glenn agree as follows:
ARTICLE 1
Employment and Separation
1.1 Employment Status . As of the Effective Date, Glenn shall resign from his current position as an executive officer and Senior Vice President and Chief Commercial Officer of the Company and shall also resign as all other roles as director, officer, manager, board member and any other position of any and all subsidiaries of the Company, except as provided in Section 1.3 below.
1.2 Employment Term . Glenn shall serve as a non-officer employee of the Company under the terms of this Agreement for the period beginning on the Effective Date and ending on May 31, 2016, which may be extended for an additional period by mutual consent of the parties (Employment Term). Notwithstanding any provision of this Agreement to the contrary, the Employment Term may be terminated by the Company or Glenn at any time and for any reason. If employment term is terminated, all remaining provisions of this agreement remain in force, subject to the survival provisions set forth in Section 4.9. For avoidance of doubt, this Agreement does not guarantee or imply any right to continued employment for any period whatsoever. The Company and Glenn acknowledge that Glenns employment is and shall continue to be at-will and no representative of the Company, other than the Companys Chief Executive Officer (CEO), has the authority to alter the at-will employment relationship.
1.3 Position; Duties . During the Employment Term, Glenn shall serve as the President of the Management Board of WagonySwidnica S.A., a wholly-owned indirect subsidiary of the Company, reporting to the Companys CEO, and shall have the duties and responsibilities as may be reasonably assigned from time to time by the CEO, including principally, (i) succession planning by providing recommendations and any necessary support within the Companys Commercial organization for Europe and the Middle East; (ii) work to obtain a mutually acceptable comprehensive Term Sheet/Letter of Intent with the counterparty in Project Star (the Term Sheet/Letter of Intent should identify the material terms of a proposed transaction which would allow Project Star to advance immediately to the formal diligence and documentation stage); (iii) upon the Companys request and in coordination with the Companys
1
CEO, work with key customers and other key relationships on transition to new management within the Commercial organization; and (iv) work as required with studies and support of GCC market and SAR.
1.4 Performance of Duties . During the Employment Term, Glenn will devote his reasonable full-time energies and efforts exclusively in furtherance of the business of the Company and its affiliates. Glenn will perform his duties during the Companys normal business hours and at other reasonably necessary times. Glenn will extend his best efforts on behalf of the Company and will abide by all policies and decisions made by the Company, as well as all applicable foreign, federal, state and local laws, regulations and ordinances. Glenn will act in the best interest of the Company at all times. Notwithstanding the foregoing, Glenn will be permitted to serve as an outside director on the board of directors of Columbia Machine, Inc., Vancouver, WA, and of nonprofit or charitable entities, provided such entities do not compete with the Company, and may participate in other professional, civic, governmental organizations and activities that do not materially affect Glenns ability to carry out the duties hereunder.
1.5 Base Salary . As compensation for Glenns performance of the duties during the Employment Term, Glenn shall be paid a base salary at a rate of $360,000.00 per annum (Base Salary), payable in accordance with the Companys customary payroll practices, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions.
1.6 Bonus . Although Glenn will not hold an Eligible Executive Officer Position during the Employment Term within the meaning of the Companys 2016 officer incentive bonus plan, Glenn will receive a cash performance-based bonus for the fiscal year ending August 31, 2016 pursuant to the Companys 2016 officer incentive bonus plan as if Glenn had remained an Eligible Executive Officer at the time of the bonus payment, without regard to whether the Employment Term expires before August 31, 2016, provided that and contingent upon Glenn having provided to the Company a signed, comprehensive release of claims against the Company and its affiliates as of the date of determination of such bonus, in substantially the form attached as Exhibit A to this Agreement.
1.7 Separation . As a material condition of this Agreement, on or before the Effective Date, Glenn agrees to submit an undated resignation as President of the Management Board of WagonySwidnica S.A. to be effective upon the expiration or earlier termination of the Employment Term and the Consulting Term, if applicable, or earlier upon appointment of a new President of the Management Board of WagonySwidnica S.A., as provided in Section 1.2 above.
1.8 Indemnification and D&O Insurance. The Indemnification Agreement, dated December 5, 2008 between Glenn and the Company remains in full force and effect in accordance with its terms. Glenn shall remain as an insured individual for his activities as President of Management Board of WagonySwidnica S.A. under any Company directors and officers insurance policy as the Company may have in place from to time.
2
ARTICLE 2
Consulting Engagement
2.1 Consulting Status . Upon the cessation of his employment with Company, Glenn, in his sole discretion, may become a consultant to the Company. Glenns status shall be as an independent contractor, and the Company shall have no authority to supervise the time, manner or place of Glenns performance of services as a consultant. Glenn may perform work for other individuals and entities, provided that such work does not interfere with the services he provides to the Company and does not violate any provision of Article 4 below.
2.2 Consulting Term . Glenns consulting term under this Agreement, if any, shall begin immediately following the expiration of the Employment Term, including any extensions thereto, and shall continue until December 31, 2016. If the Employment Term is extended beyond May 31, 2016 under Section 1.2, then the consulting engagement period shall be extended by the same amount of time the employment period is extended past May 31, 2016 (the Consulting Term). Notwithstanding any provision of this Agreement to the contrary, the Consulting Term may be terminated at any time prior to the expiration of the Consulting Term by mutual agreement of Glenn and the Company.
2.3 Consulting Fees . As compensation for Glenns performance of the duties during the initial Consulting Term ending December 31, 2016, or as extended under Section 2.2 above, the Company shall pay Glenn a monthly Consulting Fee in the amount of $30,000.00 per month (the Consulting Fees) for full-time work and as pro-rated for less time worked. The Company will not withhold any income or payroll taxes from the Consulting Fees, and Consultant will be responsible for all applicable federal, state, local and foreign income and/or payroll taxes due as a result of receipt of the Consulting Fees.
2.4 Extension of Consulting Term .
2.4.1 Prior to commencement of the Consulting Term, Glenn may elect to extend the Consulting Term beyond the initial scheduled end date by the number of days equal to Glenns unused Paid Time Off (PTO) days accrued as of the last day of the Employment Term. Glenn must provide the Company with written notice of such election no less than ten days prior to commencement of the Consulting Term.
2.4.2 Prior to the expiration of the Consulting Term, including any extension as provided in Section 2.4.1, Glenn may elect to extend the Consulting Term beyond its scheduled end date by up to an additional twelve months, to be paid at a mutually agreed rate and scope of work by the parties. Glenn must provide the Company with written notice of such election no less than ten days prior to expiration of the Consulting Term.
2.5 Consulting Duties . During the Consulting Term, including any extensions as provided in Section 2.4.1 or 2.4.2, Glenn will report to the Companys CEO, and shall have the duties and responsibilities as may be reasonably assigned from time to time by the CEO.
3
ARTICLE 3
Other Compensation and Benefits
3.1 Restricted Stock Units .
3.1.1 During the Employment Term, all unvested time-based Restricted Stock Units held by Glenn shall continue to vest, in accordance with the terms and conditions of the applicable Restricted Stock Unit Agreements (each, an RSU Agreement).
3.1.2 Upon the expiration of the Employment Term, the vesting of all unvested time-based Restricted Stock Units as set forth on the RSU vesting schedule attached as Exhibit B shall immediately accelerate, and such RSUs will become fully vested.
3.1.3 As of the Effective Date, the performance-based Restricted Stock Units held by Glenn as set forth on Exhibit B which pertain to the performance period ending on August 31, 2017 will expire unvested. The performance-based Restricted Stock Units held by Glenn as set forth in Exhibit B which pertain to the performance period ending on August 31, 2016 shall continue to vest based on performance in accordance with the terms and conditions of the applicable RSU Agreement, as determined by the Compensation Committee in November 2016, as if Glenn had remained an eligible RSU plan participant at the time of the vesting.
3.1.4 Each RSU Agreement described above is deemed to be amended to provide for modified vesting as described above.
3.2 Office/Equipment Support . During the Employment Term and the Consulting Term, including any extensions under Section 2.4, the Company shall provide reasonable access to the Companys offices and administrative support and support to Glenn as reasonably necessary for Glenn to perform services for the Company. This support includes providing Glenn with a mobile telephone, iPad, and executive assistance support.
3.3 Paid Time Off . During the Employment Term, Glenn shall be entitled to accrue PTO in accordance with the Companys standard policies and guidelines. Unless Glenn elects to extend the Consultation Term pursuant to Section 2.4.1, any accrued, unused PTO will be paid out at the expiration of the Employment Term.
3.4 401(k) . During the Employment Term, Glenn is entitled to participate in the Companys 401(k) program in the same manner as all other employees and, upon termination of employment, shall have the same options available to all other employees under such program.
3.5 Life Insurance . During the Employment Term, Glenn is entitled to participate in and benefit from the Companys group term life insurance coverage in the same manner of all other employees and, upon termination of employment, shall have the options available to all other employees under such program. During the Employment Term and the Consulting Term, including any extension as provided in Section 2.4, the Company shall continue Glenns executive life insurance, in place as of the Effective Date. In accordance with the Companys executive life insurance program, the Company shall transfer to Glenn the ownership of any such Company owned policy, including without limitation the right to the cash surrender value of the policy, upon expiration of employment or, if applicable, consulting engagement.
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3.6 Medical Insurance . During the Employment Term, Glenn will be eligible to participate in, subject to Glenns continued payment of his portion of such premiums, all employee benefit plans available to full-time, executive employees of the Company, subject to the terms and conditions of the Companys benefit plans, including health, dental and vision insurance benefits. During the Consulting Term, including any extensions under Section 2.4, but in any event not to exceed eighteen (18) months following the expiration of the Employment Term, the Company shall provide for continuation coverage pursuant to COBRA for Glenn and/or his family provided that Glenn pays the Company an amount equal to the applicable premium for employee health benefits that Glenn paid as an employee of the Company. COBRA refers to the Consolidated Omnibus Budget Reconciliation Act of 1985. Company reserves the right to change or eliminate its medical benefits applicable to all employees and to Glenn on a prospective basis without advance notice to Glenn.
3.7 Automobile Allowance . Until December 31, 2016, Glenn shall be entitled to participate in the Companys automobile allowance program at the same level as of the Effective Date.
3.8 Country Club Dues . Until December 31, 2016, the Company agrees to continue paying such portion of Glenns country club dues as the Company is paying as of the Effective Date.
3.9 IRS Section 409A . The parties intend that all compensation and benefits provided for under this Agreement shall either be exempt from IRC §409A, or shall be paid or provided in accordance with the requirements of IRC §409A, including, without limitation, the imposition of a delay in the payment of cash or transfer of other benefits to Glenn until a date that is six months after the date of Glenns separation from service, as that term is defined in Treas. Reg. §1.409A-1(h), if Glenn is determined to be a specified employee as defined under IRC §409A.
3.10 SEC Compliance . During the Employment Term and Consulting Term, including any extensions under Section 2.4, Glenn shall comply, to the extent applicable, with all requirements of Section 16 of the Securities Exchange Act of 1934 and the Companys insider trading policies and procedures.
3.11 Condition . Glenn expressly acknowledges that all compensation, bonuses, and benefits provided under this Article 3 are contingent upon and subject to Glenns compliance with Article 4 below.
ARTICLE 4
Restrictive Covenants
4.1 Protected Information .
4.1.1 Covenant . During and after expiration of Glenns Employment Term and Consulting Term, including extensions under Section 2.4, Glenn shall not, directly or indirectly, use, divulge, furnish or make accessible to any person, firm, corporation, association or other entity, or use in any manner, any Protected Information (as defined below), or cause any Protected Information to enter the public domain, except as may be required in the regular course of Glenns engagement by the Company.
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4.1.2 Access to Protected Information . The Company has advised Glenn and Glenn has acknowledged that it is the policy of the Company to maintain as secret and confidential all Protected Information, and that Protected Information has been and will be developed at substantial cost and effort to the Company. Glenn acknowledges that Glenn will acquire Protected Information with respect to the Company, which information is a valuable, special, and unique asset of the Companys business and operations, and that disclosure of such Protected Information would cause irreparable damage to the Company.
4.1.3 Glenn-Created Protected Information . Glenn agrees to promptly disclose to the Company all Protected Information developed in whole or in part by Glenn during employment and/or consulting engagement with the Company and which relates to the Companys business. Such Protected Information is, and shall remain, the exclusive property of the Company. All Protected Information created during Glenns employment and/or consulting engagement with the Company (excluding writings unrelated to the Companys business) are considered to be works-for-hire for the benefit of the Company, and the Company shall own all rights in such Protected Information.
4.1.4 Return of Confidential Records . All forms of information and all physical property made or compiled by Glenn prior to or during the Employment Term and the Consulting Term, including extensions under Section 2.4, containing or relating in any way to Protected Information shall be the Companys exclusive property. All such materials and any copies thereof shall be held by Glenn in trust solely for the benefit of the Company and shall be delivered to the Company upon expiration of Glenns employment and/or consulting engagement, or at any other time upon the Companys request.
4.1.5 Protected Information . Protected Information means trade secrets, confidential and propriety business information of the Company, any information of the Company other than information which has entered the public domain (unless Employee caused such information to enter the public domain), and all valuable and unique information and techniques acquired, developed or used by the Company relating to its business, operations, employees, customers and suppliers, which give the Company a competitive advantage over those who do not know the information and techniques, and which are protected by the Company from unauthorized disclosure, including but not limited to, financial information and conditions, customer and customer lists (including potential customers identified by the Company), sources of supply, processes, patented or proprietary technologies, plans, materials, pricing information, internal memoranda, marketing plans, internal policies, and products and services which may be developed from time to time by the Company and its agents or employees.
4.2 Non-Solicitation . Glenn agrees that, during his Employment Term and Consulting Term, including extensions under Section 2.4, and for a period of two (2) years after the expiration of the employment and/or consulting engagement, including extensions thereto, or the earlier termination of this Agreement, Glenn will not directly or indirectly, in any capacity (a) solicit any customer or vendors of the Company or its affiliates; or (b) persuade or seek to persuade any customer or vendors of the Company or its affiliates to cease to do business or reduce the amount of business that customer or vendor is then doing with the Company or its affiliates, in each case other than in the normal course of business relating to Glenns employment with a company not covered by the restrictions defined in Section 4.5.
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4.3 Non-Interference with Employment Relationships . Glenn agrees that during his Employment Term and Consulting Term, including extensions under Section 2.4, and for a period of two (2) years after the expiration of Glenns employment and/or consulting engagement, including extensions thereto, or the earlier termination of this Agreement, Glenn will not (a) directly or indirectly solicit, induce, or encourage any employee of the Company to leave his or her employment with the Company or interfere with any employment relationship between the Company and any of its employees, or (b) hire or encourage or assist any other person to hire any person who has been an employee of the Company within the previous twelve (12) months.
4.4 Disclosure of Business Opportunities . During the Employment Term and the Consulting Term, including extensions under Section 2.4, Glenn agrees to promptly and fully disclose to the Company, and not to divert to his own use or benefit or the use or benefit of others, any business opportunities involving any existing or prospective line of business, customer, product or activity of the Company or any business opportunities that otherwise should be afforded to the Company.
4.5 Non-Competition . As a condition of Glenns consulting engagement under Article 2 of this Agreement, Glenn agrees that, during the Consulting Term, including extensions under Section 2.4, and for a period of two (2) years after the expiration of the Consulting Term, including any extensions thereto, or the earlier termination of this Agreement, Glenn will not directly or indirectly, own (as an asset or equity owner), be employed by, or consult for any individual or entity, or participate in the start-up of, any business that (i) manufactures railcars, railcar components or barges in North America, Europe, Brazil or the GCC countries; (ii) maintains, services or repairs railcars or railcar parts and components in North America, Europe, Brazil, or the GCC countries; (iii) leases railcars, provided that this subjection 4.5(iii) will only apply to leasing businesses located and/or doing business in Europe and to GATX, Trinity Leasing, Union Tank Car, American Railcar Leasing, and any affiliate or captive leasing company of any of the foregoing or any other freight railcar manufacturer; (iv) manages railcars in North America, Europe, Brazil or the GCC countries, subject to the exceptions set forth immediately following. This Section does not prevent Glenn from working for agreed upon railcar management companies and suppliers for either employment or consulting engagements, provided that the CEO consents to such a relationship after consultation with Glenn and based on the CEOs determination in his reasonable discretion that such a relationship does not create a conflict of interest or harm to the Company. Ownership of one percent (1%) or less of the outstanding stock of a publicly traded corporation will not be deemed a violation of this provision. Glenn acknowledges that the geographic scope of this restriction is reasonably necessary to protect the Companys legitimate interests, particularly in light of Glenns position with the Company, Glenns corresponding duties, responsibilities and authority, and the Companys current business plans and expansion efforts. Notwithstanding the foregoing, Company will, on request of Glenn, give reasonable good faith consideration to waiving all or a portion of the covenant to enable Glenn to obtain new employment, provided Glenn furnishes the Company with the name of the employer, a description of the employers business and the job description. The Company will consider waiving all or a portion of the covenants if the Company determines, in its good faith judgment, that the new employment does not pose a substantial threat to the Companys competitive or economic interest.
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4.6 Publicity . Except as otherwise required by law, the parties agree to work together regarding any public announcement related to this Agreement and the covenants herein. The parties will cooperate and coordinate messaging and issuance of any press release, including internal communication regarding Glenns ongoing role and transition within the Company.
4.7 Non-Disparagement . Glenn 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 relationships or personal reputations. Glenn shall respond accurately and fully to any questions, inquiry or request for information when required by legal process, notwithstanding the foregoing. Glenn will report to the CEO any defamatory comments made about him by any individual Company employee or agent, and the Company will take reasonable measures to cease such communications.
4.8 Cooperation . Glenn agrees that during his Employment Term and Consulting Term, including any extensions under Section 2.4, and for a period of twelve (12) months after the expiration of Glenns employment and/or consulting engagement, including extensions thereto, or the earlier termination of this Agreement, Glenn will cooperate with the Company in responding to the reasonable requests of the Board, the Companys or its General Counsel, in connection with outstanding projects and 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 Glenns cooperation necessary or desirable. In such matters, Glenn 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. Glenn also agrees to promptly send the Company copies of all correspondence (for example, but not limited to, subpoenas) received by Glenn in connection with any such legal proceedings, unless Glenn is expressly prohibited by law from so doing. The Company will reimburse Glenn for reasonable out-of-pocket expenses incurred by Glenn as a result of his cooperation with the obligations described in this Section, within 30 day of the presentation of appropriate documentation thereof, in accordance with the Companys standard reimbursement policies and procedures.
4.9 Survival of Undertakings and Injunctive Relief .
4.9.1 Survival . The provisions of Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6, 4.7 and 4.8 shall survive the expiration of Glenns employment and/or consulting engagement, or the earlier termination of this Agreement (irrespective of the reasons therefore). In the event of any violation of Sections 4.1, 4.2, 4.3, 4.4, and 4.5 Glenn further agrees that the time periods set forth in such sections shall be extended by the period of such violation.
4.9.2 Injunctive Relief . Glenn acknowledges and agrees that the restrictions imposed upon him by this Article 4 and the purpose of such restrictions are reasonable and are designed to protect the Protected Information and the continued success of the Company without unduly restricting Glenns future employment by himself or others. Furthermore, Glenn acknowledges that, in view of the Protected Information which Glenn has or will acquire or has or will have access to, and in view of the necessity of the restrictions contained in this Article 4 any violation of any provision of this Article 4 hereof would cause irreparable injury to the Company with respect to the resulting disruption in its operations. By reason of the foregoing,
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Glenn consents and agrees that if he violates any of the provisions of this Article 4, the Company shall be entitled, in addition to any other remedies that it may have, including money damages, to an injunction to be issued by a court of competent jurisdiction, restraining Glenn from committing or continuing any violation of such sections of this Agreement.
4.10 References to the Company . All references to the Company in this Article 4 shall be deemed to include any subsidiary, parent, successor in interest, or other affiliate of the Company.
ARTICLE 5
Release of Claims
5.1 Release . In exchange for and in consideration of the payments, benefits, and other commitments described herein, including but not limited to Glenns continued employment by the Company, as provided by Article 1, and consulting engagement with the Company, as provided by Article 2, Glenn, for him and for each of his heirs, executors, administrators and assigns, hereby fully releases, acquits and forever discharges the Company and its subsidiaries, divisions, affiliates, successors, assigns, beneficiaries, insurers, representatives, agents, and all of the Companys past and present directors, officers and employees, from any and all, both past and present, claims, liabilities, causes of action, demands to any rights, damages, costs, attorneys fees, expenses and compensation whatsoever, of whatever kind or nature, in law, equity or otherwise, whether known or unknown, vested or contingent, suspected or unsuspected, that Glenn may now have, has ever had, or hereafter may have, relating directly or indirectly to his employment with the Company or its subsidiaries and/or his termination of employment. Glenn also releases any and all claims Glenn may have that arose prior to the date of this Agreement and hereby specifically waives and releases all claims, including, but not limited to, those arising under Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans With Disabilities Act of 1990; the Rehabilitation Act of 1973; Sections 1981 through 1988 of Title 42 of the United States Code; the Immigration Reform and Control Act; the Workers Adjustment and Retraining Notification Act; the Occupational Safety and Health Act; the Sarbanes-Oxley Act of 2002; the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1971; the National Labor Relations Act; the Fair Labor Standards Act; the Genetic Information Nondiscrimination Act (GINA); all as amended, and any and all similar state or local statutes, ordinances, or regulations, as well as all claims arising under federal, state, or local law involving any tort, an express or implied employment contract, covenant of good faith and fair dealing or other statute, contract, breach of fiduciary duty, fraud, misrepresentation, defamation or other theory. Notwithstanding the foregoing, Glenn is not waiving any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; however, Glenn hereby disclaims and waives any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding.
ARTICLE 6
Miscellaneous
6.1 Assignment and Transfer . Glenns rights and obligations under this Agreement shall not be transferable by assignment or otherwise, and any purported assignment, transfer or
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delegation thereof shall be void. This Agreement shall inure to the benefit of, and be binding upon and enforceable by, any purchaser of substantially all of the Companys assets, any corporate successor to the Company or any assignee thereof.
6.2 Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Oregon without regard to conflict of law principles.
6.3 Entire Agreement . This Agreement, together with the amendment to the Restricted Stock Agreements, contains the entire agreement and understanding between the parties hereto and supersedes any prior or contemporaneous written or oral agreements, representations and warranties between them respecting the subject matter hereof.
6.4 Amendment . This Agreement may be amended only in writing signed by Glenn and by a duly authorized executive officer of the Company.
6.5 Severability . If any term, provision, covenant or condition of this Agreement, or the application thereof to any person, place or circumstance, shall be held to be invalid, unenforceable or void, the remainder of this Agreement and such term, provision, covenant or condition as applied to other persons, places and circumstances shall remain in full force and effect.
6.6 Notices . Any notice, request, consent or approval required or permitted to be given under this Agreement or pursuant to law shall be sufficient if in writing, and if and when sent by certified or registered mail, with postage prepaid, to Glenns residence (as noted in the Companys records), or to the Companys principal office, as the case may be.
6.7 Disputes . Any controversy, claim or dispute arising out of or relating to this Agreement or the employment and/or consulting relationship, either during the existence of the employment and/or consulting relationship or afterwards, between the parties hereto, their assignees, their affiliates, their attorneys, or agents, shall be litigated solely in state or federal court in Multnomah County, Oregon. Each party (a) submits to the jurisdiction of such court, (b) waives the defense of an inconvenient forum, (c) agrees that valid consent to service may be made by mailing or delivery of such service to the Oregon Secretary of State (the Agent) or to the party at the partys last known address, if personal service delivery cannot be easily effected, and (d) authorizes and directs the Agent to accept such service in the event that personal service delivery cannot easily be effected.
IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement as of the date set forth below.
THE GREENBRIER COMPANIES, INC. | ||||||||
By: |
/s/ Martin R. Baker |
/s/ William G. Glenn |
||||||
Title: |
Senior Vice President |
WILLIAM G. GLENN | ||||||
Dated: |
February 26, 2016 |
Dated: |
February 26, 2016 |
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EXHIBIT A
RELEASE OF CLAIMS
William G. Glenn, together with his heirs, family members, executors, administrators, agents and assigns (Glenn) hereby fully releases, acquits and forever discharges The Greenbrier Companies, Inc., (Greenbrier) its subsidiaries, affiliates, officers, directors, shareholders, employees, agents and attorneys, both past and present (collectively, the Released Parties and individually, a Released Party) from any and all claims, liabilities, causes of action, demands to any rights, costs, attorneys fees, expenses and compensation whatsoever, of whatever kind or nature, in law, equity or otherwise, whether known or unknown, vested or contingent, suspected or unsuspected, that Glenn may now have, has ever had, or hereafter may have, relating directly or indirectly to his employment with Greenbrier and/or his termination of employment.
Glenn also releases any and all claims Glenn may have that arose prior to the date of this Release and hereby specifically waives and releases all claims against any Released Party, including without limitation those arising under Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Equal Pay Act; the Americans With Disabilities Act of 1990; the Rehabilitation Act of 1973; the Age Discrimination in Employment Act; Sections 1981 through 1988 of Title 42 of the United States Code; the Immigration Reform and Control Act; the Workers Adjustment and Retraining Notification Act; the Occupational Safety and Health Act; the Sarbanes-Oxley Act of 2002; the Consolidated Omnibus Budget Reconciliation Act (COBRA); the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1971; the National Labor Relations Act; the Fair Labor Standards Act; all as amended, and any and all similar state or local statutes, ordinances, or regulations, as well as all claims arising under federal, state, or local law involving any tort, an express or implied employment contract, covenant of good faith and fair dealing or other statute, contract, breach of fiduciary duty, fraud, misrepresentation, defamation or other theory.
This release includes a release of all claims under the Age Discrimination in Employment Act (ADEA), and, therefore, pursuant to the requirement of the ADEA, Glenn acknowledges that he has been advised in writing that: (a) this release includes, but is not limited to, all rights or claims arising under the ADEA up to and including the date of execution of this release; (b) Glenn should consult with an attorney before executing this release; (c) Glenn has up to twenty-one (21) days within which to consider this release; (d) Glenn has seven (7) days following execution of this release to revoke this release; and (e) this release of claims under the ADEA shall become effective and enforceable on the eighth day after Glenn signs and delivers this Agreement to the Companys Chief Human Resources Officer. Nothing in this release prevents or precludes Glenn from challenging, or seeking a determination in good faith of, the validity of this waiver under the ADEA or the Older Workers Benefit Protection Act (nor does it impose
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any condition precedent, penalties or cost for doing so, unless specifically authorized by federal law), or from participating in any investigation or proceeding conducted by the Equal Employment Opportunity Commission.
William G. Glenn |
||
Date signed: |
|
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EXHIBIT B
RSU VESTING SCHEDULE
Status of Unvested RSUs |
Date of
Grant |
# of
Remaining Units |
Vesting Date | |||||||||||||||||||||||||||||||||||
William Glenn |
5/5/16 | 5/22/16 | 5/28/16 | 8/31/16 | * | 5/5/17 | 5/22/17 | 8/31/17 | * | 5/22/18 | ||||||||||||||||||||||||||||
Time Based Units |
5/28/13 | 2,539 | 2,539 | |||||||||||||||||||||||||||||||||||
5/5/14 | 2,691 | 1,346 | 1,345 | |||||||||||||||||||||||||||||||||||
5/22/15 | 6,250 | 2,084 | 2,083 | 2,083 | ||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Total Time Based Units |
11,480 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Performance Based Units |
5/5/14 | 4,037 | 4,037 | |||||||||||||||||||||||||||||||||||
5/22/15 | 6,250 | 6,250 | ||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Total Performance Based |
10,287 | |||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||
Total RSUs |
21,767 | |||||||||||||||||||||||||||||||||||||
|
|
* | Performance RSUs at Target Level |
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Exhibit 10.5
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT, dated as of February 19, 2016 (this Amendment ), is entered into among GREENBRIER LEASING COMPANY LLC, an Oregon limited liability company (the Borrower ), the Lenders party hereto, and BANK OF AMERICA, N.A., as Administrative Agent for the Lenders (in such capacity, the Administrative Agent ). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in the Credit Agreement (as defined below).
RECITALS
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to that certain Credit Agreement, dated as of March 20, 2014 (as amended or modified from time to time, the Credit Agreement ); and
WHEREAS, the parties hereto have agreed to amend the Credit Agreement as provided herein.
NOW, THEREFORE, in consideration of the agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Amendments .
(a) | The following definitions are hereby added to Section 1.01 of the Credit Agreement in the appropriate alphabetical order to read as follows: |
Notice of Loan Prepayment means a notice of prepayment with respect to a Loan, which shall be substantially in the form of Exhibit 2.06 or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer.
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(b) | The following definitions in Section 1.01 of the Credit Agreement are hereby amended to read as follows: |
Loan Notice means a notice of (a) a Borrowing, (b) a conversion of Term Loans from one Type to the other, or (c) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a) , which shall be substantially in the form of Exhibit 2.02 or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower.
Parent Credit Facility means that certain Third Amended and Restated Credit Agreement, dated as of October 29, 2015 among the Parent, the guarantors from time to time party thereto, the lenders from time to time party thereto and Bank of America as administrative agent (including, without limitation, any guarantee agreements and security documents and other documentation entered into in connection therewith), as any such agreement or facility may be amended (including any amendment and restatement thereof), restated, supplemented, refinanced, replaced (in whole or in part), or otherwise modified in writing from time to time, including any agreement (including any subsequent agreement or agreements) exchanging, extending the maturity of, refinancing, renewing, replacing, substituting or otherwise restructuring, whether in the bank or debt capital markets or otherwise (or combination thereof) (including increasing the amount of available borrowings thereunder or adding or removing borrowers or guarantors thereunder) and whether in whole or in part, all or any portion of the Indebtedness under such agreement or facility or any successor or replacement agreement or facility (including, without limitation, any guarantee agreements and security documents and other documentation entered into in connection therewith).
2
Responsible Officer means the chief executive officer, president, vice president, chief financial officer, controller, secretary or assistant secretary, treasurer or assistant treasurer of the Borrower and, solely for purposes of notices given pursuant to Article II , any other officer or employee of the Borrower so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the Borrower designated in or pursuant to an agreement between the Borrower and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.
(c) | Subclause (b) of the definition of Change of Control is hereby amended to read as follows: |
(b) during any period of 24 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Parent cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body.
(d) | The definition of Eurocurrency Rate in Section 1.01 of the Credit Agreement is hereby amended to add the following sentence at the end thereof: |
Notwithstanding the foregoing, if the Eurocurrency Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.
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(e) | The definition of Consolidated Funded Indebtedness is hereby amended to add the following sentence at the end thereof: |
Notwithstanding the foregoing, for so long as neither the Borrower nor any of its Subsidiaries is designated as a borrower or an issuer under the Parent Credit Facility, all Indebtedness and other obligations (whether consisting of guarantees or otherwise) in respect of the Parent Credit Facility shall be excluded from the definition of Consolidated Funded Indebtedness.
(f) | Section 2.02(a) of the Credit Agreement is hereby amended to read as follows: |
(a) Each Borrowing, each conversion of Term Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the Borrowers irrevocable notice to the Administrative Agent which may be given by: (A) telephone or (B) a Loan Notice; provided that any telephonic notice must be confirmed promptly by delivery to the Administrative Agent of a Loan Notice. Each Loan Notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Term Loans that are Eurocurrency Rate Loans or of any conversion of any such Eurocurrency Rate Loans to Base Rate Loans, and (ii) on the Closing Date for the Borrowing of Term Loans that are Base Rate Loans. Notwithstanding the foregoing, if the Borrower wishes to request Eurocurrency Rate Loans having an Interest Period other than seven (7) days, one, two, three or six months in duration as provided in the definition of Interest Period, the applicable notice must be received by the Administrative Agent not later than 11:00 a.m. (i) four Business Days prior to the requested date of such Borrowing, conversion or continuation of Eurocurrency Rate Loans, whereupon the Administrative Agent shall give prompt notice to the Lenders of such request and determine whether the requested Interest Period is acceptable to all of them. Not later than 11:00 a.m., on the applicable Business Day specified in the immediately preceding sentence for which a request for such a Borrowing, conversion or continuation must be received, the Administrative Agent shall notify the Borrower (which notice may be by telephone) whether or not the requested Interest Period has been consented to by all the Lenders. Each conversion to or continuation of Eurocurrency Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof. Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof. Each Loan Notice shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of Term Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Term Loans to be borrowed, converted or continued, (iv) the Type of Term Loans to be borrowed or to which existing Term Loans are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto. If the Borrower fails to specify a Type of Term Loan in a Loan Notice or if the Borrower fails to give a
4
timely notice requesting a conversion or continuation, then the applicable Term Loans shall be made as, or converted to, Base Rate Loans. Any automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans. If the Borrower requests a conversion to, or continuation of Eurocurrency Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.
(g) | The first sentence in Section 2.06(a) of the Credit Agreement is hereby amended to read as follows: |
The Borrower may, upon delivery of a Notice of Loan Prepayment from the Borrower to the Administrative Agent, at any time or from time to time voluntarily prepay the Loans in whole or in part without premium or penalty; provided that such notice must be received by the Administrative Agent not later than 10:00 a.m. (i) three Business Days prior to the requested date of prepayment of Eurocurrency Rate Loans and (ii) on the requested date of prepayment of Base Rate Loans.
(h) | The following sentence is hereby added to the end of Section 5.18 of the Credit Agreement to read as follows: |
The Borrower and its Subsidiaries have conducted their businesses in compliance in all material respects with the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010, and other similar anti-corruption legislation in other jurisdictions and have instituted and maintained policies and procedures designed to promote compliance in all material respects with such laws.
(i) | The following clause is hereby added to the end of Section 7.11 of the Credit Agreement to read as follows: |
Directly or indirectly use the proceeds of any Credit Extension for any purpose which would breach the United States Foreign Corrupt Practices Act of 1977, the UK Bribery Act 2010 or other similar anti-corruption legislation in other jurisdictions.
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(j) | The first paragraph of Section 10.02(b) of the Credit Agreement is hereby amended to read as follows: |
(b) Electronic Communications . Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e mail, FpML messaging, and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the Borrower may each, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.
(k) | The phrase arising out of the Borrowers or the Administrative Agents transmission of Borrower Materials through the Internet, telecommunications, electronic or other information systems appearing in Section 10.02(c) of the Credit Agreement is hereby amended to read as follows: |
arising out of the Borrowers or the Administrative Agents transmission of Borrower Materials or notices through the Platform, any other electronic platform or electronic messaging service or through the Internet
(l) | Section 10.06(f) of the Credit Agreement is hereby deleted. |
(m) | A new Section 10.19 is hereby added to the C r edit Agreement to read as follows: |
10.19 Electronic Execution of Assignments and Certain Other Documents .
The words delivery, execute, execution, signed, signature, and words of like import in any Loan Document or any other document executed in connection herewith shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Administrative Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or
6
enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that notwithstanding anything contained herein to the contrary neither the Administrative Agent nor any Lender is under any obligation to agree to accept electronic signatures in any form or in any format unless expressly agreed to by the Administrative Agent or such Lender pursuant to procedures approved by it and provided further without limiting the foregoing, upon the request of any party, any electronic signature shall be promptly followed by such manually executed counterpart.
(n) | A new Exhibit 2.06 to the Credit Agreement is hereby added in the form of Exhibit 2.06 attached hereto. |
2. Effectiveness; Conditions Precedent . This Amendment shall be effective upon receipt by the Administrative Agent of copies of this Amendment duly executed by the Borrower and the Required Lenders.
3. Expenses . To the extent required by Section 10.04 of the Credit Agreement, the Borrower agrees to reimburse the Administrative Agent for all reasonable out-of-pocket costs and expenses of the Administrative Agent in connection with the preparation, execution and delivery of this Amendment, including without limitation the reasonable fees and expenses of Moore & Van Allen, PLLC.
4. Ratification of Credit Agreement . The Borrower acknowledges and consents to the terms set forth herein and agrees that this Amendment does not impair, reduce or limit any of its obligations under the Loan Documents, as amended hereby. This Amendment is a Loan Document.
5. Authority/Enforceability . The Borrower represents and warrants as follows:
(a) It has taken all necessary action to authorize the execution, delivery and performance of this Amendment.
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(b) This Amendment has been duly executed and delivered by the Borrower and constitutes its legal, valid and binding obligations, enforceable in accordance with its terms, subject to applicable Debtor Relief Laws and to general principles of equity.
(c) No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by the Borrower of this Amendment except (a) as have been obtained or made and are in full force and effect, (b) for the authorizations, approvals, actions, notices and filings listed on Schedule 5.03 to the Credit Agreement, (c) filings and recordings with respect to the Collateral to be made, or otherwise delivered to the Administrative Agent for filing or recordation and (d) notices and filings required by law in connection with the exercise of remedies pursuant to the Loan Documents.
(d) The execution and delivery of this Amendment does not (i) contravene the terms of its Organization Documents or (ii) violate any material Law.
6. Representations and Warranties . The Borrower represents and warrants to the Lenders that after giving effect to this Amendment (a) the representations and warranties set forth in Article V of the Credit Agreement are true and correct in all material respects (or, if such representation or warranty is qualified by materiality or Material Adverse Effect, it is true and correct in all respects as drafted) as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (or, if such representation or warranty is qualified by materiality or Material Adverse Effect, it is true and correct in all respects as drafted) as of such earlier date, and (b) no event has occurred and is continuing which constitutes a Default.
7. Counterparts/Telecopy . This Amendment may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one and the same instrument. Delivery of executed counterparts of this Amendment by telecopy or other secure electronic format (.pdf) shall be effective as an original.
8. FATCA Certification . For purposes of determining withholding Taxes imposed under FATCA, from and after the date of this Amendment, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Credit Agreement as not qualifying as a grandfathered obligation within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).
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9. GOVERNING LAW . THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Successors and Assigns . This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
11. Headings . The headings of the sections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Amendment.
12. Severability . If any provision of this Amendment is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Amendment shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
13. No Waiver . The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor, except as expressly provided herein, constitute a waiver or amendment of any provision of any of the Loan Documents.
[remainder of page intentionally left blank]
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Each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written.
BORROWER: | GREENBRIER LEASING COMPANY, LLC, | |||||
an Oregon limited liability company | ||||||
By: |
/s/ Lorie L.Tekorius |
|||||
Name: | Lorie L. Tekorius | |||||
Title: | Senior Vice President and Treasurer |
GREENBRIER LEASING COMPANY LLC
FIRST AMENDMENT TO CREDIT AGREEMENT
ADMINISTRATIVE AGENT: | BANK OF AMERICA, N.A., as Administrative | |||||
Agent | ||||||
By: |
/s/ Joan Mok |
|||||
Name: |
Joan Mok |
|||||
Title: |
Vice President |
GREENBRIER LEASING COMPANY LLC
FIRST AMENDMENT TO CREDIT AGREEMENT
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
LENDERS: | BANK OF AMERICA, N.A., as a Lender | |||||
By: |
/s/ Michael Snook |
|||||
Name: |
Michael Snook |
|||||
Title: |
Senior Vice President |
|||||
UNION BANK, N.A., as a Lender | ||||||
By: |
/s/ Stephen A. Sloan |
|||||
Name: |
Stephen A. Sloan |
|||||
Title: |
Director |
|||||
DVB BANK SE, as a Lender | ||||||
By: |
/s/ Joachim Steck |
|||||
Name: |
Joachim Steck |
|||||
Title: |
Vice President |
|||||
By: |
/s/ Jann Gertjegerdes |
|||||
Name: |
Jann Gertjegerdes |
|||||
Title: |
Senior Vice President |
|||||
FIFTH THIRD BANK, as a Lender | ||||||
By: |
/s/ Andrew J. Valko |
|||||
Name: |
Andrew J. Valko |
|||||
Title: |
AVP |
GREENBRIER LEASING COMPANY LLC
FIRST AMENDMENT TO CREDIT AGREEMENT
BANK OF THE WEST, as a Lender | ||||||
By: |
/s/ Dale Parshall |
|||||
Name: |
Dale Parshall |
|||||
Title: |
Vice President |
|||||
COMERICA BANK, as a Lender | ||||||
By: |
/s/ Brian T. Fitzgerald |
|||||
Name: |
Brian T. Fitzgerald |
|||||
Title: |
Vice President |
|||||
BRANCH BANKING AND TRUST COMPANY, as a Lender | ||||||
By: |
/s/ Robert M. Searson |
|||||
Name: |
Robert M. Searson |
|||||
Title: |
Senior Vice President |
|||||
CAPITAL ONE EQUIPMENT FINANCE CORP., as a Lender | ||||||
By |
|
|||||
Name: |
|
|||||
Title: |
|
GREENBRIER LEASING COMPANY LLC
FIRST AMENDMENT TO CREDIT AGREEMENT
CREDIT INDUSTRIEL ET COMMERCIAL, NEW YORK BRANCH, as a Lender | ||||||
By: |
/s/ Adrienne Molloy |
|||||
Name: |
Adrienne Molloy |
|||||
Title: |
Managing Director |
|||||
By: |
/s/ Marcus Edward |
|||||
Name: |
Marcus Edward |
|||||
Title: |
Managing Director |
|||||
COLUMBIA BANK, as a Lender | ||||||
By: |
/s/ Kevin N. Meabon |
|||||
Name: |
Kevin N. Meabon |
|||||
Title: |
Senior Vice President |
|||||
UMPQUA BANK, as a Lender | ||||||
By: |
/s/ Jeffrey Seiler |
|||||
Name: |
Jeffrey Seiler |
|||||
Title: |
Vice President |
GREENBRIER LEASING COMPANY LLC
FIRST AMENDMENT TO CREDIT AGREEMENT
Exhibit 2.06
FORM OF NOTICE OF LOAN PREPAYMENT
TO: | Bank of America, N.A., as Administrative Agent | |
RE: | Credit Agreement dated as of March 20, 2014 (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 GREENBRIER LEASING COMPANY LLC, an Oregon limited liability company (the Borrower ), the Lenders party thereto and Bank of America, N.A., in its capacity as administrative agent (in such capacity, the Administrative Agent ) for the lenders from time to time party to the Credit Agreement. | |
DATE: | [Date] |
The Borrower hereby notifies the Administrative Agent that on pursuant to the terms of Section 2.06 of the Credit Agreement, the Borrower intends to prepay the following Loans as more specifically set forth below:
¨ | Voluntary prepayment in the following amount(s): |
¨ | Eurocurrency Rate Loans: $ | |
Applicable Interest Period: | ||
¨ | Base Rate Loans: $ |
Delivery of an executed counterpart of a signature page of this notice by fax transmission or other electronic mail transmission (e.g. pdf or tif) shall be effective as delivery of a manually executed counterpart of this notice.
GREENBRIER LEASING COMPANY LLC, | ||
By: |
|
|
Name: |
|
|
Title: |
|
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 29, 2016; |
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 5, 2016
/s/ William A. Furman |
William A. Furman President and Chief Executive Officer |
THE GREENBRIER COMPANIES, INC.
Exhibit 31.2
CERTIFICATIONS (contd)
I, Lorie L. Tekorius, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of The Greenbrier Companies, Inc. for the quarterly period ended February 29, 2016; |
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 5, 2016
/s/ Lorie L. Tekorius |
Lorie L. Tekorius Senior Vice President, Chief Financial Officer and Treasurer |
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 29, 2016, 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 5, 2016
/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 29, 2016, as filed with the Securities and Exchange Commission on the date therein specified (the Report), I, Lorie L. Tekorius, Senior Vice President, Chief Financial Officer and Treasurer 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 5, 2016
/s/ Lorie L. Tekorius |
Lorie L. Tekorius Senior Vice President, Chief Financial Officer and Treasurer |