UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended May 31, 2021February 28, 2022
☐ | 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) (503) 684-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock without par value | GBX | New York Stock Exchange |
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☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ☒ |
| Accelerated filer |
| ☐ |
Non-accelerated filer |
| ☐ |
| Smaller reporting company |
| ☐ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares of the registrant’s common stock, without par value, outstanding on July 2, 2021March 31, 2022 was 32,377,43932,587,696 shares.
FORM 10-Q
Table of Contents
Page | ||
3 | ||
PART I. | 4 | |
Item 1. | 4 | |
4 | ||
5 | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) | 6 | |
7 | ||
9 | ||
10 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 5. | 48 | |
Item 6. |
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Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations of future events and include any statement that does not relate to any historical or current fact. We use words such as “anticipates,” “believes,” “can,” “could,” “designed to,” “estimates,” “expects,” “forecast,“foresee,” “future,” “intends,” “likely,” “may,” “plans,” “potential,” “preliminary,” “seeks,” “should,” “strategy,” “will,” “would,” and similar expressions to identify forward-looking statements. Forward-looking statements are not guarantees of future performance.
Forward-looking statements are based on currently available operating, financial and market information and are subject to various risks and uncertainties. Actual future results and trends may differ materially depending on a variety of factors, including, but not limited to:
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The foregoing risks are described in more detail in Part I Item 1A “Risk Factors” in our most recent Annual Report on Form 10-K and our subsequent Quarterly ReportsReport on Form 10-Q which are incorporated herein by reference. You are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the date hereof. 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 31st unless otherwise noted.
3
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheets
(In millions, except number of shares which are reflected in thousands, unaudited)
|
| May 31, 2021 |
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| August 31, 2020 |
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| February 28, |
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| August 31, |
| ||||
Assets |
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Cash and cash equivalents |
| $ | 628,200 |
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| $ | 833,745 |
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| $ | 586.8 |
| $ | 646.8 |
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Restricted cash |
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| 8,689 |
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| 8,342 |
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| 15.7 |
| 24.6 |
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Accounts receivable, net |
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| 274,792 |
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| 230,488 |
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| 399.0 |
| 306.4 |
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Income tax receivable |
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| 75,135 |
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| 9,109 |
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| 106.0 |
| 112.1 |
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Inventories |
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| 553,137 |
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| 529,529 |
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| 728.5 |
| 573.6 |
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Leased railcars for syndication |
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| 154,017 |
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| 107,671 |
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| 80.0 |
| 51.6 |
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Equipment on operating leases, net |
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| 446,888 |
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| 350,442 |
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| 650.4 |
| 609.8 |
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Property, plant and equipment, net |
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| 676,010 |
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| 711,524 |
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| 646.5 |
| 670.2 |
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Investment in unconsolidated affiliates |
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| 79,420 |
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| 72,354 |
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| 90.2 |
| 79.9 |
| |||
Intangibles and other assets, net |
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| 180,829 |
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| 190,322 |
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| 179.6 |
| 183.6 |
| |||
Goodwill |
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| 133,050 |
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| 130,308 |
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| 130.0 |
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| 132.1 |
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| $ | 3,210,167 |
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| $ | 3,173,834 |
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| $ | 3,612.7 |
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| $ | 3,390.7 |
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Liabilities and Equity |
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Revolving notes |
| $ | 325,150 |
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| $ | 351,526 |
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| $ | 292.2 |
| $ | 372.2 |
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Accounts payable and accrued liabilities |
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| 480,373 |
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| 463,880 |
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| 581.2 |
| 569.8 |
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Deferred income taxes |
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| 44,900 |
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| 7,701 |
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| 51.9 |
| 73.3 |
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Deferred revenue |
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| 43,676 |
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| 42,467 |
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| 43.0 |
| 42.8 |
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Notes payable, net |
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| 835,027 |
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| 804,088 |
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| 1,209.2 |
| 826.5 |
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Commitments and contingencies (Note 15) |
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Contingently redeemable noncontrolling interest |
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| 30,323 |
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| 31,117 |
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| 28.5 |
| 29.7 |
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Equity: |
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Greenbrier |
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Preferred stock - without par value; 25,000 shares authorized; NaN outstanding |
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| — |
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| — |
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| — |
| — |
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Common stock - without par value; 50,000 shares authorized; 32,377 and 32,701 shares outstanding at May 31, 2021 and August 31, 2020 |
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| — |
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| — |
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Common stock - without par value; 50,000 shares |
| — |
| — |
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Additional paid-in capital |
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| 467,806 |
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| 460,400 |
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| 413.4 |
| 469.7 |
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Retained earnings |
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| 858,947 |
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| 885,460 |
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| 892.5 |
| 881.7 |
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Accumulated other comprehensive loss |
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| (39,990 | ) |
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| (52,817 | ) |
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| (53.3 | ) |
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| (43.7 | ) |
Total equity – Greenbrier |
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| 1,286,763 |
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| 1,293,043 |
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| 1,252.6 |
| 1,307.7 |
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Noncontrolling interest |
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| 163,955 |
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| 180,012 |
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| 154.1 |
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| 168.7 |
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Total equity |
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| 1,450,718 |
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| 1,473,055 |
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| 1,406.7 |
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| 1,476.4 |
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| $ | 3,210,167 |
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| $ | 3,173,834 |
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| $ | 3,612.7 |
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| $ | 3,390.7 |
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The accompanying notes are an integral part of these financial statements
4
Condensed Consolidated Statements of IncomeOperations
(In millions, except number of shares which are reflected in thousands exceptand per share amounts, unaudited)
|
| Three Months Ended May 31, |
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| Nine Months Ended May 31, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Revenue |
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Manufacturing |
| $ | 341,939 |
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| $ | 653,007 |
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| $ | 852,755 |
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| $ | 1,800,317 |
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Wheels, Repair & Parts |
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| 80,871 |
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| 82,024 |
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| 218,050 |
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| 259,857 |
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Leasing & Services |
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| 27,333 |
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| 27,526 |
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| 77,949 |
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| 95,590 |
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| 450,143 |
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| 762,557 |
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| 1,148,754 |
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| 2,155,764 |
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Cost of revenue |
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Manufacturing |
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| 292,464 |
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| 562,793 |
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| 775,125 |
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| 1,567,014 |
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Wheels, Repair & Parts |
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| 73,690 |
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| 75,001 |
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| 203,341 |
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| 241,266 |
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Leasing & Services |
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| 8,857 |
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| 17,232 |
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| 36,814 |
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| 61,428 |
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| 375,011 |
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| 655,026 |
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| 1,015,280 |
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| 1,869,708 |
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Margin |
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| 75,132 |
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| 107,531 |
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| 133,474 |
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| 286,056 |
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Selling and administrative expense |
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| 49,239 |
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| 49,494 |
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| 136,371 |
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| 158,455 |
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Net (gain) loss on disposition of equipment |
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| 184 |
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| (8,775 | ) |
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| (765 | ) |
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| (19,431 | ) |
Earnings (loss) from operations |
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| 25,709 |
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| 66,812 |
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| (2,132 | ) |
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| 147,032 |
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Other costs |
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Interest and foreign exchange |
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| 10,204 |
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| 7,562 |
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| 30,875 |
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| 33,023 |
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Net loss on extinguishment of debt |
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| 4,763 |
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| — |
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| 4,763 |
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| — |
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Earnings (loss) before income tax and earnings from unconsolidated affiliates |
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| 10,742 |
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| 59,250 |
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| (37,770 | ) |
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| 114,009 |
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Income tax benefit (expense) |
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| 6,914 |
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| (24,421 | ) |
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| 35,998 |
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| (37,878 | ) |
Earnings (loss) before earnings from unconsolidated affiliates |
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| 17,656 |
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| 34,829 |
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| (1,772 | ) |
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| 76,131 |
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Earnings from unconsolidated affiliates |
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| 2,379 |
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| 1,040 |
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| 1,257 |
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| 3,764 |
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Net earnings (loss) |
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| 20,035 |
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| 35,869 |
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| (515 | ) |
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| 79,895 |
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Net (earnings) loss attributable to noncontrolling interest |
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| (298 | ) |
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| (8,097 | ) |
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| 1,215 |
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| (30,825 | ) |
Net earnings attributable to Greenbrier |
| $ | 19,737 |
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| $ | 27,772 |
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| $ | 700 |
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| $ | 49,070 |
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Basic earnings per common share |
| $ | 0.61 |
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| $ | 0.85 |
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| $ | 0.02 |
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| $ | 1.50 |
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Diluted earnings per common share |
| $ | 0.59 |
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| $ | 0.83 |
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| $ | 0.02 |
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| $ | 1.47 |
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Weighted average common shares: |
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Basic |
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| 32,573 |
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| 32,690 |
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| 32,726 |
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| 32,660 |
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Diluted |
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| 33,605 |
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| 33,478 |
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| 33,747 |
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| 33,414 |
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| Three Months Ended |
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| Six Months Ended |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Revenue |
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Manufacturing |
| $ | 555.7 |
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| $ | 201.5 |
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| $ | 1,008.2 |
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| $ | 506.0 |
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Maintenance Services |
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| 86.6 |
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| 71.6 |
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| 159.0 |
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| 137.2 |
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Leasing & Management Services |
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| 40.5 |
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| 22.5 |
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| 66.3 |
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| 55.4 |
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| 682.8 |
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| 295.6 |
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| 1,233.5 |
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| 698.6 |
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Cost of revenue |
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Manufacturing |
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| 535.0 |
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| 201.8 |
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| 956.6 |
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| 482.7 |
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Maintenance Services |
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| 81.7 |
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| 66.7 |
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| 152.9 |
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| 129.7 |
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Leasing & Management Services |
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| 11.3 |
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| 9.5 |
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| 21.6 |
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| 27.9 |
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| 628.0 |
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| 278.0 |
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| 1,131.1 |
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| 640.3 |
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Margin |
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| 54.8 |
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| 17.6 |
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| 102.4 |
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| 58.3 |
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Selling and administrative expense |
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| 54.7 |
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| 43.4 |
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| 99.0 |
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| 87.1 |
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Net gain on disposition of equipment |
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| (25.1 | ) |
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| (0.1 | ) |
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| (33.6 | ) |
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| (1.0 | ) |
Earnings (loss) from operations |
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| 25.2 |
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| (25.7 | ) |
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| 37.0 |
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| (27.8 | ) |
Other costs |
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Interest and foreign exchange |
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| 11.8 |
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| 9.6 |
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| 24.4 |
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| 20.7 |
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Earnings (loss) before income tax and earnings (loss) |
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| 13.4 |
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| (35.3 | ) |
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| 12.6 |
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| (48.5 | ) |
Income tax (expense) benefit |
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| (3.2 | ) |
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| 21.8 |
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| (1.8 | ) |
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| 29.1 |
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Earnings (loss) before earnings (loss) from |
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| 10.2 |
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| (13.5 | ) |
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| 10.8 |
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| (19.4 | ) |
Earnings (loss) from unconsolidated affiliates |
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| 1.0 |
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| (0.4 | ) |
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| 6.0 |
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| (1.2 | ) |
Net earnings (loss) |
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| 11.2 |
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| (13.9 | ) |
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| 16.8 |
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| (20.6 | ) |
Net loss attributable to noncontrolling interest |
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| 1.6 |
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| 4.8 |
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| 6.8 |
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| 1.5 |
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Net earnings (loss) attributable to Greenbrier |
| $ | 12.8 |
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| $ | (9.1 | ) |
| $ | 23.6 |
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| $ | (19.1 | ) |
Basic earnings (loss) per common share |
| $ | 0.39 |
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| $ | (0.28 | ) |
| $ | 0.72 |
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| $ | (0.58 | ) |
Diluted earnings (loss) per common share |
| $ | 0.38 |
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| $ | (0.28 | ) |
| $ | 0.70 |
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| $ | (0.58 | ) |
Weighted average common shares: |
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Basic |
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| 32,582 |
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| 32,810 |
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| 32,546 |
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| 32,766 |
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Diluted |
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| 34,463 |
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| 32,810 |
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| 33,609 |
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| 32,766 |
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The accompanying notes are an integral part of these financial statements
5
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands,millions, unaudited)
|
| Three Months Ended May 31, |
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| Nine Months Ended May 31, |
| ||||||||||
|
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Net earnings (loss) |
| $ | 20,035 |
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| $ | 35,869 |
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| $ | (515 | ) |
| $ | 79,895 |
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Other comprehensive income (loss) |
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Translation adjustment |
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| 4,835 |
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|
| (11,029 | ) |
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| 9,299 |
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|
| (13,315 | ) |
Reclassification of derivative financial instruments recognized in net earnings (loss) 1 |
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| 1,389 |
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| 1,845 |
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| 3,904 |
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| 2,322 |
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Unrealized income (loss) on derivative financial instruments 2 |
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| 658 |
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|
| (5,643 | ) |
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| (237 | ) |
|
| (7,127 | ) |
Other (net of tax effect) |
|
| (191 | ) |
|
| 81 |
|
|
| (138 | ) |
|
| (140 | ) |
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|
| 6,691 |
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|
| (14,746 | ) |
|
| 12,828 |
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|
| (18,260 | ) |
Comprehensive income |
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| 26,726 |
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|
| 21,123 |
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|
| 12,313 |
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|
| 61,635 |
|
Comprehensive (income) loss attributable to noncontrolling interest |
|
| (295 | ) |
|
| (8,096 | ) |
|
| 1,214 |
|
|
| (30,816 | ) |
Comprehensive income attributable to Greenbrier |
| $ | 26,431 |
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| $ | 13,027 |
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| $ | 13,527 |
|
| $ | 30,819 |
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|
| Three Months Ended |
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| Six Months Ended |
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|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net earnings (loss) |
| $ | 11.2 |
|
| $ | (13.9 | ) |
| $ | 16.8 |
|
| $ | (20.6 | ) |
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| ||||
Other comprehensive income (loss) |
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| ||||
Translation adjustment |
|
| 4.3 |
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|
| 0.6 |
|
|
| (9.6 | ) |
|
| 4.5 |
|
Reclassification of derivative financial instruments |
|
| 1.3 |
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| 1.3 |
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| 2.3 |
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| 2.5 |
|
Unrealized gain (loss) on derivative financial instruments 2 |
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| 0.8 |
|
|
| (0.1 | ) |
|
| (2.4 | ) |
|
| (0.9 | ) |
Other (net of tax effect) |
|
| 0.2 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
|
| 6.6 |
|
|
| 1.8 |
|
|
| (9.6 | ) |
|
| 6.1 |
|
Comprehensive income (loss) |
|
| 17.8 |
|
|
| (12.1 | ) |
|
| 7.2 |
|
|
| (14.5 | ) |
Comprehensive loss attributable to noncontrolling interest |
|
| 1.6 |
|
|
| 4.8 |
|
|
| 6.8 |
|
|
| 1.5 |
|
Comprehensive income (loss) attributable to Greenbrier |
| $ | 19.4 |
|
| $ | (7.3 | ) |
| $ | 14.0 |
|
| $ | (13.0 | ) |
1 Net of tax effect of $(0.2 million) and $(0.4 million) for the three months ended February 28, 2022 and February 28, 2021 and $(0.7 million) and $(0.8 million) for the six months ended February 28, 2022 and February 28, 2021. 2 Net of tax effect of ($0.8 million) and ($0.1 million) for the three months ended February 28, 2022 and February 28, 2021 and $0.2 million and ($0.1 million) for the six months ended February 28, 2022 and February 28, 2021.
|
|
|
|
The accompanying notes are an integral part of these financial statements
6
Condensed Consolidated Statements of Equity
(In thousands,millions, except per share amounts, unaudited)
| Attributable to Greenbrier |
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Common Stock Shares |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Equity - Greenbrier |
| Noncontrolling Interest |
| Total Equity |
| Contingently Redeemable Noncontrolling Interest |
| ||||||||
Balance August 31, 2020 |
| 32,701 |
| $ | 460,400 |
| $ | 885,460 |
| $ | (52,817 | ) | $ | 1,293,043 |
| $ | 180,012 |
| $ | 1,473,055 |
| $ | 31,117 |
|
Cumulative effect adjustment due to adoption of ASU 2016-13 (see Note 1) |
| — |
|
| — |
|
| (509 | ) |
| — |
|
| (509 | ) |
| — |
|
| (509 | ) |
| — |
|
Net earnings |
| — |
|
| — |
|
| 700 |
|
| — |
|
| 700 |
|
| (421 | ) |
| 279 |
|
| (794 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 12,827 |
|
| 12,827 |
|
| 1 |
|
| 12,828 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 343 |
|
| 343 |
|
| — |
|
Joint venture partner distribution declared |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (22,980 | ) |
| (22,980 | ) |
| — |
|
Investment by joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,000 |
|
| 7,000 |
|
| — |
|
Restricted stock awards (net of cancellations) |
| 145 |
|
| 15,053 |
|
| — |
|
| — |
|
| 15,053 |
|
| — |
|
| 15,053 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (17,854 | ) |
| — |
|
| — |
|
| (17,854 | ) |
| — |
|
| (17,854 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 12,468 |
|
| — |
|
| — |
|
| 12,468 |
|
| — |
|
| 12,468 |
|
| — |
|
Repurchase of stock |
| (469 | ) |
| (20,000 | ) |
| — |
|
| — |
|
| (20,000 | ) |
| — |
|
| (20,000 | ) |
| — |
|
2.875% Convertible senior notes, due 2028 - equity component, net of tax |
| — |
|
| 56,253 |
|
| — |
|
| — |
|
| 56,253 |
|
| — |
|
| 56,253 |
|
| — |
|
2.875% Convertible senior notes, due 2028 issuance costs - equity component, net of tax |
| — |
|
| (1,801 | ) |
| — |
|
| — |
|
| (1,801 | ) |
| — |
|
| (1,801 | ) |
| — |
|
2.875% Convertible senior notes, due 2024 - equity component extinguishment, net of tax |
| — |
|
| (28,499 | ) |
| — |
|
| — |
|
| (28,499 | ) |
| — |
|
| (28,499 | ) |
| — |
|
2.25% Convertible senior notes, due 2024 - equity component extinguishment, net of tax |
| — |
|
| (8,214 | ) |
| — |
|
| — |
|
| (8,214 | ) |
| — |
|
| (8,214 | ) |
| — |
|
Cash dividends ($0.81 per share) |
| — |
|
| — |
|
| (26,704 | ) |
| — |
|
| (26,704 | ) |
| — |
|
| (26,704 | ) |
| — |
|
Balance May 31, 2021 |
| 32,377 |
| $ | 467,806 |
| $ | 858,947 |
| $ | (39,990 | ) | $ | 1,286,763 |
| $ | 163,955 |
| $ | 1,450,718 |
| $ | 30,323 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance August 31, 2021 |
| 32.4 |
| $ | 469.7 |
| $ | 881.7 |
| $ | (43.7 | ) | $ | 1,307.7 |
| $ | 168.7 |
| $ | 1,476.4 |
| $ | 29.7 |
|
Cumulative effect adjustment due |
| — |
|
| (58.8 | ) |
| 4.9 |
|
| — |
|
| (53.9 | ) |
| — |
|
| (53.9 | ) |
| — |
|
Net earnings |
| — |
|
| — |
|
| 23.6 |
|
| — |
|
| 23.6 |
|
| (5.6 | ) |
| 18.0 |
|
| (1.2 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| (9.6 | ) |
| (9.6 | ) |
| — |
|
| (9.6 | ) |
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (0.6 | ) |
| (0.6 | ) |
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (8.4 | ) |
| (8.4 | ) |
| — |
|
Restricted stock awards (net of |
| 0.2 |
|
| 11.9 |
|
| — |
|
| — |
|
| 11.9 |
|
| — |
|
| 11.9 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (15.3 | ) |
| — |
|
| — |
|
| (15.3 | ) |
| — |
|
| (15.3 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 5.9 |
|
| — |
|
| — |
|
| 5.9 |
|
| — |
|
| 5.9 |
|
| — |
|
Cash dividends ($0.54 per share) |
| — |
|
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
|
| |
Balance February 28, 2022 |
| 32.6 |
| $ | 413.4 |
| $ | 892.5 |
| $ | (53.3 | ) | $ | 1,252.6 |
| $ | 154.1 |
| $ | 1,406.7 |
| $ | 28.5 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Common Stock Shares |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Equity - Greenbrier |
| Noncontrolling Interest |
| Total Equity |
| Contingently Redeemable Noncontrolling Interest |
| ||||||||
Balance February 28, 2021 |
| 32,825 |
| $ | 466,994 |
| $ | 848,192 |
| $ | (46,684 | ) | $ | 1,268,502 |
| $ | 175,857 |
| $ | 1,444,359 |
| $ | 30,037 |
|
Net earnings |
| — |
|
| — |
|
| 19,737 |
|
| — |
|
| 19,737 |
|
| 12 |
|
| 19,749 |
|
| 286 |
|
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 6,694 |
|
| 6,694 |
|
| (3 | ) |
| 6,691 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 1,628 |
|
| 1,628 |
|
| — |
|
Joint venture partner distribution declared |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (20,539 | ) |
| (20,539 | ) |
| — |
|
Investment by Joint Venture Partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 7,000 |
|
| 7,000 |
|
| — |
|
Restricted stock awards (net of cancellations) |
| 21 |
|
| (444 | ) |
| — |
|
| — |
|
| (444 | ) |
| — |
|
| (444 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 3,517 |
|
| — |
|
| — |
|
| 3,517 |
|
| — |
|
| 3,517 |
|
| — |
|
Repurchase of stock |
| (469 | ) |
| (20,000 | ) |
| — |
|
| — |
|
| (20,000 | ) |
| — |
|
| (20,000 | ) |
| — |
|
2.875% Convertible senior notes, due 2028 - equity component, net of tax |
| — |
|
| 56,253 |
|
| — |
|
| — |
|
| 56,253 |
|
| — |
|
| 56,253 |
|
| — |
|
2.875% Convertible senior notes, due 2028 issuance costs - equity component, net of tax |
| — |
|
| (1,801 | ) |
| — |
|
| — |
|
| (1,801 | ) |
| — |
|
| (1,801 | ) |
| — |
|
2.875% Convertible senior notes, due 2024 - equity component extinguishment, net of tax |
| — |
|
| (28,499 | ) |
| — |
|
| — |
|
| (28,499 | ) |
| — |
|
| (28,499 | ) |
| — |
|
2.25% Convertible senior notes, due 2024 - equity component extinguishment, net of tax |
| — |
|
| (8,214 | ) |
| — |
|
| — |
|
| (8,214 | ) |
| — |
|
| (8,214 | ) |
| — |
|
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (8,982 | ) |
| — |
|
| (8,982 | ) |
| — |
|
| (8,982 | ) |
| — |
|
Balance May 31, 2021 |
| 32,377 |
| $ | 467,806 |
| $ | 858,947 |
| $ | (39,990 | ) | $ | 1,286,763 |
| $ | 163,955 |
| $ | 1,450,718 |
| $ | 30,323 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance November 30, 2021 |
| 32.5 |
| $ | 408.5 |
| $ | 888.7 |
| $ | (59.9 | ) | $ | 1,237.3 |
| $ | 162.7 |
| $ | 1,400.0 |
| $ | 29.7 |
|
Net earnings |
| — |
|
| — |
|
| 12.8 |
|
| — |
|
| 12.8 |
|
| (0.4 | ) |
| 12.4 |
|
| (1.2 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 6.6 |
|
| 6.6 |
|
| — |
|
| 6.6 |
|
| — |
|
Noncontrolling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (0.4 | ) |
| (0.4 | ) |
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (7.8 | ) |
| (7.8 | ) |
| — |
|
Restricted stock awards (net of |
| 0.1 |
|
| 1.4 |
|
| — |
|
| — |
|
| 1.4 |
|
| — |
|
| 1.4 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (1.3 | ) |
| — |
|
| — |
|
| (1.3 | ) |
| — |
|
| (1.3 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 4.8 |
|
| — |
|
| — |
|
| 4.8 |
|
| — |
|
| 4.8 |
|
| — |
|
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
| (9.0 | ) |
| — |
|
Balance February 28, 2022 |
| 32.6 |
| $ | 413.4 |
| $ | 892.5 |
| $ | (53.3 | ) | $ | 1,252.6 |
| $ | 154.1 |
| $ | 1,406.7 |
| $ | 28.5 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Common Stock Shares |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Equity - Greenbrier |
| Noncontrolling Interest |
| Total Equity |
| Contingently Redeemable Noncontrolling Interest |
| ||||||||
Balance August 31, 2019 |
| 32,488 |
| $ | 453,943 |
| $ | 867,602 |
| $ | (44,815 | ) | $ | 1,276,730 |
| $ | 164,967 |
| $ | 1,441,697 |
| $ | 31,564 |
|
Cumulative effect adjustment due to adoption of ASU 2016-02 (See Note 1) |
| — |
|
| — |
|
| 4,393 |
|
| — |
|
| 4,393 |
|
| — |
|
| 4,393 |
|
| — |
|
Net earnings |
| — |
|
| — |
|
| 49,070 |
|
| — |
|
| 49,070 |
|
| 31,778 |
|
| 80,848 |
|
| (953 | ) |
Other comprehensive loss, net |
| — |
|
| — |
|
| — |
|
| (18,251 | ) |
| (18,251 | ) |
| (9 | ) |
| (18,260 | ) |
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 2,826 |
|
| 2,826 |
|
| — |
|
Joint venture partner distribution declared |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (34,751 | ) |
| (34,751 | ) |
| — |
|
Noncontrolling interest acquired |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,075 |
|
| 12,075 |
|
| — |
|
Restricted stock awards (net of cancellations) |
| 213 |
|
| 6,797 |
|
| — |
|
| — |
|
| 6,797 |
|
| — |
|
| 6,797 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (9,063 | ) |
| — |
|
| — |
|
| (9,063 | ) |
| — |
|
| (9,063 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 7,991 |
|
| — |
|
| — |
|
| 7,991 |
|
| — |
|
| 7,991 |
|
| — |
|
Cash dividends ($0.79 per share) |
| — |
|
| — |
|
| (26,446 | ) |
| — |
|
| (26,446 | ) |
| — |
|
| (26,446 | ) |
| — |
|
Balance May 31, 2020 |
| 32,701 |
| $ | 459,668 |
| $ | 894,619 |
| $ | (63,066 | ) | $ | 1,291,221 |
| $ | 176,886 |
| $ | 1,468,107 |
| $ | 30,611 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Common Stock Shares |
| Additional Paid-in Capital |
| Retained Earnings |
| Accumulated Other Comprehensive Loss |
| Total Equity - Greenbrier |
| Noncontrolling Interest |
| Total Equity |
| Contingently Redeemable Noncontrolling Interest |
| ||||||||
Balance February 29, 2020 |
| 32,642 |
| $ | 458,908 |
| $ | 875,885 |
| $ | (48,321 | ) | $ | 1,286,472 |
| $ | 201,410 |
| $ | 1,487,882 |
| $ | 30,782 |
|
Net earnings |
| — |
|
| — |
|
| 27,772 |
|
| — |
|
| 27,772 |
|
| 8,268 |
|
| 36,040 |
|
| (171 | ) |
Other comprehensive loss, net |
| — |
|
| — |
|
| — |
|
| (14,745 | ) |
| (14,745 | ) |
| (1 | ) |
| (14,746 | ) |
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,212 | ) |
| (6,212 | ) |
| — |
|
Joint venture partner distribution declared |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (26,579 | ) |
| (26,579 | ) |
| — |
|
Noncontrolling interest acquired |
| — |
|
| — |
|
| — |
|
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
Restricted stock awards (net of cancellations) |
| 59 |
|
| (4,317 | ) |
| — |
|
| — |
|
| (4,317 | ) |
| — |
|
| (4,317 | ) |
| — |
|
Unamortized restricted stock |
| — |
|
| 3,945 |
|
| — |
|
| — |
|
| 3,945 |
|
| — |
|
| 3,945 |
|
| — |
|
Restricted stock amortization |
| — |
|
| 1,132 |
|
| — |
|
| — |
|
| 1,132 |
|
| — |
|
| 1,132 |
|
| — |
|
Cash dividends ($0.27 per share) |
| — |
|
| — |
|
| (9,038 | ) |
| — |
|
| (9,038 | ) |
| — |
|
| (9,038 | ) |
| — |
|
Balance May 31, 2020 |
| 32,701 |
| $ | 459,668 |
| $ | 894,619 |
| $ | (63,066 | ) | $ | 1,291,221 |
| $ | 176,886 |
| $ | 1,468,107 |
| $ | 30,611 |
|
7
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance August 31, 2020 |
| 32.7 |
| $ | 460.4 |
| $ | 885.5 |
| $ | (52.8 | ) | $ | 1,293.1 |
| $ | 180.0 |
| $ | 1,473.1 |
| $ | 31.1 |
|
Cumulative effect adjustment due |
| — |
|
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
| (0.5 | ) |
| — |
|
Net earnings (loss) |
| — |
|
| — |
|
| (19.1 | ) |
| — |
|
| (19.1 | ) |
| (0.4 | ) |
| (19.5 | ) |
| (1.1 | ) |
Other comprehensive income |
| — |
|
| — |
|
| — |
|
| 6.1 |
|
| 6.1 |
|
| — |
|
| 6.1 |
|
| — |
|
Noncontrolling interest adjustments |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1.3 | ) |
| (1.3 | ) |
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (2.4 | ) |
| (2.4 | ) |
| — |
|
Restricted stock awards (net of |
| 0.1 |
|
| 15.5 |
|
| — |
|
| — |
|
| 15.5 |
|
| — |
|
| 15.5 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (17.9 | ) |
| — |
|
| — |
|
| (17.9 | ) |
| — |
|
| (17.9 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 9.0 |
|
| — |
|
| — |
|
| 9.0 |
|
| — |
|
| 9.0 |
|
| — |
|
Cash dividends ($0.54 per share) |
| — |
|
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
| — |
|
| (17.7 | ) |
| — |
|
Balance February 28, 2021 |
| 32.8 |
| $ | 467.0 |
| $ | 848.2 |
| $ | (46.7 | ) | $ | 1,268.5 |
| $ | 175.9 |
| $ | 1,444.4 |
| $ | 30.0 |
|
| Attributable to Greenbrier |
|
|
|
|
|
|
| ||||||||||||||||
| Common |
| Additional |
| Retained |
| Accumulated |
| Total |
| Noncontrolling |
| Total |
| Contingently |
| ||||||||
Balance November 30, 2020 |
| 32.8 |
| $ | 462.5 |
| $ | 866.4 |
| $ | (48.5 | ) | $ | 1,280.4 |
| $ | 180.5 |
| $ | 1,460.9 |
| $ | 30.7 |
|
Net loss |
| — |
|
| — |
|
| (9.1 | ) |
| — |
|
| (9.1 | ) |
| (4.2 | ) |
| (13.3 | ) |
| (0.7 | ) |
Other comprehensive income, net |
| — |
|
| — |
|
| — |
|
| 1.8 |
|
| 1.8 |
|
| — |
|
| 1.8 |
|
| — |
|
Noncontrolling interest |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Joint venture partner |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (0.4 | ) |
| (0.4 | ) |
| — |
|
Restricted stock awards (net of |
| — |
|
| 1.3 |
|
| — |
|
| — |
|
| 1.3 |
|
| — |
|
| 1.3 |
|
| — |
|
Unamortized restricted stock |
| — |
|
| (1.3 | ) |
| — |
|
| — |
|
| (1.3 | ) |
| — |
|
| (1.3 | ) |
| — |
|
Restricted stock amortization |
| — |
|
| 4.5 |
|
| — |
|
| — |
|
| 4.5 |
|
| — |
|
| 4.5 |
|
| — |
|
Cash dividends ($0.27 per |
| — |
|
| — |
|
| (9.1 | ) |
| — |
|
| (9.1 | ) |
| — |
|
| (9.1 | ) |
| — |
|
Balance February 28, 2021 |
| 32.8 |
| $ | 467.0 |
| $ | 848.2 |
| $ | (46.7 | ) | $ | 1,268.5 |
| $ | 175.9 |
| $ | 1,444.4 |
| $ | 30.0 |
|
The accompanying notes are an integral part of these financial statements
8
Condensed Consolidated Statements of Cash Flows
(In thousands,millions, unaudited)
|
| Nine Months Ended May 31, |
|
| Six Months Ended |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net earnings (loss) |
| $ | (515 | ) |
| $ | 79,895 |
|
| $ | 16.8 |
| $ | (20.6 | ) | |
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
| ||||||||
Adjustments to reconcile net earnings (loss) to net cash used in operating activities: |
|
|
|
|
|
| ||||||||||
Deferred income taxes |
|
| 20,197 |
|
|
| (11,450 | ) |
| (4.3 | ) |
| 17.0 |
| ||
Depreciation and amortization |
|
| 75,637 |
|
|
| 82,452 |
|
| 50.9 |
| 50.9 |
| |||
Net gain on disposition of equipment |
|
| (765 | ) |
|
| (19,431 | ) |
| (33.6 | ) |
| (1.0 | ) | ||
Accretion of debt discount |
|
| 4,639 |
|
|
| 4,102 |
|
| — |
| 2.9 |
| |||
Stock based compensation expense |
|
| 12,468 |
|
|
| 8,265 |
|
| 5.9 |
| 9.0 |
| |||
Net loss on extinguishment of debt |
|
| 4,763 |
|
|
| — |
| ||||||||
Noncontrolling interest adjustments |
|
| 343 |
|
|
| 2,826 |
|
| (0.6 | ) |
| (1.3 | ) | ||
Other |
|
| 1,729 |
|
|
| 568 |
|
| 2.4 |
| 1.1 |
| |||
Decrease (increase) in assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts receivable, net |
|
| (49,160 | ) |
|
| 110,431 |
|
| (93.5 | ) |
| (10.7 | ) | ||
Income tax receivable |
|
| (66,026 | ) |
|
| — |
|
| 6.2 |
| (53.0 | ) | |||
Inventories |
|
| (92,294 | ) |
|
| 12,555 |
|
| (166.5 | ) |
| (35.0 | ) | ||
Leased railcars for syndication |
|
| (55,532 | ) |
|
| (38,826 | ) |
| (12.2 | ) |
| (38.0 | ) | ||
Other assets |
|
| 863 |
|
|
| (59,212 | ) |
| (8.5 | ) |
| (2.9 | ) | ||
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
|
| 18,626 |
|
|
| (77,243 | ) |
| 15.2 |
| (13.3 | ) | |||
Deferred revenue |
|
| 1,189 |
|
|
| (5,900 | ) |
|
| 1.5 |
|
|
| 0.1 |
|
Net cash provided by (used in) operating activities |
|
| (123,838 | ) |
|
| 89,032 |
| ||||||||
Net cash used in operating activities |
|
| (220.3 | ) |
|
| (94.8 | ) | ||||||||
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Proceeds from sales of assets |
|
| 12,156 |
|
|
| 78,521 |
|
| 148.6 |
| 11.3 |
| |||
Capital expenditures |
|
| (62,774 | ) |
|
| (55,326 | ) |
| (198.0 | ) |
| (50.3 | ) | ||
Investments in and advances to / repayments from unconsolidated affiliates |
|
| 674 |
|
|
| (1,500 | ) |
| (4.2 | ) |
| 4.5 |
| ||
Cash distribution from unconsolidated affiliates and other |
|
| 652 |
|
|
| 11,273 |
|
|
| 1.2 |
|
|
| 0.5 |
|
Net cash provided by (used in) investing activities |
|
| (49,292 | ) |
|
| 32,968 |
| ||||||||
Net cash used in investing activities |
|
| (52.4 | ) |
|
| (34.0 | ) | ||||||||
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Net change in revolving notes with maturities of 90 days or less |
|
| 147,571 |
|
|
| 214,932 |
|
| (75.6 | ) |
|
| 98.4 |
| |
Proceeds from revolving notes with maturities longer than 90 days |
|
| 112,000 |
|
|
| 175,000 |
|
| — |
|
|
| 112.0 |
| |
Repayments of revolving notes with maturities longer than 90 days |
|
| (286,000 | ) |
|
| — |
|
| — |
|
|
| (286.0 | ) | |
Proceeds from issuance of notes payable |
|
| 373,750 |
|
|
| — |
|
| 323.3 |
|
|
| — |
| |
Repayments of notes payable |
|
| (308,468 | ) |
|
| (24,002 | ) |
| (7.6 | ) |
| (15.0 | ) | ||
Debt issuance costs |
|
| (14,067 | ) |
|
| — |
|
| (5.2 | ) |
| — |
| ||
Repurchase of stock |
|
| (20,000 | ) |
|
| — |
| ||||||||
Dividends |
|
| (26,882 | ) |
|
| (26,344 | ) |
| (18.1 | ) |
| (18.0 | ) | ||
Investment by joint venture partner |
|
| 7,000 |
|
|
| — |
| ||||||||
Cash distribution to joint venture partner |
|
| (24,055 | ) |
|
| (36,152 | ) |
| (8.5 | ) |
| (3.6 | ) | ||
Tax payments for net share settlement of restricted stock |
|
| (2,802 | ) |
|
| (2,266 | ) |
|
| (3.5 | ) |
|
| (2.4 | ) |
Net cash provided by (used in) financing activities |
|
| (41,953 | ) |
|
| 301,168 |
|
|
| 204.8 |
|
|
| (114.6 | ) |
Effect of exchange rate changes |
|
| 9,885 |
|
|
| (17,693 | ) |
| (1.0 | ) |
| 3.4 |
| ||
Increase (decrease) in cash and cash equivalents and restricted cash |
|
| (205,198 | ) |
|
| 405,475 |
| ||||||||
Decrease in cash and cash equivalents and restricted cash |
| (68.9 | ) |
| (240.0 | ) | ||||||||||
Cash and cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Beginning of period |
|
| 842,087 |
|
|
| 338,487 |
|
|
| 671.4 |
|
|
| 842.1 |
|
End of period |
| $ | 636,889 |
|
| $ | 743,962 |
|
| $ | 602.5 |
|
| $ | 602.1 |
|
Balance sheet reconciliation |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 628,200 |
|
| $ | 735,258 |
|
| $ | 586.8 |
| $ | 593.5 |
| |
Restricted cash |
|
| 8,689 |
|
|
| 8,704 |
|
|
| 15.7 |
|
|
| 8.6 |
|
Total cash and cash equivalents and restricted cash as presented above |
| $ | 636,889 |
|
| $ | 743,962 |
|
| $ | 602.5 |
|
| $ | 602.1 |
|
Cash paid during the period for |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Interest |
| $ | 20,670 |
|
| $ | 16,757 |
|
| $ | 14.9 |
| $ | 15.8 |
| |
Income taxes, net |
| $ | 9,940 |
|
| $ | 36,393 |
|
| $ | 1.7 |
| $ | 7.1 |
| |
Non-cash activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Transfer from Leased railcars for syndication and Inventories to Equipment on operating leases, net |
| $ | 78,124 |
|
| $ | 55,739 |
| ||||||||
Transfers between Leased railcars for syndication and Inventories and |
| $ | 10.5 |
| $ | 78.0 |
| |||||||||
Capital expenditures accrued in Accounts payable and accrued liabilities |
| $ | 1,943 |
|
| $ | 2,769 |
|
| $ | 2.6 |
| $ | 0.8 |
| |
Change in Accounts payable and accrued liabilities associated with dividends declared |
| $ | 179 |
|
| $ | (102 | ) |
| $ | 0.4 |
| $ | 0.3 |
| |
Conversion of unconsolidated affiliate note receivable to Investment in unconsolidated affiliates |
| $ | — |
|
| $ | 4,760 |
| ||||||||
Change in Accounts payable and accrued liabilities associated with cash distributions to joint venture partner |
| $ | 1,075 |
|
| $ | 1,401 |
|
| $ | 0.1 |
| $ | 1.2 |
|
The accompanying notes are an integral part of these financial statements
9
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 – Interim Financial Statements
The Condensed Consolidated Financial Statements of The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) as of May 31, 2021February 28, 2022 and for the three and ninesix months ended May 31,February 28, 2022 and 2021 and 2020 have been prepared to 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 ninesix months ended May 31, 2021February 28, 2022 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2021. 2022.
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 unaudited financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020.2021.
In the first quarter of 2022 the Company renamed two of its reportable segments to more prominently display the nature of the customer solutions it provides and markets in which it operates. The new names of its reportable segments are Manufacturing (unchanged), Maintenance Services (previously Wheels, Repair & Parts), and Leasing & Management Services (previously Leasing & Services). The name changes have no impact on the organization’s reporting structure nor on financial information previously reported. Separately, effective September 1, 2021, the Company changed its measurement basis for allocating syndication revenue between the Manufacturing and Leasing & Management Services reportable segments. This change in measurement reflects the information currently used by management to assess the Company's operating performance in accordance with its refined leasing strategy and has no impact to the Company’s total consolidated revenue. Segment results for the prior periods have been recast to conform to the current period presentation.
Greenbrier-Astra Rail was formed in 2017 between the Company’s existing European operations headquartered in Poland and Astra Rail, based in Romania. Greenbrier-Astra Rail is controlled by the Company with an approximate 75% interest. In 2017, Astra Rail received a put option to sell its entire noncontrolling interest to Greenbrier. The option was exercisable 30 business days prior to and up until June 1, 2022. During the second quarter of 2022, the option was extended to be exercisable 30 business days prior to and up until June 1, 2026.
Management Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (GAAP) requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.
Initial Adoption of Accounting Standards
Measurement of Credit Losses on Financial Instruments
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update 2016-13, Financial Instruments – Credit Losses (ASU 2016-13). This update introduced a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new guidance applies to loans, accounts receivable, trade receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet credit exposures. The new guidance also applies to debt securities and other financial assets measured at fair value through other comprehensive income (loss). The new guidance is effective for annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance beginning September 1, 2020. The Company estimated the expected lifetime credit loss by pooling financial instruments based on similar characteristics. Expected losses were then estimated using historical loss information and aging considerations, as well as other information such as the current and future economic conditions of its customers and the end markets in which they operate. The Company adopted this guidance using a modified retrospective approach through a cumulative effect adjustment, which decreased opening retained earnings by $0.5 million on September 1, 2020. The ongoing application of ASU 2016-13 is not expected to materially impact the Company’s consolidated financial statements.
Prospective Accounting Changes
Convertible Instruments and Contracts in an Entity’s Own Equity
In August 2020, the FASB issued Accounting Standard Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity(ASU 2020-06), which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity’s own equity and modifies the guidance on diluted EPS calculations as a result of these changes. The Company expectsadopted this changeguidance effective September 1, 2021 on a modified retrospective basis and recorded a cumulative effect adjustment to reduce reportedincrease Retained earnings by $5 million. The impact of adoption also resulted in a reduction to Additional paid in capital of approximately $59 million related to amounts attributable to conversion options that had previously been recorded in equity and the associated derecognition of related deferred tax liabilities of $17 million. Additionally, the Company recorded an increase to its convertible notes balance by an aggregate amount of approximately $71 million as a result of derecognizing the debt discount. The adoption of this guidance also decreased the amount of non-cash interest expense increase reportedto be recognized in future periods as a result of eliminating the discount associated with the equity component. The Company did not incur any impact to liquidity or cash flows. As of September 1, 2021, when calculating net income, and result in a reclassificationearnings attributable to Greenbrier per share of certain convertible balance sheet amounts from stockholders’ equity to liabilities as it relates tocommon stock, the Company’s convertible senior notes. Additionally, ASU 2020-06 requires the application ofCompany uses the if-converted method as required under ASU 2020-06 to calculatedetermine the impactdilutive effect of its convertible instruments on diluted EPS, which is expected to be incrementally dilutive compared to the Company’s current accounting treatment. The guidance in this ASU can be adopted using either a full or modified retrospective approach and becomes effective for annualnotes.
reporting periods beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and disclosures.10
Simplification of Accounting for Income Taxes
In December 2019, the FASB issued Accounting Standard Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes(ASU 2019-12), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 for: recognizing deferred taxes for investments, performing intra-period allocations and calculating taxes in interim periods. The ASU also improves consistent application of GAAP for other areas of Topic 740 by clarifying and amending existing guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. The standardCompany adopted this guidance September 1, 2021 with no impact to the Company's consolidated financial statements. The ongoing application of ASU 2019-12 is effectivenot expected to materially impact the Company's consolidated financial statements.
Prospective Accounting Changes
Reference Rate Reform
In March 2020, the FASB issued Accounting Standard Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04), which provides practical expedients and exceptions for fiscal years beginningapplying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The elective amendments provide expedients to contract modification, affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London interbank offered rate (LIBOR) or another reference rate expected to be discontinued as a result of reference rate reform. This guidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 15, 2020. Early adoption is permitted.31, 2022. The guidance can be applied immediately through December 31, 2022. The Company expects to adopt this standard when LIBOR is currently evaluatingdiscontinued if there is a mismatch in its interest rate swap and derivatives for a period of time. The Company does not expect a material impact to its financial condition, results of operations or disclosures based on the impactcurrent debt portfolio and capital structure.
Note 2 – Asset Backed Securities
GBX Leasing 2022-1 LLC (GBXL I) was formed as a wholly owned special purpose entity (SPE) of this guidanceGBX Leasing to securitize the leasing assets of GBX Leasing. On February 9, 2022, GBXL I (Issuer) issued $323.3 million of term notes secured by a portfolio of railcars and associated operating leases and other assets, acquired and owned by GBXL I. Greenbrier Management Services, LLC (GMS) entered into certain agreements relating to the management and servicing of the Issuer’s assets. The Company used the net proceeds received from the issuance of the term notes to pay down the GBX Leasing warehouse credit facility.
The Company evaluated the accounting for the transaction and concluded that, based on its consolidatedequity investment in the Issuer combined with GMS’s capacity as servicer, the Company is the primary beneficiary of the SPE and will consolidate the SPE for financial statementsreporting purposes.
Issued debt includes principal of $302.6 million of GBXL I Series 2022-1 Class A Secured Railcar Equipment Notes (Class A Notes) and disclosures.$20.7 million of GBXL I Series 2022-1 Class B Secured Railcar Equipment Notes (Class B Notes), collectively the GBXL Series 2022-1 Notes (the GBXL Notes). The GBXL Notes bear interest at fixed rates of 2.87% and 3.45% for the Class A Notes and Class B Notes, respectively. The GBXL Notes are payable monthly and have a legal maturity date of February 20, 2052. The Company incurred $5.0 million in debt issuance costs, which will be amortized to interest expense through the expected repayment period. Both Class A and Class B Notes have an anticipated repayment date of January 20, 2029 and a legal maturity date. While the legal maturity date is in 2052, the cash flows generated from the railcar assets will pay down the GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the legal maturity date. If the principal amount of the GBXL Notes has not been repaid in full by the anticipated repayment date, then the Issuer will also be required to pay additional interest to the holders at a rate equal to 4.00% per annum.
11
The GBXL Notes are obligations of the Issuer only and are nonrecourse to Greenbrier. The GBXL Notes are subject to a Master Indenture between the Issuer and U.S. Bank Trust Company, National Association, as trustee, as supplemented by a Series 2022-1 Supplement dated February 9, 2022. The GBXL Notes may be subject to acceleration upon the occurrence of certain events of default.
The following table summarizes the Issuer's net carrying amount of the assets transferred and the related debt.
(in millions) |
| February 28, 2022 |
| |
Assets |
|
|
| |
Restricted cash |
| $ | 7.0 |
|
Equipment on operating leases, net |
|
| 408.7 |
|
Liabilities |
|
|
| |
Notes payable, net |
| $ | 318.3 |
|
Note 23 – Revenue Recognition
Contract balances
Contract assets primarily consist of unbilled receivables related to marine vessel construction and railcar repair services, for which the respective contracts do not yet permit billing at the reporting date.date, and railcar repair and conversion inventories. Contract liabilities primarily consist of customer prepayments for manufacturing, maintenance, and other management-type services, for which the Company has not yet satisfied the related performance obligations.
The contract balances are as follows:
(in thousands) |
| Balance sheet classification |
| May 31, 2021 |
|
| August 31, 2020 |
|
| $ change |
| |||||||||||||||||
(in millions) |
| Balance sheet classification |
| February 28, |
|
| August 31, |
|
| $ |
| |||||||||||||||||
Contract assets |
| Accounts receivable, net |
| $ | 18,999 |
|
| $ | 430 |
|
| $ | 18,569 |
|
| Accounts receivable, net |
| $ | 10.1 |
| $ | 5.9 |
| $ | 4.2 |
| ||
Contract assets |
| Inventories |
| $ | 9,728 |
|
| $ | 7,081 |
|
| $ | 2,647 |
|
| Inventories |
| $ | 7.1 |
| $ | 6.7 |
| $ | 0.4 |
| ||
Contract liabilities 1 |
| Deferred revenue |
| $ | 36,867 |
|
| $ | 27,009 |
|
| $ | 9,858 |
|
| Deferred revenue |
| $ | 37.5 |
| $ | 36.4 |
| $ | 1.1 |
|
1 Contract liabilities balance includes deferred revenue within the scope of Revenue from Contracts with Customers (Topic 606).
|
|
For the ninethree and six months ended May 31, 2021,February 28, 2022, the Company recognized $5.9$3.8 million and $13.4 million, respectively, of revenue that was included in Contract liabilities as of August 31, 2020.2021.
Performance obligations
As of May 31, 2021,February 28, 2022, the Company has entered into contracts with customers for which revenue has not yet been recognized. The following table outlines estimated revenue related to performance obligations wholly or partially unsatisfied, that the Company anticipates will be recognized in future periods.
(in millions) |
| February 28, |
| |
Revenue type: |
|
|
| |
Manufacturing – Railcar sales |
| $ | 2,739.2 |
|
Manufacturing – Marine |
| $ | 47.5 |
|
Manufacturing – Conversions |
| $ | 174.1 |
|
Management services |
| $ | 129.8 |
|
Other |
| $ | 16.5 |
|
|
|
|
| |
Manufacturing – Railcars intended for syndication 1 |
| $ | 701.2 |
|
1 Not a performance obligation as defined in Topic 606.
(in millions) |
| May 31, 2021 |
| |
Revenue type: |
|
|
|
|
Manufacturing – Railcar sales |
| $ | 2,145.0 |
|
Manufacturing – Marine |
| $ | 39.4 |
|
Services |
| $ | 131.0 |
|
Other |
| $ | 68.1 |
|
|
|
|
|
|
Manufacturing – Railcars intended for syndication 1 |
| $ | 253.0 |
|
|
|
Based on current production and delivery schedules and existing contracts, approximately $0.4$1.0 billion of Railcar sales are expected to be recognized in the remaining threesix months of 20212022 while the remaining amount is expected to be
12
recognized into 2024. The table above excludes estimated revenue to be recognized at the Company’s Brazilian manufacturing operations, as they are accounted for under the equity method.
Revenue amounts reflected in Railcars intended for syndication may be syndicated to third parties or held in the Company’s fleet depending on a variety of factors.
Marine revenue is expected to be recognized through 20222023 as vessel construction is completed.
ServicesConversions represent modernization orders to existing or in-service railcars and are expected to be recognized through 2023.
Management services includes management and maintenance services of which approximately 47%52% are expected to be performed through 20252026 and the remaining amount through 2037.
Note 34 – Inventories
Inventories are valued at the lower of cost or net realizable value using the first-in first-out method. Work-in-process includes material, labor and overhead. Finished goods includes completed wheels, parts and railcars not on lease or in transit. The following table summarizes the Company’s inventory balance:
(in millions) |
| February 28, |
|
| August 31, |
| ||
Manufacturing supplies and raw materials |
| $ | 530.2 |
|
| $ | 352.8 |
|
Work-in-process |
|
| 146.5 |
|
|
| 167.3 |
|
Finished goods |
|
| 66.8 |
|
|
| 73.4 |
|
Excess and obsolete adjustment |
|
| (15.0 | ) |
|
| (19.9 | ) |
|
| $ | 728.5 |
|
| $ | 573.6 |
|
(In thousands) |
| May 31, 2021 |
|
| August 31, 2020 |
| ||
Manufacturing supplies and raw materials |
| $ | 315,587 |
|
| $ | 263,080 |
|
Work-in-process |
|
| 140,285 |
|
|
| 116,909 |
|
Finished goods |
|
| 117,012 |
|
|
| 173,761 |
|
Excess and obsolete adjustment |
|
| (19,747 | ) |
|
| (24,221 | ) |
|
| $ | 553,137 |
|
| $ | 529,529 |
|
Note 45 – 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 Company’s identifiable intangible and other assets balance:
(in millions) |
| February 28, |
|
| August 31, |
| ||
Intangible assets subject to amortization: |
|
|
|
|
|
| ||
Customer relationships |
| $ | 89.8 |
|
| $ | 89.8 |
|
Accumulated amortization |
|
| (66.9 | ) |
|
| (64.1 | ) |
Other intangibles |
|
| 41.2 |
|
|
| 40.3 |
|
Accumulated amortization |
|
| (14.4 | ) |
|
| (13.0 | ) |
|
|
| 49.7 |
|
|
| 53.0 |
|
Intangible assets not subject to amortization |
|
| 2.4 |
|
|
| 2.4 |
|
Prepaid and other assets |
|
| 30.0 |
|
|
| 26.7 |
|
Operating lease ROU assets |
|
| 40.2 |
|
|
| 39.8 |
|
Nonqualified savings plan investments |
|
| 46.9 |
|
|
| 47.7 |
|
Debt issuance costs, net |
|
| 8.6 |
|
|
| 8.6 |
|
Assets held for sale |
|
| 1.8 |
|
|
| 5.4 |
|
Total Intangible and other assets, net |
| $ | 179.6 |
|
| $ | 183.6 |
|
(In thousands) |
| May 31, 2021 |
|
| August 31, 2020 |
| ||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
Customer relationships |
| $ | 89,722 |
|
| $ | 89,722 |
|
Accumulated amortization |
|
| (62,237 | ) |
|
| (56,509 | ) |
Other intangibles |
|
| 38,928 |
|
|
| 37,798 |
|
Accumulated amortization |
|
| (12,147 | ) |
|
| (10,595 | ) |
|
|
| 54,266 |
|
|
| 60,416 |
|
Intangible assets not subject to amortization |
|
| 2,474 |
|
|
| 2,474 |
|
Prepaid and other assets |
|
| 26,349 |
|
|
| 22,026 |
|
Operating lease ROU assets |
|
| 41,621 |
|
|
| 62,389 |
|
Nonqualified savings plan investments |
|
| 45,816 |
|
|
| 35,744 |
|
Revolving notes issuance costs, net |
|
| 4,890 |
|
|
| 3,623 |
|
Assets held for sale |
|
| 5,413 |
|
|
| 3,650 |
|
Total Intangible and other assets, net |
| $ | 180,829 |
|
| $ | 190,322 |
|
Amortization expense was $2.9$2.3 million and $8.5$5.4 million for the three and ninesix months ended May 31, 2021February 28, 2022, respectively and $2.7$2.9 million and $8.2$5.7 million for the three and ninesix months ended May 31, 2020.February 28, 2021, respectively. Amortization expense for the years ending August 31, 2021, 2022, 2023, 2024, 2025 and 20252026 is expected to be $11.6$9.4 million, $8.3$7.9 million, $6.9$7.3 million, $6.7$6.2 million and $5.8$6.0 million, respectively.
13
Note 56 – Revolving Notes
Senior secured credit facilities, consisting of 4 components, aggregated to $1.04$1.1 billion as of May 31, 2021.February 28, 2022.
As of May 31, 2021,February 28, 2022, a $600.0$600.0 million revolving line of credit, maturing June 2024,August 2026, secured by substantially all the Company’s U.S. assets in the U.S. not otherwise pledged as security for term loans or the warehouse credit facility, existed to provide working capital and interim financing of equipment, principally for the Company’s U.S. and Mexican operations. Advances under this North American credit facility bear interest at LIBOR plus 1.50%1.50% or Prime plus 0.50%0.50% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of May 31, 2021,February 28, 2022, a $300.0$350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing, a joint venture in which the Company owns approximately 90%95%. Advances under this facility bear interest at LIBOR plus 2.0%2.0%. The warehouse credit facility converts to a term loan in April 2023 whichand matures in April 2025. 2025.
As of May 31, 2021, there were $96.6 million in outstanding borrowings associated with this facility.
As of May 31, 2021,February 28, 2022, lines of credit totaling $71.4$74.3 million secured by certain of the Company’s European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2%1.2% to WIBOR plus 1.5%1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%1.1%, were available for working capital needs of the Company’s European manufacturing operations. The European lines of credit include $36.6$36.9 million of facilities which are guaranteed by the Company. European credit facilities are regularly renewed. Currently, these European credit facilities have maturities that range from August2021June 2022 through September 2022.October 2023.
As of May 31, 2021,February 28, 2022, the Company’s Mexican railcar manufacturing operations had 34 lines of credit totaling $70.0 million.$120.0 million for working capital needs. The first line of credit provides up to $30.0$30.0 million, of which the Company and its joint venture partner have each guaranteed 50%50%. Advances under this facility bear interest at LIBOR plus 3.75%3.75% to 4.25%4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2024.2024. The second line of credit provides up to $35.0$35.0 million, of which the Company and its joint venture partner have each guaranteed 50%50%. Advances under this facility bear interest at LIBOR plus 3.70%3.70%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2023.2023. The third line of credit provides up to $5.0$50.0 million and matures in September 2022.October 2024. Advances under this facility bear interest at LIBOR plus 2.95%4.25%. The fourth line of credit provides up to $5.0 million and are to be used for working capital needs.matures in September 2022. Advances under this facility bear interest at LIBOR plus 2.95%.
As of May 31, 2021, outstanding
Credit facility balances:
(in millions) |
| February 28, |
|
| August 31, |
| ||
|
|
|
|
|
|
| ||
North America |
| $ | 160.0 |
|
| $ | 160.0 |
|
Mexico |
|
| 75.0 |
|
|
| 15.0 |
|
Europe |
|
| 57.2 |
|
|
| 50.2 |
|
GBX Leasing |
|
| - |
|
|
| 147.0 |
|
Total Revolving notes |
| $ | 292.2 |
|
| $ | 372.2 |
|
Outstanding commitments under the senior secured credit facilities consisted of $160.0 million in borrowings and $25.2 million in letters of credit under the North American credit facility $38.6included letters of credit which totaled $6.5 million outstanding under the European credit facilities and $30.0$8.4 million outstanding under the Mexican credit facilities. as of February 28, 2022 and August 31, 2021, respectively.
As of May 31, 2021,February 28, 2022, the Company had an aggregate of $221.3$216.8 million available to draw down under committed credit facilities.
As of August 31, 2020, outstanding commitments under the senior secured credit facilities consisted of $28.7 million in letters of credit and $275.0 million in borrowings under the North American credit facility, $46.5 million outstanding under the European credit facilities and $30.0 million outstanding under the Mexican credit facilities.
14
Note 67 – Accounts Payable and Accrued Liabilities
(In thousands) |
| May 31, 2021 |
|
| August 31, 2020 |
| ||
Trade payables |
| $ | 190,802 |
|
| $ | 148,971 |
|
Other accrued liabilities |
|
| 104,839 |
|
|
| 100,168 |
|
Operating lease liabilities |
|
| 44,317 |
|
|
| 64,509 |
|
Accrued payroll and related liabilities |
|
| 108,812 |
|
|
| 105,008 |
|
Accrued warranty |
|
| 31,603 |
|
|
| 45,224 |
|
|
| $ | 480,373 |
|
| $ | 463,880 |
|
(in millions) |
| February 28, |
|
| August 31, |
| ||
Trade payables |
| $ | 286.3 |
|
| $ | 265.1 |
|
Other accrued liabilities |
|
| 106.2 |
|
|
| 109.1 |
|
Operating lease liabilities |
|
| 42.7 |
|
|
| 42.6 |
|
Accrued payroll and related liabilities |
|
| 115.9 |
|
|
| 125.1 |
|
Accrued warranty |
|
| 30.1 |
|
|
| 27.9 |
|
|
| $ | 581.2 |
|
| $ | 569.8 |
|
Note 78 – 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 May 31, |
|
| Nine Months Ended May 31, |
| ||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Balance at beginning of period |
| $ | 42,689 |
|
| $ | 46,850 |
|
| $ | 45,224 |
|
| $ | 46,678 |
|
Charged to cost of revenue, net |
|
| (9,232 | ) |
|
| 2,600 |
|
|
| (7,881 | ) |
|
| 5,862 |
|
Payments |
|
| (1,980 | ) |
|
| (1,518 | ) |
|
| (5,824 | ) |
|
| (4,653 | ) |
Currency translation effect |
|
| 126 |
|
|
| (189 | ) |
|
| 84 |
|
|
| (144 | ) |
Balance at end of period |
| $ | 31,603 |
|
| $ | 47,743 |
|
| $ | 31,603 |
|
| $ | 47,743 |
|
Note 8 – Notes Payable, Net
(In thousands) |
| May 31, 2021 |
|
| August 31, 2020 |
| ||
2.875% Convertible senior notes, due 2028 |
| $ | 373,750 |
|
| $ | - |
|
2.875% Convertible senior notes, due 2024 |
|
| 67,876 |
|
|
| 275,000 |
|
Term loans |
|
| 481,396 |
|
|
| 498,858 |
|
2.25% Convertible senior notes, due 2024 |
|
| — |
|
|
| 50,000 |
|
Other notes payable |
|
| 1,936 |
|
|
| 10,135 |
|
|
| $ | 924,958 |
|
| $ | 833,993 |
|
Debt discount and issuance costs |
|
| (89,931 | ) |
|
| (29,905 | ) |
|
| $ | 835,027 |
|
| $ | 804,088 |
|
In April 2021, the Company issued $373.8 million of convertible senior notes, due 2028 (2028 Convertible Notes) and used $283.3 million of the net proceeds to repurchase $207.1 million of our 2.875% 2024 Convertible Notes and the 2.25% 2024 Convertible Notes. The proceeds were allocated between the repurchase of the liability and the equity components for both notes with liability component fair values of $198.1 million and $46.5 million for the 2.875% and 2.25% 2024 Convertible Notes respectively, with the remaining accounted for as a repurchase of the equity components, reducing Additional paid-in capital. The difference between the fair value of the debt component and the carrying value, net of unamortized debt discount and issuance costs, resulted in a loss on extinguishment of $4.8 million. After giving effect to the repurchase, the remaining principal amount outstanding on the 2.875% 2024 Notes was $67.9 million.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Balance at beginning of period |
| $ | 27.5 |
|
| $ | 45.6 |
|
| $ | 27.9 |
|
| $ | 45.2 |
|
Charged to cost of revenue, net |
|
| 5.5 |
|
|
| (0.6 | ) |
|
| 6.4 |
|
|
| 1.4 |
|
Payments |
|
| (2.8 | ) |
|
| (2.4 | ) |
|
| (3.8 | ) |
|
| (3.8 | ) |
Currency translation effect |
|
| (0.1 | ) |
|
| 0.1 |
|
|
| (0.4 | ) |
|
| (0.1 | ) |
Balance at end of period |
| $ | 30.1 |
|
| $ | 42.7 |
|
| $ | 30.1 |
|
| $ | 42.7 |
|
2028 Convertible Notes:
The 2028 Convertible Notes are senior unsecured obligations and rank equally with other senior unsecured debt. The notes bear interest at an annual rate of 2.875% payable semiannually in arrears on April 15 and October 15 of each year, commencing October 15, 2021. The notes will mature on April 15, 2028, unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 18.0317 shares of common stock per $1,000 principal amount which is equivalent to an initial conversion price of approximately $55.46 per share. The conversion rate and the resulting conversion price are subject to adjustment in certain events. Upon a conversion of the notes, the Company may elect to pay or deliver, as the case may be, cash and, if applicable, shares of the Company’s common stock, as provided in the 2028 Notes Indenture (as defined below).
The 2028 Convertible Notes are subject to that certain indenture entered into on April 20, 2021 by the Company and Wells Fargo Bank, National Association, as trustee, as amended and restated by the first supplemental indenture dated June 1, 2021 (2028 Notes Indenture). The 2028 Convertible Notes are convertible at the option of the holders prior to January 15, 2028, under certain circumstances as described in the 2028 Notes Indenture. Additionally, the Company may elect to call the notes on or after April 15, 2025 and on or before the 40th trading day prior to April 15, 2028, at a cash redemption price described in the 2028 Notes Indenture if the stock price exceeds 130% of the conversion price during certain trading days as defined in the 2028 Notes Indenture. Calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption.
The Company evaluated the accounting for the issuance of the 2028 Convertible Notes and concluded the embedded conversion features met the requirements for a derivative scope exception and that the cash conversion guidance applies. Therefore, proceeds of $373.8 million are allocated first to the liability component based on non-convertible debt with the residual proceeds allocated to the equity component for the conversion features. The carrying amount of the equity component of $73.6 million is recorded in Additional paid-in capital and is not remeasured as long as it continues to meet the condition for equity classification. The debt discount, representing the excess of the principal amount of the liability component over the carrying amount of the debt, is amortized to interest expense at an effective interest rate of 5.75% over the contractual term. The Company allocated $12.0 million in issuance costs associated with the 2028 Convertible Notes to the liability and equity component in the same proportion as the $373.8 million in proceeds.
The following table summarizes the net carrying amount of the 2028 Convertible Notes:
(In thousands) |
| May 31, 2021 |
| |
Debt principal |
| $ | 373,750 |
|
Debt discount, net |
| $ | (72,888 | ) |
Debt issuance costs, net |
| $ | (9,517 | ) |
|
| $ | 291,345 |
|
Note 9 – Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, net of tax effect as appropriate, consisted of the following:
(in millions) |
| Unrealized |
|
| Foreign |
|
| Other |
|
| Accumulated |
| ||||
Balance, August 31, 2021 |
| $ | (7.4 | ) |
| $ | (35.8 | ) |
| $ | (0.5 | ) |
| $ | (43.7 | ) |
Other comprehensive gain (loss) before reclassifications |
|
| (2.4 | ) |
|
| (9.6 | ) |
|
| 0.1 |
|
|
| (11.9 | ) |
Amounts reclassified from Accumulated other |
|
| 2.3 |
|
|
| — |
|
|
| — |
|
|
| 2.3 |
|
Balance, February 28, 2022 |
| $ | (7.5 | ) |
| $ | (45.4 | ) |
| $ | (0.4 | ) |
| $ | (53.3 | ) |
(In thousands) |
| Unrealized Gain (Loss) on Derivative Financial Instruments |
|
| Foreign Currency Translation Adjustment |
|
| Other |
|
| Accumulated Other Comprehensive Loss |
| ||||
Balance, August 31, 2020 |
| $ | (11,970 | ) |
| $ | (39,816 | ) |
| $ | (1,031 | ) |
| $ | (52,817 | ) |
Other comprehensive gain (loss) before reclassifications |
|
| (237 | ) |
|
| 9,298 |
|
|
| (138 | ) |
|
| 8,923 |
|
Amounts reclassified from Accumulated other comprehensive loss |
|
| 3,904 |
|
|
| — |
|
|
| — |
|
|
| 3,904 |
|
Balance, May 31, 2021 |
| $ | (8,303 | ) |
| $ | (30,518 | ) |
| $ | (1,169 | ) |
| $ | (39,990 | ) |
The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income,Operations, with financial statement caption, were as follows:
|
| Three Months Ended |
|
|
| |||||
(in millions) |
| 2022 |
|
| 2021 |
|
| Financial Statement Caption | ||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
| ||
Foreign exchange contracts |
| $ | 0.2 |
|
| $ | 0.4 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| 1.3 |
|
|
| 1.3 |
|
| Interest and foreign exchange |
|
|
| 1.5 |
|
|
| 1.7 |
|
| Total before tax |
|
|
| (0.2 | ) |
|
| (0.4 | ) |
| Income tax expense |
|
| $ | 1.3 |
|
| $ | 1.3 |
|
| Net of tax |
15
|
| Six Months Ended |
|
|
| |||||
(in millions) |
| 2022 |
|
| 2021 |
|
| Financial Statement Caption | ||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
| ||
Foreign exchange contracts |
| $ | 0.4 |
|
| $ | 0.7 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| 2.6 |
|
|
| 2.6 |
|
| Interest and foreign exchange |
|
|
| 3.0 |
|
|
| 3.3 |
|
| Total before tax |
|
|
| (0.7 | ) |
|
| (0.8 | ) |
| Income tax expense |
|
| $ | 2.3 |
|
| $ | 2.5 |
|
| Net of tax |
|
| Three Months Ended May 31, |
|
|
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| Financial Statement Caption | ||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| $ | 546 |
|
| $ | 1,711 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| 1,307 |
|
|
| 783 |
|
| Interest and foreign exchange |
Total before tax |
|
| 1,853 |
|
|
| 2,494 |
|
|
|
Income tax |
|
| (464 | ) |
|
| (649 | ) |
|
|
Net of tax |
| $ | 1,389 |
|
| $ | 1,845 |
|
|
|
|
| Nine Months Ended May 31, |
|
|
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| Financial Statement Caption | ||
(Gain) loss on derivative financial instruments: |
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| $ | 1,218 |
|
| $ | 1,812 |
|
| Revenue and Cost of revenue |
Interest rate swap contracts |
|
| 3,901 |
|
|
| 1,319 |
|
| Interest and foreign exchange |
Total before tax |
|
| 5,119 |
|
|
| 3,131 |
|
|
|
Income tax |
|
| (1,215 | ) |
|
| (809 | ) |
|
|
Net of tax |
| $ | 3,904 |
|
| $ | 2,322 |
|
|
|
Note 10 – Earnings (Loss) Per Share
The shares used in the computation of basic and diluted earnings (loss) per common share are reconciled as follows:
| Three Months Ended May 31, |
|
| Nine Months Ended May 31, |
| ||||||||||
(In thousands) | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Weighted average basic common shares outstanding (1) |
| 32,573 |
|
|
| 32,690 |
|
|
| 32,726 |
|
|
| 32,660 |
|
Dilutive effect of 2.875% convertible notes, due 2024 (2) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Dilutive effect of 2.875% convertible notes, due 2028 (3) |
| 0 |
|
| N/A |
|
|
| 0 |
|
| N/A |
| ||
Dilutive effect of 2.25% convertible notes, due 2024 (4) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Dilutive effect of restricted stock units (5) |
| 1,032 |
|
|
| 788 |
|
|
| 1,021 |
|
|
| 754 |
|
Weighted average diluted common shares outstanding |
| 33,605 |
|
|
| 33,478 |
|
|
| 33,747 |
|
|
| 33,414 |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(In thousands) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Weighted average basic common shares outstanding (1) |
| 32,582 |
|
|
| 32,810 |
|
|
| 32,546 |
|
|
| 32,766 |
|
Dilutive effect of 2.875% convertible notes due 2024 (2) (3) |
| 815 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Dilutive effect of 2.875% convertible notes due 2028 (4) |
| — |
|
| N/A |
|
|
| — |
|
| N/A |
| ||
Dilutive effect of 2.25% convertible notes due 2024 (2) (5) | N/A |
|
|
| — |
|
| N/A |
|
|
| — |
| ||
Dilutive effect of restricted stock units (2) (6) |
| 1,066 |
|
|
| — |
|
|
| 1,063 |
|
|
| — |
|
Weighted average diluted common shares outstanding |
| 34,463 |
|
|
| 32,810 |
|
|
| 33,609 |
|
|
| 32,766 |
|
(1) Restricted stock grants and restricted stock units that are considered participating securities, 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 common stock equivalents was excluded from the share calculation for the three and six months ended February 28, 2021 due to a net loss.
(3) The dilutive effect of the 2.875% Convertible notes due 2024 was excluded for the six months ended February 28, 2022 as they were considered anti-dilutive under the “if converted” method as further discussed below.
(4) The dilutive effect of the 2.875% Convertible notes due 2028 was excluded for the three and six months ended February 28, 2022 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive. As these notes require cash settlement for the principal, only the premium is dilutive under the "if converted" method as further discussed below. These convertible notes were issued in April 2021.
(5) The 2.25% Convertible notes due 2024 were retired in April 2021.
(6) Restricted stock units that are not considered participating securities and restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position.
|
|
Basic earnings (loss) per common share (EPS) is computed by dividing Net earnings (loss) attributable to Greenbrier by weighted average basic common shares outstanding, which includes restricted stock grants and restricted stock units that are considered participating securities when the Company is in a net earnings position.
|
|
|
|
|
|
| The Company's approach for calculating diluted |
Diluted EPS was modified beginning September 1, 2021 upon the adoption of Accounting Standard Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. See Note 1 - Interim Financial Statements for additional information.
For the three and six months ended February 28, 2022, diluted EPS was calculated using the more dilutive of two methods. The first method includes the dilutive effect, using the treasury stock method, associated with restricted stock units that are not considered participating securities and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second method supplements the first by also including the “if converted” effect of the 2.875% Convertible notes due 2024 and shares underlying the 2.875% Convertible notes due 2028, when there is a conversion premium. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes due 2024 are added back to net earnings and the share count is increased by the shares underlying the convertible notes.
16
For the three and six months ended February 28, 2021, diluted EPS was calculated using the treasury stock method associated with shares underlying the 2.875% convertible2.875% Convertible notes due 2024, 2.875% convertible notes due 2028, 2.25%2.25% convertible notes due 2024, restricted stock units that are not considered participating securities and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The dilutive effect of common stock equivalents was excluded from the share calculation for the three and six months ended February 28, 2021 due to a net loss.
|
| Three Months Ended May 31, |
|
| Nine Months Ended May 31, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net earnings attributable to Greenbrier |
| $ | 19,737 |
|
| $ | 27,772 |
|
| $ | 700 |
|
| $ | 49,070 |
|
Weighted average diluted common shares outstanding |
|
| 33,605 |
|
|
| 33,478 |
|
|
| 33,747 |
|
|
| 33,414 |
|
Diluted earnings per share |
| $ | 0.59 |
|
| $ | 0.83 |
|
| $ | 0.02 |
|
| $ | 1.47 |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions, except shares which are reflected in thousands, and per share amounts) | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net earnings (loss) attributable to Greenbrier | $ | 12.8 |
|
| $ | (9.1 | ) |
| $ | 23.6 |
|
| $ | (19.1 | ) |
Weighted average basic common shares outstanding |
| 32,582 |
|
|
| 32,810 |
|
|
| 32,546 |
|
|
| 32,766 |
|
Basic earnings (loss) per share | $ | 0.39 |
|
| $ | (0.28 | ) |
| $ | 0.72 |
|
| $ | (0.58 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net earnings (loss) attributable to Greenbrier | $ | 12.8 |
|
| $ | (9.1 | ) |
| $ | 23.6 |
|
| $ | (19.1 | ) |
Add back: |
|
|
|
|
|
|
|
|
|
|
| ||||
Interest and debt issuance costs on the 2.875% |
| 0.3 |
|
| n/a |
|
| n/a |
|
| n/a |
| |||
Earnings before interest and debt issuance costs | $ | 13.1 |
|
| n/a |
|
| n/a |
|
| n/a |
| |||
Weighted average diluted common shares outstanding |
| 34,463 |
|
|
| 32,810 |
|
|
| 33,609 |
|
|
| 32,766 |
|
Diluted earnings (loss) per share | $ | 0.38 |
| (1) | $ | (0.28 | ) |
| $ | 0.70 |
|
| $ | (0.58 | ) |
(1) Diluted earnings per share was calculated as follows:
Earnings before interest and debt issuance costs on the 2.875% convertible notes due 2024
Weighted average diluted common shares outstanding
Note 11 – Stock Based Compensation
The value of stock based compensation awards is amortized as compensation expense from the date of grant through the earlier of the vesting period or in some instances the recipient’s eligible retirement date. Stock based compensation expense consists of restricted stock unit awards.
Stock based compensation expense was $3.5$4.9 million and $12.5$5.9 million for the three and ninesix months ended May 31, 2021,February 28, 2022, respectively and $1.0$4.5 million and $8.3$9.0 million for the three and ninesix months ended May 31, 2020,February 28, 2021, respectively. Compensation expense is recorded in Selling and administrative expense and Cost of revenue on the Consolidated Statements of Income. Operations.
Note 12 – Derivative Instruments
Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are used to reduce the impact of changes in interest rates on certain current and probable future debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the effective portion of unrealized gains and losses is recorded in accumulated other comprehensive income or loss.
At May 31, 2021February 28, 2022 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $147.7$122.0 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when in a loss position, or as Accounts receivable, net when in a gain position. As the contracts mature at various dates through December 2022,October 2023, any such gain or loss remaining will be recognized in manufacturing revenue or cost of revenue along with the related transactions. In the event that the underlying transaction does not occur or does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to the results of operations in Interest and foreign exchange at the time of occurrence. At May 31, 2021February 28, 2022 exchange rates, approximately $0.4$4.4 million would be reclassified to revenue or cost of revenue in the next year.
17
At May 31, 2021, anFebruary 28, 2022, interest rate swap agreementagreements maturing in from September 2023 through January 2032 had a notional amount of $102.7 million and an interest rate swap agreement maturing June 2024 had a notional amount of $138.8amounts that aggregated to $315.9 million. The fair value of the contracts areis included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities when in a loss position, or in Accounts receivable, net when in a gain position. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated other comprehensive loss and charged or credited to interest expense. At May 31, 2021February 28, 2022 interest rates, approximately $5.0$3.6 million would be reclassified to interest expense in the next year.
Fair Values of Derivative Instruments
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||||||||||
|
|
|
| May 31, 2021 |
|
| August 31, 2020 |
|
|
|
| May 31, 2021 |
|
| August 31, 2020 |
| ||||
(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 |
| $ | 606 |
|
| $ | 560 |
|
| Accounts payable and accrued liabilities |
| $ | 9 |
|
| $ | 3 |
|
Interest rate swap contracts |
| Accounts receivable, net |
|
| — |
|
|
| — |
|
| Accounts payable and accrued liabilities |
|
| 11,361 |
|
|
| 15,904 |
|
|
|
|
| $ | 606 |
|
| $ | 560 |
|
|
|
| $ | 11,370 |
|
| $ | 15,907 |
|
Derivatives not designated as hedging instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign forward exchange contracts |
| Accounts receivable, net |
| $ | 4 |
|
| $ | 22 |
|
| Accounts payable and accrued liabilities |
| $ | 47 |
|
| $ | — |
|
(in millions)
|
| Asset Derivatives |
|
| Liability Derivatives |
| ||||||||||||||
|
|
|
| February 28, |
|
| August 31, |
|
|
|
| February 28, |
|
| August 31, |
| ||||
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
|
| Balance sheet location |
| Fair Value |
|
| Fair Value |
| ||||
Derivatives designated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign forward |
| Accounts receivable, |
| $ | 0.4 |
|
| $ | 0.1 |
|
| Accounts payable and |
| $ | 4.5 |
|
| $ | 0.3 |
|
Interest rate swap |
| Accounts receivable, |
|
| 0.3 |
|
|
| — |
|
| Accounts payable and |
|
| 5.5 |
|
|
| 10.0 |
|
|
|
|
| $ | 0.7 |
|
| $ | 0.1 |
|
|
|
| $ | 10.0 |
|
| $ | 10.3 |
|
Derivatives not |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign forward |
| Accounts receivable, |
| $ | — |
|
| $ | — |
|
| Accounts payable and |
| $ | 0.1 |
|
| $ | 0.1 |
|
The Effect of Derivative Instruments on the Statements of IncomeOperations
(in millions)
Three Months Ended February 28, 2022 and 2021
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2022 |
|
| 2021 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (0.1 | ) |
| $ | — |
|
Derivatives in | Gain (loss) recognized |
| Location of gain | Gain (loss) reclassified |
| Location of gain | Gain (loss) recognized |
| |||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
Foreign | $ | (0.4 | ) |
| $ | (0.6 | ) | Revenue | $ | (0.2 | ) |
| $ | (0.4 | ) | Revenue | $ | 0.3 |
|
| $ | 0.1 |
|
Foreign |
| 1.4 |
|
|
| (0.2 | ) | Cost of |
| — |
|
|
| — |
| Cost of |
| 0.3 |
|
|
| 0.1 |
|
Interest rate |
| 0.6 |
|
|
| 0.8 |
| Interest and |
| (1.3 | ) |
|
| (1.3 | ) | Interest and |
| — |
|
|
| — |
|
| $ | 1.6 |
|
| $ | — |
|
| $ | (1.5 | ) |
| $ | (1.7 | ) |
| $ | 0.6 |
|
| $ | 0.2 |
|
18
Derivatives in cash flow hedging relationships |
| Location of gain (loss) recognized in income on derivatives |
| Gain (loss) recognized in income on derivatives three months ended |
| |||||
|
|
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | 95 |
|
| $ | 154 |
|
Derivatives in cash flow hedging relationships | Gain (loss) recognized in OCI on derivatives three months ended, |
| Location of gain (loss) reclassified from accumulated OCI into income | Gain (loss) reclassified from accumulated OCI into income three months ended |
| Location of gain (loss) on derivative (amount excluded from effectiveness testing) | Gain (loss) recognized on derivative (amount excluded from effectiveness testing) three months ended |
| |||||||||||||||
| May 31, 2021 |
|
| May 31, 2020 |
|
| May 31, 2021 |
|
| May 31, 2020 |
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||||||
Foreign forward exchange contracts | $ | 494 |
|
| $ | (599 | ) | Revenue | $ | (522 | ) |
| $ | (485 | ) | Revenue | $ | 165 |
|
| $ | 138 |
|
Foreign forward exchange contracts |
| 273 |
|
|
| (2,015 | ) | Cost of revenue |
| (24 | ) |
|
| (1,226 | ) | Cost of revenue |
| 32 |
|
|
| 130 |
|
Interest rate swap contracts |
| (515 | ) |
|
| (5,155 | ) | Interest and foreign exchange |
| (1,307 | ) |
|
| (783 | ) | Interest and foreign exchange |
| — |
|
|
| 281 |
|
| $ | 252 |
|
| $ | (7,769 | ) |
| $ | (1,853 | ) |
| $ | (2,494 | ) |
| $ | 197 |
|
| $ | 549 |
|
The following table presents the amounts in the Consolidated Statements of IncomeOperations in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the three months ended May 31,February 28, 2022 and 2021:
|
| For The Three Months Ended February 28, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||
Revenue |
| $ | 682.8 |
|
| $ | (0.2 | ) |
| $ | 295.6 |
|
| $ | (0.4 | ) |
Cost of revenue |
| $ | 628.0 |
|
| $ | — |
|
| $ | 278.0 |
|
| $ | — |
|
Interest and foreign exchange |
| $ | 11.8 |
|
| $ | (1.3 | ) |
| $ | 9.6 |
|
| $ | (1.3 | ) |
Six Months Ended February 28, 2022 and 2021 and 2020:
|
| For The Three Months Ended |
| |||||||||||||
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||||||||||
|
| Total |
|
| Amount of gain (loss) on cash flow hedge activity |
|
| Total |
|
| Amount of gain (loss) on cash flow hedge activity |
| ||||
Revenue |
| $ | 450,143 |
|
| $ | (522 | ) |
| $ | 762,557 |
|
| $ | (485 | ) |
Cost of revenue |
|
| 375,011 |
|
|
| (24 | ) |
|
| 655,026 |
|
|
| (1,226 | ) |
Interest and foreign exchange |
|
| 10,204 |
|
|
| (1,307 | ) |
|
| 7,562 |
|
|
| (783 | ) |
Derivatives in cash flow hedging relationships |
| Location of gain (loss) |
| Gain (loss) recognized in income on |
| |||||
|
|
|
| 2022 |
|
| 2021 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (0.4 | ) |
| $ | (0.1 | ) |
Derivatives in |
| Gain (loss) recognized |
|
| Location of gain |
| Gain (loss) reclassified |
|
| Location of gain |
| Gain (loss) recognized |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
|
|
|
| 2022 |
|
| 2021 |
| ||||||
Foreign |
| $ | (5.0 | ) |
| $ | (1.6 | ) |
| Revenue |
| $ | (0.4 | ) |
| $ | (0.6 | ) |
| Revenue |
| $ | 0.5 |
|
| $ | 0.3 |
|
Foreign |
|
| 0.1 |
|
|
| (0.3 | ) |
| Cost of |
|
| — |
|
|
| (0.1 | ) |
| Cost of |
|
| 0.4 |
|
|
| 0.1 |
|
Interest rate |
|
| 2.3 |
|
|
| 1.2 |
|
| Interest and |
|
| (2.6 | ) |
|
| (2.6 | ) |
| Interest and |
|
| — |
|
|
| — |
|
|
| $ | (2.6 | ) |
| $ | (0.7 | ) |
|
|
| $ | (3.0 | ) |
| $ | (3.3 | ) |
|
|
| $ | 0.9 |
|
| $ | 0.4 |
|
Derivatives in cash flow hedging relationships |
| Location of gain (loss) recognized in income on derivatives |
| Gain (loss) recognized in income on derivatives nine months ended |
| |||||
|
|
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||
Foreign forward exchange contract |
| Interest and foreign exchange |
| $ | (37 | ) |
| $ | 60 |
|
|
| For The Six Months Ended February 28, |
| |||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||
|
| Total |
|
| Amount of gain |
|
| Total |
|
| Amount of gain |
| ||||
Revenue |
| $ | 1,233.5 |
|
| $ | (0.4 | ) |
| $ | 698.6 |
|
| $ | (0.6 | ) |
Cost of revenue |
| $ | 1,131.1 |
|
| $ | — |
|
| $ | 640.3 |
|
| $ | (0.1 | ) |
Interest and foreign exchange |
| $ | 24.4 |
|
| $ | (2.6 | ) |
| $ | 20.7 |
|
| $ | (2.6 | ) |
19
Derivatives in cash flow hedging relationships |
| Gain (loss) recognized in OCI on derivatives nine months ended |
|
| Location of gain (loss) reclassified from accumulated OCI into income |
| Gain (loss) reclassified from accumulated OCI into income nine months ended |
|
| Location of gain (loss) on derivative amount excluded from effectiveness testing) |
| Gain (loss) recognized on derivative (amount excluded from effectiveness testing) nine months ended |
| |||||||||||||||
|
| May 31, 2021 |
|
| May 31, 2020 |
|
|
|
| May 31, 2021 |
|
| May 31, 2020 |
|
|
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||||||
Foreign forward exchange contracts |
| $ | (1,118 | ) |
| $ | 164 |
|
| Revenue |
| $ | (1,145 | ) |
| $ | (584 | ) |
| Revenue |
| $ | 467 |
|
| $ | 781 |
|
Foreign forward exchange contracts |
|
| (22 | ) |
|
| (2,198 | ) |
| Cost of revenue |
|
| (73 | ) |
|
| (1,228 | ) |
| Cost of revenue |
|
| 97 |
|
|
| 474 |
|
Interest rate swap contracts |
|
| 642 |
|
|
| (7,939 | ) |
| Interest and foreign exchange |
|
| (3,901 | ) |
|
| (1,319 | ) |
| Interest and foreign exchange |
|
| — |
|
|
| — |
|
|
| $ | (498 | ) |
| $ | (9,973 | ) |
|
|
| $ | (5,119 | ) |
| $ | (3,131 | ) |
|
|
| $ | 564 |
|
| $ | 1,255 |
|
|
| For the Nine Months Ended |
| |||||||||||||
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||||||||||
|
| Total |
|
| Amount of gain (loss) on cash flow hedge activity |
|
| Total |
|
| Amount of gain (loss) on cash flow hedge activity |
| ||||
Revenue |
| $ | 1,148,754 |
|
| $ | (1,145 | ) |
| $ | 2,155,764 |
|
| $ | (584 | ) |
Cost of revenue |
|
| 1,015,280 |
|
|
| (73 | ) |
|
| 1,869,708 |
|
|
| (1,228 | ) |
Interest and foreign exchange |
|
| 30,875 |
|
|
| (3,901 | ) |
|
| 33,023 |
|
|
| (1,319 | ) |
Note 13 – Segment Information
The Company operates in 3 reportable segments: Manufacturing; Wheels, Repair & Parts;Maintenance Services; and Leasing & Management Services.
The accounting policies of the segments are described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2020.2021. Performance is evaluated based on Earnings (loss) 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) benefit (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 Company’s Consolidated Financial Statements.
In the first quarter of 2022 the Company renamed two of its reportable segments to more prominently display the nature of the customer solutions it provides and markets in which it operates. The new names of its reportable segments are Manufacturing (unchanged), Maintenance Services (previously Wheels, Repair & Parts), and Leasing & Management Services (previously Leasing & Services). The name changes have no impact on the organization’s reporting structure nor on financial information previously reported. Separately, effective September 1, 2021, the Company changed its measurement basis for allocating syndication revenue between the Manufacturing and Leasing & Management Services reportable segments. This change in measurement reflects the information currently used by management to assess the Company's operating performance in accordance with its refined leasing strategy and has no impact to the Company’s total consolidated revenue. Segment results for the prior periods have been recast to conform to the current period presentation.
The information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes.
For the three months ended May 31, 2021:February 28, 2022:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||||||||||||||||||||||||||
(In thousands) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||||||||||||||||||||||||||
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||||||||||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||||||||||||||||||||||||||
Manufacturing |
| $ | 341,939 |
|
| $ | 7,451 |
|
| $ | 349,390 |
|
| $ | 31,341 |
|
| $ | 492 |
|
| $ | 31,833 |
|
| $ | 555.7 |
| $ | 1.8 |
| $ | 557.5 |
| $ | 1.8 |
| $ | — |
| $ | 1.8 |
| |||||
Wheels, Repair & Parts |
|
| 80,871 |
|
|
| 2,292 |
|
|
| 83,163 |
|
|
| 4,173 |
|
|
| 75 |
|
|
| 4,248 |
| ||||||||||||||||||||||||
Leasing & Services |
|
| 27,333 |
|
|
| 2,286 |
|
|
| 29,619 |
|
|
| 12,280 |
|
|
| 2,272 |
|
|
| 14,552 |
| ||||||||||||||||||||||||
Maintenance Services |
| 86.6 |
| 6.1 |
| 92.7 |
| 2.9 |
| — |
| 2.9 |
| |||||||||||||||||||||||||||||||||||
Leasing & Management Services |
| 40.5 |
| 0.4 |
| 40.9 |
| 47.6 |
| — |
| 47.6 |
| |||||||||||||||||||||||||||||||||||
Eliminations |
|
| — |
|
|
| (12,029 | ) |
|
| (12,029 | ) |
|
| — |
|
|
| (2,839 | ) |
|
| (2,839 | ) |
| — |
| (8.3 | ) |
| (8.3 | ) |
| — |
| — |
| — |
| |||||||||
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22,085 | ) |
|
| — |
|
|
| (22,085 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27.1 | ) |
|
| — |
|
|
| (27.1 | ) |
|
| $ | 450,143 |
|
| $ | — |
|
| $ | 450,143 |
|
| $ | 25,709 |
|
| $ | — |
|
| $ | 25,709 |
|
| $ | 682.8 |
|
| $ | — |
|
| $ | 682.8 |
|
| $ | 25.2 |
|
| $ | — |
|
| $ | 25.2 |
|
For the ninesix months ended May 31, 2021:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(In thousands) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 852,755 |
|
| $ | 30,467 |
|
| $ | 883,222 |
|
| $ | 23,811 |
|
| $ | 3,097 |
|
| $ | 26,908 |
|
Wheels, Repair & Parts |
|
| 218,050 |
|
|
| 4,196 |
|
|
| 222,246 |
|
|
| 6,406 |
|
|
| 52 |
|
|
| 6,458 |
|
Leasing & Services |
|
| 77,949 |
|
|
| 8,064 |
|
|
| 86,013 |
|
|
| 24,590 |
|
|
| 7,191 |
|
|
| 31,781 |
|
Eliminations |
|
| — |
|
|
| (42,727 | ) |
|
| (42,727 | ) |
|
| — |
|
|
| (10,340 | ) |
|
| (10,340 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (56,939 | ) |
|
| — |
|
|
| (56,939 | ) |
|
| $ | 1,148,754 |
|
| $ | — |
|
| $ | 1,148,754 |
|
| $ | (2,132 | ) |
| $ | — |
|
| $ | (2,132 | ) |
February 28, 2022:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,008.2 |
|
| $ | 41.2 |
|
| $ | 1,049.4 |
|
| $ | 14.1 |
|
| $ | 0.3 |
|
| $ | 14.4 |
|
Maintenance Services |
|
| 159.0 |
|
|
| 8.8 |
|
|
| 167.8 |
|
|
| 1.8 |
|
|
| — |
|
|
| 1.8 |
|
Leasing & Management Services |
|
| 66.3 |
|
|
| 0.7 |
|
|
| 67.0 |
|
|
| 64.8 |
|
|
| — |
|
|
| 64.8 |
|
Eliminations |
|
| — |
|
|
| (50.7 | ) |
|
| (50.7 | ) |
|
| — |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (43.7 | ) |
|
| — |
|
|
| (43.7 | ) |
|
| $ | 1,233.5 |
|
| $ | — |
|
| $ | 1,233.5 |
|
| $ | 37.0 |
|
| $ | — |
|
| $ | 37.0 |
|
20
For the three months ended May 31, 2020:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(In thousands) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 653,007 |
|
| $ | 1,151 |
|
| $ | 654,158 |
|
| $ | 68,445 |
|
| $ | 95 |
|
| $ | 68,540 |
|
Wheels, Repair & Parts |
|
| 82,024 |
|
|
| 1,527 |
|
|
| 83,551 |
|
|
| 3,785 |
|
|
| (393 | ) |
|
| 3,392 |
|
Leasing & Services |
|
| 27,526 |
|
|
| 14,841 |
|
|
| 42,367 |
|
|
| 11,837 |
|
|
| 14,454 |
|
|
| 26,291 |
|
Eliminations |
|
| — |
|
|
| (17,519 | ) |
|
| (17,519 | ) |
|
| — |
|
|
| (14,156 | ) |
|
| (14,156 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,255 | ) |
|
| — |
|
|
| (17,255 | ) |
|
| $ | 762,557 |
|
| $ | — |
|
| $ | 762,557 |
|
| $ | 66,812 |
|
| $ | — |
|
| $ | 66,812 |
|
February 28, 2021:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 201.5 |
|
| $ | 2.4 |
|
| $ | 203.9 |
|
| $ | (17.8 | ) |
| $ | 0.1 |
|
| $ | (17.7 | ) |
Maintenance Services |
|
| 71.6 |
|
|
| 1.6 |
|
|
| 73.2 |
|
|
| 2.4 |
|
|
| — |
|
|
| 2.4 |
|
Leasing & Management Services |
|
| 22.5 |
|
|
| 0.5 |
|
|
| 23.0 |
|
|
| 7.0 |
|
|
| — |
|
|
| 7.0 |
|
Eliminations |
|
| — |
|
|
| (4.5 | ) |
|
| (4.5 | ) |
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17.3 | ) |
|
| — |
|
|
| (17.3 | ) |
|
| $ | 295.6 |
|
| $ | — |
|
| $ | 295.6 |
|
| $ | (25.7 | ) |
| $ | — |
|
| $ | (25.7 | ) |
For the ninesix months ended May 31, 2020:February 28, 2021:
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(in millions) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 506.0 |
|
| $ | 23.0 |
|
| $ | 529.0 |
|
| $ | (12.3 | ) |
| $ | 2.6 |
|
| $ | (9.7 | ) |
Maintenance Services |
|
| 137.2 |
|
|
| 1.9 |
|
|
| 139.1 |
|
|
| 2.2 |
|
|
| — |
|
|
| 2.2 |
|
Leasing & Management Services |
|
| 55.4 |
|
|
| 0.9 |
|
|
| 56.3 |
|
|
| 17.1 |
|
|
| — |
|
|
| 17.1 |
|
Eliminations |
|
| — |
|
|
| (25.8 | ) |
|
| (25.8 | ) |
|
| — |
|
|
| (2.6 | ) |
|
| (2.6 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34.8 | ) |
|
| — |
|
|
| (34.8 | ) |
|
| $ | 698.6 |
|
| $ | — |
|
| $ | 698.6 |
|
| $ | (27.8 | ) |
| $ | — |
|
| $ | (27.8 | ) |
|
| Total assets |
| |||||
(in millions) |
| February 28, |
|
| August 31, |
| ||
Manufacturing |
| $ | 1,698.5 |
|
| $ | 1,493.5 |
|
Maintenance Services |
|
| 272.0 |
|
|
| 260.9 |
|
Leasing & Management Services |
|
| 1,038.8 |
|
|
| 949.4 |
|
Unallocated, including cash |
|
| 603.4 |
|
|
| 686.9 |
|
|
| $ | 3,612.7 |
|
| $ | 3,390.7 |
|
|
| Revenue |
|
| Earnings (loss) from operations |
| ||||||||||||||||||
(In thousands) |
| External |
|
| Intersegment |
|
| Total |
|
| External |
|
| Intersegment |
|
| Total |
| ||||||
Manufacturing |
| $ | 1,800,317 |
|
| $ | 1,269 |
|
| $ | 1,801,586 |
|
| $ | 167,693 |
|
| $ | 73 |
|
| $ | 167,766 |
|
Wheels, Repair & Parts |
|
| 259,857 |
|
|
| 12,511 |
|
|
| 272,368 |
|
|
| 8,219 |
|
|
| (903 | ) |
|
| 7,316 |
|
Leasing & Services |
|
| 95,590 |
|
|
| 31,830 |
|
|
| 127,420 |
|
|
| 34,407 |
|
|
| 30,127 |
|
|
| 64,534 |
|
Eliminations |
|
| — |
|
|
| (45,610 | ) |
|
| (45,610 | ) |
|
| — |
|
|
| (29,297 | ) |
|
| (29,297 | ) |
Corporate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (63,287 | ) |
|
| — |
|
|
| (63,287 | ) |
|
| $ | 2,155,764 |
|
| $ | — |
|
| $ | 2,155,764 |
|
| $ | 147,032 |
|
| $ | — |
|
| $ | 147,032 |
|
|
| Total assets |
| |||||
(In thousands) |
| May 31, 2021 |
|
| August 31, 2020 |
| ||
Manufacturing |
| $ | 1,413,590 |
|
| $ | 1,301,715 |
|
Wheels, Repair & Parts |
|
| 265,847 |
|
|
| 271,862 |
|
Leasing & Services |
|
| 878,743 |
|
|
| 739,025 |
|
Unallocated, including cash |
|
| 651,987 |
|
|
| 861,232 |
|
|
| $ | 3,210,167 |
|
| $ | 3,173,834 |
|
Reconciliation of Earnings (loss) from operations to Earnings (loss) before income tax and earnings (loss) from unconsolidated affiliates:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Earnings (loss) from operations |
| $ | 25.2 |
|
| $ | (25.7 | ) |
| $ | 37.0 |
|
| $ | (27.8 | ) |
Interest and foreign exchange |
|
| 11.8 |
|
|
| 9.6 |
|
|
| 24.4 |
|
|
| 20.7 |
|
Earnings (loss) before income tax and |
| $ | 13.4 |
|
| $ | (35.3 | ) |
| $ | 12.6 |
|
| $ | (48.5 | ) |
|
| Three Months Ended May 31, |
|
| Nine Months Ended May 31, |
| ||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Earnings (loss) from operations |
| $ | 25,709 |
|
| $ | 66,812 |
|
| $ | (2,132 | ) |
| $ | 147,032 |
|
Interest and foreign exchange |
|
| 10,204 |
|
|
| 7,562 |
|
|
| 30,875 |
|
|
| 33,023 |
|
Net loss on extinguishment of debt |
|
| 4,763 |
|
|
| — |
|
|
| 4,763 |
|
|
| — |
|
Earnings (loss) before income tax and earnings from unconsolidated affiliates |
| $ | 10,742 |
|
| $ | 59,250 |
|
| $ | (37,770 | ) |
| $ | 114,009 |
|
Note 14 – Leases
Lessor
Equipment on operating leases is reported net of accumulated depreciation of $30.5$37.6 million and $33.4$34.4 million as of May 31, 2021February 28, 2022 and August 31, 2020,2021, respectively. Depreciation expense was $3.3$5.4 million and $10.1$10.5 million for the three and ninesix months ended May 31, 2021, respectivelyFebruary 28, 2022 and $2.6$3.2 million and $9.2$6.8 million for the three and ninesix months ended May 31, 2020,February 28, 2021, respectively. In addition, certain railcar equipment leased-in by the Company on operating leases is subleased to customers under non-cancelable operating leases with lease terms ranging from one to approximately fifteen years.fourteen years. Operating lease rental revenues included in the Company’s Statements of IncomeOperations for the three and ninesix months ended May 31, 2021February 28, 2022 was $8.0$16.3 million and $32.1$31.3 million, respectively, which included $2.8$3.9 million and $10.2$8.5 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements. Operating lease rental revenues included in the Company’s Statements of IncomeOperations for the three and ninesix months ended May 31, 2020February 28, 2021 was $9.0$12.3 million and $30.2$24.1 million, respectively, which included $2.8$3.8 million and $9.3$7.4 million, respectively, of revenue as a result of daily, monthly or car hire utilization arrangements.
21
Aggregate minimum future amounts receivable under all non-cancelable operating leases and subleases at May 31, 2021,February 28, 2022, will mature as follows:
(in thousands) |
|
|
|
| ||||
Remaining three months of 2021 |
| $ | 8,705 |
| ||||
2022 |
|
| 24,151 |
| ||||
(in millions) |
|
|
| |||||
Remaining six months of 2022 |
| $ | 21.9 |
| ||||
2023 |
|
| 19,714 |
|
| 35.1 |
| |
2024 |
|
| 17,224 |
|
| 28.5 |
| |
2025 |
|
| 10,775 |
|
| 22.8 |
| |
2026 |
| 20.1 |
| |||||
Thereafter |
|
| 23,627 |
|
|
| 40.0 |
|
|
| $ | 104,196 |
|
| $ | 168.4 |
|
Lessee
The Company leases railcars, real estate, and certain equipment under operating and, to a lesser extent, finance lease arrangements. As of and for the three and ninesix months ended May 31,February 28, 2022 and February 28, 2021, and 2020, finance leases were not a material component of the Company's lease portfolio. The Company’s real estate and equipment leases have remaining lease terms ranging from less than one year to 77 years, with some including options to extend up to 15 years.years. The Company recognizes a lease liability and corresponding right-of-use (ROU) asset based on the present value of lease payments. To determine the present value of lease payments, as most of its leases do not provide a readily determinable implicit rate, the Company’s incremental borrowing rate is used to discount the lease payments based on information available at lease commencement date. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when estimating its incremental borrowing rate.
The components of operating lease costs were as follows:
(in thousands) |
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||||
|
| May 31, 2021 |
|
| May 31, 2020 |
|
| May 31, 2021 |
|
| May 31, 2020 |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| February 28, |
|
| February 28, |
| ||||||||||||||||||||
Operating lease expense |
| $ | 2,920 |
|
| $ | 4,388 |
|
| $ | 10,438 |
|
| $ | 11,238 |
|
| $ | 2.5 |
|
| $ | 3.6 |
|
| $ | 5.2 |
|
| $ | 7.5 |
|
Short-term lease expense |
|
| 991 |
|
|
| 1,707 |
|
|
| 3,577 |
|
|
| 6,437 |
|
|
| 1.4 |
|
|
| 1.3 |
|
| $ | 2.7 |
|
| $ | 2.6 |
|
Total |
| $ | 3,911 |
|
| $ | 6,095 |
|
| $ | 14,015 |
|
| $ | 17,675 |
|
| $ | 3.9 |
|
| $ | 4.9 |
|
| $ | 7.9 |
|
| $ | 10.1 |
|
Aggregate minimum future amounts payable under operating leases having initial or remaining non-cancelable terms at May 31, 2021February 28, 2022 will mature as follows:
(in millions) |
|
|
| |
Remaining six months of 2022 |
| $ | 5.1 |
|
2023 |
|
| 10.0 |
|
2024 |
|
| 8.8 |
|
2025 |
|
| 6.1 |
|
2026 |
|
| 4.9 |
|
Thereafter |
|
| 12.8 |
|
Total lease payments |
| $ | 47.7 |
|
Less: Imputed interest |
|
| (5.0 | ) |
Total lease obligations |
| $ | 42.7 |
|
(in thousands) |
|
|
|
|
Remaining three months of 2021 |
| $ | 2,405 |
|
2022 |
|
| 9,151 |
|
2023 |
|
| 8,713 |
|
2024 |
|
| 7,429 |
|
2025 |
|
| 5,070 |
|
Thereafter |
|
| 17,557 |
|
Total lease payments |
| $ | 50,325 |
|
Less: Imputed interest |
|
| (6,008 | ) |
Total lease obligations |
| $ | 44,317 |
|
The table below presents additional information related to the Company’s leases:
Weighted average remaining lease term: | |||||
Operating leases |
| ||||
| |||||
Weighted average discount rate: | |||||
Operating leases |
| % |
22
Supplemental cash flow information related to leases were as follows:
(in millions) |
| Three months ended |
| |
Cash paid for amounts included in the measurement |
|
|
| |
Operating cash flows from operating leases |
| $ | 5.5 |
|
ROU assets obtained in exchange for new operating |
| $ | 5.4 |
|
ROU assets disposed of for lease terminations |
| $ | - |
|
(in thousands) |
| Nine months ended May 31, 2021 |
| |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
Operating cash flows from operating leases |
| $ | 10,091 |
|
ROU assets obtained in exchange for new operating lease liabilities |
| $ | 404 |
|
ROU assets disposed of for lease terminations |
| $ | (12,053 | ) |
Note 15 – Commitments and Contingencies
Portland Harbor Superfund Site
The Company’s Portland, Oregon manufacturing facility (the Portland Property) is located adjacent to the Willamette River. 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 Company’s 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. Ten private and public entities, including the Company (the Lower Willamette Group or LWG), 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 did not sign such consent, but nevertheless contributed financially to the effort. The EPA-mandated RI/FS was produced by the LWG and cost over $110$110 million during a 17-year period. The Company bore a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’s aggregate expenditure during the 17-year period was not material. Some or all of any such outlay may be recoverable from other responsible parties. The EPA issued its Record of Decision (ROD) for the Portland Harbor Site on January 6, 2017 and accordingly on October 26, 2017, the AOC was terminated.
Separate from the process described above, which focused on the type of remediation to be performed at the Portland Harbor Site and the schedule for such remediation, 83 parties, including the State of Oregon and the federal government, entered into a non-judicial mediation process to try to allocate costs associated with remediation of the Portland Harbor Site. Approximately 110 additional parties 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 been stayed by the court until January 14, 2022.2025.
The EPA's January 6, 2017 ROD identifies a clean-up remedy that the EPA estimates will take 13 years of active remediation, followed by 30 years of monitoring with an estimated undiscounted cost of $1.7$1.7 billion. The EPA typically expects its cost estimates to be accurate within a range of -30%-30% to +50%+50%, but this ROD states that changes in costs are likely to occur as a result of new data collected over a 2-year period prior to final remedy design. The ROD identifies 13EPA has identified 15 Sediment Decision Units.Units within the ROD cleanup area. One of the units, RM9W, includes the nearshore area of the river sediments offshore of the Portland Property as well as upstream and downstream of the facility. It also includes a portion of the Company’s riverbank. The ROD does not break down total remediation costs by Sediment Decision Unit. The EPA's ROD concluded that more data was needed to better define clean-up scope and cost. On December 8, 2017, the EPA announced that Portland Harbor is one of 21 Superfund sites targeted for greater attention. On December 19, 2017, the EPA announced that it had entered a new AOC with a group of four potentially responsible parties to conduct additional sampling during 2018 and 2019 to provide more certainty about clean-up costs and aid the mediation process to allocate those costs. The parties to the mediation, including the Company, agreed to help fund the additional sampling, which is now complete. The EPA requested that potentially responsible parties enter AOCs during 2019 agreeing to conduct remedial design studies. Some parties have signed AOCs, including one party with respect to RM9W which includes the area offshore of the Company’s manufacturing facility. The Company has
23
not signed an AOC in connection with remedial design, but will potentially be directly or indirectly responsible for conducting or funding a portion of such RM9W remedial design. The allocation process is continuing in parallel with the process to define the remedial design.
The ROD does not address responsibility for the costs of clean-up, nor does it allocate such costs among the potentially responsible parties. Responsibility for funding and implementing the EPA's selected cleanup remedy will be determined at an unspecified later date. Based on the investigation to date, the Company believes that it did not contribute in any material way to contaminationcontaminants of concern 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 the Company’s ownership of the Portland Property. Because these environmental investigations are still underway, sufficient information is currently not available to determine the Company’s liability, if any, for the cost of any
required remediation or restoration of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phases of investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the river's classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Company’s business and Consolidated Financial Statements, or the value of the Portland Property.
On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the U.S. and the State of Oregon for costs it incurred in assessing alleged natural resource damages to the Columbia River from contaminants deposited in Portland Harbor. Confederated Tribes and Bands of the Yakama Nation v. Air Liquide America Corp., et al., U.S. Court for the District of Oregon Case No. 3i17-CV-00164-SB. The complaint does not specify the amount of damages the plaintiff will seek. The case has been stayed until January 14, 2022.2025.
Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing Operations
The Company 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. 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 discussing with the DEQ potential remedial actions which may be required. The Company’s aggregate expenditure has not been material, however it could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties.
Other Litigation, Commitments and Contingencies
In connection with the acquisition of the manufacturing business of American Railcar Industries, Inc. (ARI), the Company agreed to assume potential legacy liabilities (known and unknown) related to railcars manufactured by ARI. Among these potential liabilities are certain retrofit and repair obligations arising from regulatory actions by the Federal Railroad Administration and the Association of American Railroads. In some cases, the seller shares with the Company the costs of these retrofit and repair obligations. The Company currently is not able to determine if any of these liabilities will have a material adverse impact on the Company’s Consolidated Financial Statements.
From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcomes of which cannot be predicted with certainty. While the ultimate outcome of such legal proceedings cannot be determined at this time, the Company believes that the resolution of pending litigation will not have a material adverse effect on the Company's Consolidated Financial Statements.
As of May 31, 2021,February 28, 2022, the Company had outstanding letters of credit aggregating to $25.2$6.5 million associated with performance guarantees, facility leases and workers compensation insurance.
24
Note 16 – Fair Value Measures
Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:
Level 1 - observable inputs such as unadjusted quoted prices in active markets for identical instruments;
Level 2 - inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; and
Level 3 - unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.
Assets and liabilities measured at fair value on a recurring basis as of May 31, 2021February 28, 2022 were:
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
| $ | 610 |
|
| $ | — |
|
| $ | 610 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 45,816 |
|
|
| 45,816 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 203,833 |
|
|
| 203,833 |
|
|
| — |
|
|
| — |
|
|
| $ | 250,259 |
|
| $ | 249,649 |
|
| $ | 610 |
|
| $ | — |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
| $ | 11,417 |
|
| $ | — |
|
| $ | 11,417 |
|
| $ | — |
|
|
|
Assets and liabilities measured at fair value on a recurring basis as of August 31, 20202021 were:
(in millions) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 0.1 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 47.7 |
|
|
| 47.7 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 228.9 |
|
|
| 228.9 |
|
|
| — |
|
|
| — |
|
|
| $ | 276.7 |
|
| $ | 276.6 |
|
| $ | 0.1 |
|
| $ | — |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative financial instruments |
| $ | 10.5 |
|
| $ | — |
|
| $ | 10.5 |
|
| $ | — |
|
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 (1) |
|
| Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
| $ | 582 |
|
| $ | — |
|
| $ | 582 |
|
| $ | — |
|
Nonqualified savings plan investments |
|
| 35,744 |
|
|
| 35,744 |
|
|
| — |
|
|
| — |
|
Cash equivalents |
|
| 203,509 |
|
|
| 203,509 |
|
|
| — |
|
|
| — |
|
|
| $ | 239,835 |
|
| $ | 239,253 |
|
| $ | 582 |
|
| $ | — |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments |
| $ | 15,907 |
|
| $ | — |
|
| $ | 15,907 |
|
| $ | — |
|
Note 17 – Related Party Transactions
The Company has a 41.9%41.9% interest in Axis, LLC (Axis), a joint venture. The Company purchased $3.3$3.3 million and $10.0$6.1 million for the three and ninesix months ended May 31, 2021,February 28, 2022, respectively and $4.3$2.2 million and $11.5$6.0 million for the three and ninesix months ended May 31, 2020,February 28, 2021, respectively of railcar components from Axis.
The Company has a 40% interest in the common equity of an entity that buys and sells railcar assets that are leased to third parties. As of May 31, 2021, the carrying amount of the investment was $3.2 million which is classified in Investment in unconsolidated affiliates in the Consolidated Balance Sheet. There were 0 sales to or from this entity during the nine months ended May 31, 2021 and 2020. The Company also provides administrative and remarketing services to this entity and earns management fees for these services which were immaterial for the three and nine months ended May 31, 2021 and 2020.25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Executive Summary
We operate in three reportable segments: Manufacturing; Wheels, Repair & Parts;Maintenance Services; and Leasing & Management Services. Our segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland, Romania and Turkey, produces double-stack intermodal railcars, tank cars, conventional railcars, automotive railcar products and marine vessels. The Wheels, Repair & PartsMaintenance Services segment performs wheel and axle servicing;servicing, railcar repair, refurbishmentmaintenance and maintenance; as well as production ofproduces a variety of parts for the rail industry in North America. The Leasing & Management Services segment, which includes GBX Leasing, owns approximately 8,70011,000 railcars as of May 31, 2021.February 28, 2022. We also provide management services for approximately 445,000431,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America as of May 31, 2021.February 28, 2022. Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil.
In the first quarter of 2022, we renamed two of our reportable segments to more prominently display the nature of the customer solutions it provides and markets in which it operates. The new names of our reportable segments are Manufacturing (unchanged), Maintenance Services (previously Wheels, Repair & Parts), and Leasing & Management Services (previously Leasing & Services). The name changes have no impact on our organization’s reporting structure nor on financial information previously reported. Separately, effective September 1, 2021, we changed our measurement basis for allocating syndication revenue between the Manufacturing and Leasing & Management Services reportable segments. This change in measurement reflects the information currently used by management to assess our operating performance in accordance with our refined leasing strategy and has no impact to our total consolidated revenue. Segment results for the nineprior periods have been recast to conform to the current period presentation.
We identify three general trends impacting our business at present, all of which we believe are reflected in our results for the six months ended May 31, 2021 are representative ofFebruary 28, 2022. First, we believe the challenges of the currentNorth American freight rail equipment market conditions. The decrease in operating profits comparedis beginning to the same period in the prior year is primarily attributable toemerge from the cyclical decrease in economic activity in the freight rail equipment market which began prior to the emergence of COVID-19 (Cyclical Downturn). The Cyclical Downturn intensified dueCOVID-19. Second, we believe global economic activity continues to recover from the historic sharp dramatic decrease resulting from the COVID-19 Events (as defined below).pandemic. Third, secular inflation, sectoral price volatility, supply chain disruptions and geopolitical disquiet, demand concerted management focus for successful execution across the business. While we believe the current market and broader economic environment most likely will present many positive opportunities for our business, as we navigate the recovery, we face a number of challenges which include:
In February 2022, the Russian Federation commenced a military invasion of Ukraine. As a result of this action, various nations have instituted economic sanctions against the Russian Federation. The short and long-term implications of Russia’s invasion of Ukraine and related sanctions are difficult to predict at this time but may have an adverse effect on the global economic markets generally and could exacerbate the existing challenges noted above.
We have adhered to disciplined management through
As described in Part II, Item 1A “Risk Factors” of this crucial time. Our core strategy since March 2020 has been and continues to be to:
|
|
|
|
|
|
We strengthened our financial position through strategic spending reductions which included reducing our selling and administrative expense by $22.1 million duringAnnual Report on Form 10-K for the nine monthsyear ended MayAugust 31, 2021 comparedand our subsequent Quarterly Report on Form 10-Q, the items described above may have a material negative impact on our business, liquidity, results of operations and stock price. Beyond these general observations, we are unable to predict when, how, or with what magnitude these items will impact our business.
26
We believe we have the prior comparable period.
management expertise and are well-positioned to navigate the immediate challenges of increasing production rates safely amidst emerging COVID variants and geopolitical disquiet, while managing labor and supply chain continuity. Despite the challenging operating environment, we achieved the following noteworthy accomplishments were achieved during the quarter:first half of 2022 as we navigate the recovery phase:
|
|
|
|
|
|
Our backlog remains strong with railcar deliveries into 2024 and marine deliveries into 2022.2023. Our railcar backlog was 24,80032,100 units with an estimated value of $2.58$3.6 billion as of May 31, 2021.February 28, 2022. Backlog units for lease may be syndicated to third parties or held in our ownlease fleet depending on a variety of factors. Multi-year supply agreements are a part of rail industry practice. A portion of the orders included in backlog reflects an assumed product mix. Under terms of the orders, the exact mix and pricing will be determined in the future, which may impact backlog. Approximately 9%5% of backlog units and 7%4% of estimated backlog value as of May 31, 2021February 28, 2022 was associated with our Brazilian manufacturing operations which is accounted for under the equity method. Marine backlog as of May 31, 2021February 28, 2022 was $39$48 million.
Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations. Certain orders in backlog are subject to customary documentation and completion of terms. Customers may attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time to time.
COVID-19 and the Downturn in Global Economic Activity
We continue to actively monitor and manage the impacts on our business of the COVID-19 coronavirus pandemic, the significant decline in global economic activity and governmental reactions to these historic events (COVID-19 Events).
Our manufacturing and service facilities continue regular operations. We function as an essential infrastructure business under guidance issued by the U.S. Department of Homeland Security. Similar guidelines and authorities exist in other nations where we operate. Since the emergence of COVID-19, our facilities in the U.S. have been permitted to continue to operate subject to enhanced safety protocols, both voluntary and government mandated, that aim to protect the health of our workforce and the residents of the communities in which our facilities are located. The situation is similar in our facilities in Mexico, Europe, Brazil and Turkey which also have been permitted by applicable governmental authorities to operate subject to enhanced health and safety protocols.
As described in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, COVID-19 Events may have a material negative impact on our business, liquidity, results of operations, and stock price. Beyond these general observations, we are unable to predict when, how, or with what magnitude COVID-19 Events, in combination with the Cyclical Downturn, will negatively impact our business.
Leasing Strategy27
In February 2021 we announced a refined leasing strategy to grow our owned portfolio of leased railcars built by Greenbrier by approximately $200 million per year. This will create an incremental annuity stream of tax-advantaged cash flows while reducing our exposure to the new railcar order and delivery cycle. We are executing this strategy through GBX Leasing, a newly formed joint venture in which we own over 90%.
GBX Leasing commenced operations in April 2021 upon the closing of a $300 million non-recourse warehouse credit facility, and the conclusion of the initial sale and contribution of railcars and associated leases by Greenbrier valued at approximately $130 million.
GBX Leasing is financed with non-recourse debt and is expected to be levered approximately 3:1 debt to equity. We intend that GBX Leasing will aggregate leased railcars to obtain permanent debt financing issued in connection with asset-backed securities. We consolidate GBX Leasing for financial reporting purposes within the Leasing & Services segment. Greenbrier Management Services provides management services to the GBX Leasing fleet.
Three Months Ended May 31, 2021February 28, 2022 Compared to the Three Months Ended May 31, 2020February 28, 2021
Overview
Revenue, Cost of revenue, Margin and Earnings (loss) from operations (operating profit)profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
| Three Months Ended May 31, |
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||
Revenue: |
|
|
|
|
|
|
|
|
Manufacturing |
| $ | 341,939 |
|
| $ | 653,007 |
|
Wheels, Repair & Parts |
|
| 80,871 |
|
|
| 82,024 |
|
Leasing & Services |
|
| 27,333 |
|
|
| 27,526 |
|
|
|
| 450,143 |
|
|
| 762,557 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Manufacturing |
|
| 292,464 |
|
|
| 562,793 |
|
Wheels, Repair & Parts |
|
| 73,690 |
|
|
| 75,001 |
|
Leasing & Services |
|
| 8,857 |
|
|
| 17,232 |
|
|
|
| 375,011 |
|
|
| 655,026 |
|
Margin: |
|
|
|
|
|
|
|
|
Manufacturing |
|
| 49,475 |
|
|
| 90,214 |
|
Wheels, Repair & Parts |
|
| 7,181 |
|
|
| 7,023 |
|
Leasing & Services |
|
| 18,476 |
|
|
| 10,294 |
|
|
|
| 75,132 |
|
|
| 107,531 |
|
Selling and administrative |
|
| 49,239 |
|
|
| 49,494 |
|
Net (gain) loss on disposition of equipment |
|
| 184 |
|
|
| (8,775 | ) |
Earnings from operations |
|
| 25,709 |
|
|
| 66,812 |
|
Interest and foreign exchange |
|
| 10,204 |
|
|
| 7,562 |
|
Net loss on extinguishment of debt |
|
| 4,763 |
|
|
| — |
|
Earnings before income taxes and earnings from unconsolidated affiliates |
|
| 10,742 |
|
|
| 59,250 |
|
Income tax benefit (expense) |
|
| 6,914 |
|
|
| (24,421 | ) |
Earnings before earnings from unconsolidated affiliates |
|
| 17,656 |
|
|
| 34,829 |
|
Earnings from unconsolidated affiliates |
|
| 2,379 |
|
|
| 1,040 |
|
Net earnings |
|
| 20,035 |
|
|
| 35,869 |
|
Net earnings attributable to noncontrolling interest |
|
| (298 | ) |
|
| (8,097 | ) |
Net earnings attributable to Greenbrier |
| $ | 19,737 |
|
| $ | 27,772 |
|
Diluted earnings per common share |
| $ | 0.59 |
|
| $ | 0.83 |
|
|
| Three Months Ended |
| |||||
(in millions, except per share amounts) |
| 2022 |
|
| 2021 |
| ||
Revenue: |
|
|
|
|
|
| ||
Manufacturing |
| $ | 555.7 |
|
| $ | 201.5 |
|
Maintenance Services |
|
| 86.6 |
|
|
| 71.6 |
|
Leasing & Management Services |
|
| 40.5 |
|
|
| 22.5 |
|
|
|
| 682.8 |
|
|
| 295.6 |
|
Cost of revenue: |
|
|
|
|
|
| ||
Manufacturing |
|
| 535.0 |
|
|
| 201.8 |
|
Maintenance Services |
|
| 81.7 |
|
|
| 66.7 |
|
Leasing & Management Services |
|
| 11.3 |
|
|
| 9.5 |
|
|
|
| 628.0 |
|
|
| 278.0 |
|
Margin: |
|
|
|
|
|
| ||
Manufacturing |
|
| 20.7 |
|
|
| (0.3 | ) |
Maintenance Services |
|
| 4.9 |
|
|
| 4.9 |
|
Leasing & Management Services |
|
| 29.2 |
|
|
| 13.0 |
|
|
|
| 54.8 |
|
|
| 17.6 |
|
Selling and administrative |
|
| 54.7 |
|
|
| 43.4 |
|
Net gain on disposition of equipment |
|
| (25.1 | ) |
|
| (0.1 | ) |
Earnings (loss) from operations |
|
| 25.2 |
|
|
| (25.7 | ) |
Interest and foreign exchange |
|
| 11.8 |
|
|
| 9.6 |
|
Earnings (loss) before income taxes and earnings (loss) from |
|
| 13.4 |
|
|
| (35.3 | ) |
Income tax (expense) benefit |
|
| (3.2 | ) |
|
| 21.8 |
|
Earnings (loss) before earnings (loss) from |
|
| 10.2 |
|
|
| (13.5 | ) |
Earnings (loss) from unconsolidated affiliates |
|
| 1.0 |
|
|
| (0.4 | ) |
Net earnings (loss) |
|
| 11.2 |
|
|
| (13.9 | ) |
Net loss attributable to noncontrolling interest |
|
| 1.6 |
|
|
| 4.8 |
|
Net earnings (loss) attributable to Greenbrier |
| $ | 12.8 |
|
| $ | (9.1 | ) |
Diluted earnings (loss) per common share |
| $ | 0.38 |
|
| $ | (0.28 | ) |
Performance for our segments is evaluated based on operating profit.profit or loss. 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) benefit (expense) for either external or internal reporting purposes.
|
| Three Months Ended May 31, |
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||
Operating profit: |
|
|
|
|
|
|
|
|
Manufacturing |
| $ | 31,341 |
|
| $ | 68,445 |
|
Wheels, Repair & Parts |
|
| 4,173 |
|
|
| 3,785 |
|
Leasing & Services |
|
| 12,280 |
|
|
| 11,837 |
|
Corporate |
|
| (22,085 | ) |
|
| (17,255 | ) |
|
| $ | 25,709 |
|
| $ | 66,812 |
|
|
| Three Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Operating profit (loss): |
|
|
|
|
|
| ||
Manufacturing |
| $ | 1.8 |
|
| $ | (17.8 | ) |
Maintenance Services |
|
| 2.9 |
|
|
| 2.4 |
|
Leasing & Management Services |
|
| 47.6 |
|
|
| 7.0 |
|
Corporate |
|
| (27.1 | ) |
|
| (17.3 | ) |
|
| $ | 25.2 |
|
| $ | (25.7 | ) |
28
Consolidated Results
|
| Three Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue |
| $ | 450,143 |
|
| $ | 762,557 |
|
| $ | (312,414 | ) |
|
| (41.0 | %) |
| $ | 682.8 |
| $ | 295.6 |
| $ | 387.2 |
| 131.0 | % | ||||
Cost of revenue |
| $ | 375,011 |
|
| $ | 655,026 |
|
| $ | (280,015 | ) |
|
| (42.7 | %) |
| $ | 628.0 |
| $ | 278.0 |
| $ | 350.0 |
| 125.9 | % | ||||
Margin (%) |
|
| 16.7 | % |
|
| 14.1 | % |
|
| 2.6 | % |
| * |
|
| 8.0 | % |
| 6.0 | % |
| 2.0 | % |
| * |
| |||||
Net earnings attributable to Greenbrier |
| $ | 19,737 |
|
| $ | 27,772 |
|
| $ | (8,035 | ) |
|
| (28.9 | %) | ||||||||||||||||
Net earnings (loss) attributable to Greenbrier |
| $ | 12.8 |
| $ | (9.1 | ) |
| $ | 21.9 |
| (240.7 | %) |
* 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 41.0% decrease131.0% increase in revenue for the three months ended May 31, 2021February 28, 2022 as compared to the three months ended May 31, 2020February 28, 2021 was primarily due to a 47.6% decrease175.8% increase in Manufacturing revenue. The decreaseincrease in Manufacturing revenue was primarily attributed to a 48.1% decrease158.8% increase in railcar deliveries.
The 42.7% decrease125.9% increase in cost of revenue for the three months ended May 31, 2021February 28, 2022 as compared to the three months ended May 31, 2020February 28, 2021 was primarily due to a 48.0% decrease165.1% increase in Manufacturing cost of revenue. The decreaseincrease in Manufacturing cost of revenue was primarily attributed to a 48.1% decrease158.8% increase in railcar deliveries. The decrease in cost of revenue was also due to a 48.6% decrease in Leasing & Services cost of revenue primarily due to a decrease indeliveries and higher steel and other input costs during the volume of railcars sold that we purchased from third parties, lower transportation costs and a decrease in costs from a decline in management services volume. The three months ended May 31, 2021 and 2020 were both negatively impacted by February 28, 2022.costs associated with operating our manufacturing facilities in the COVID-19 pandemic.
Margin as a percentage of revenue was 16.7%8.0% and 14.1%6.0% for the three months ended May 31,February 28, 2022 and 2021, and 2020, respectively. The overall margin as a percentage of revenue was positively impacted by an increase in Leasing & ServicesManufacturing margin from (0.1%) to 67.6% from 37.4% primarily attributed to a benefit associated with a lease transfer fee on previously syndicated railcars during3.7%. The increase in Manufacturing margin percentage for the three months ended May 31, 2021 and the prior year being negatively impacted byFebruary 28, 2022 was primarily attributed to operating at higher sales of railcars that we purchased from third parties which have lower margin percentages.volumes. The overall margin as a percentage of revenue was also positively impacted by an increase in ManufacturingLeasing & Management Service margin from 57.8% to 14.5% from 13.8%72.1%. The Manufacturingincrease in Leasing & Management Service margin percentage for the three months ended May 31, 2021 benefited from a favorable resolution of warranty and other loss contingencies associated with our international operations.February 28, 2022 was primarily attributed to higher syndication activity.
The $8.0$21.9 million decreaseincrease in net earnings attributable to Greenbrier for the three months ended May 31, 2021February 28, 2022 as compared to the three months ended May 31, 2020February 28, 2021 was primarily attributable to a decrease in the after-tax margin due to a reductionthe following:
Manufacturing Segment
|
| Three Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||
(In thousands, except railcar deliveries) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 341,939 |
|
| $ | 653,007 |
|
| $ | (311,068 | ) |
|
| (47.6 | %) |
Cost of revenue |
| $ | 292,464 |
|
| $ | 562,793 |
|
| $ | (270,329 | ) |
|
| (48.0 | %) |
Margin (%) |
|
| 14.5 | % |
|
| 13.8 | % |
|
| 0.7 | % |
| * |
| |
Operating profit ($) |
| $ | 31,341 |
|
| $ | 68,445 |
|
| $ | (37,104 | ) |
|
| (54.2 | %) |
Operating profit (%) |
|
| 9.2 | % |
|
| 10.5 | % |
|
| (1.3 | %) |
| * |
| |
Deliveries |
|
| 2,800 |
|
|
| 5,400 |
|
|
| (2,600 | ) |
|
| (48.1 | %) |
|
|
Manufacturingsyndication revenue decreased $311.1 million or 47.6% for the three months ended May 31,February 28, 2022.
These were partially offset by:
29
Manufacturing Segment
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(In millions, except railcar deliveries) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 555.7 |
|
| $ | 201.5 |
|
| $ | 354.2 |
|
|
| 175.8 | % |
Cost of revenue |
| $ | 535.0 |
|
| $ | 201.8 |
|
| $ | 333.2 |
|
|
| 165.1 | % |
Margin (%) |
|
| 3.7 | % |
|
| (0.1 | %) |
|
| 3.8 | % |
| * |
| |
Operating profit (loss) ($) |
| $ | 1.8 |
|
| $ | (17.8 | ) |
| $ | 19.6 |
|
|
| 110.1 | % |
Operating profit (loss) (%) |
|
| 0.3 | % |
|
| (8.8 | %) |
|
| 9.1 | % |
| * |
| |
Deliveries |
|
| 4,400 |
|
|
| 1,700 |
|
|
| 2,700 |
|
|
| 158.8 | % |
* Not meaningful
Our Manufacturing segment primarily generates revenue from manufacturing a wide range of freight railcars and from the conversion of existing or in-service railcars through our facilities in North America and Europe. We also manufacture a broad range of ocean-going and river barges for transporting merchandise between ports within the United States.
Manufacturing revenue increased $354.2 million or 175.8% for the three months ended February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The decreaseincrease in revenue was primarily attributed to a 48.1% decrease158.8% increase in railcar deliveries. The increase was also due to the additional revenue associated with an increase in steel and other input costs during the three months ended February 28, 2022, as many of our customer contracts include price escalation provisions when certain of our manufacturing costs increase.
Manufacturing cost of revenue decreased $270.3increased $333.2 million or 48.0%165.1% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The decreaseincrease in cost of revenue was primarily attributed to a 48.1% decrease158.8% increase in the volume of railcar deliveries.deliveries and higher steel and other input costs during the three months ended February 28, 2022.
Manufacturing margin as a percentage of revenue increased 0.7%3.8% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The increase in margin percentage for the three months ended May 31, 2021 benefited from a $15.8 million favorable resolution of warranty and other loss contingencies associated with our international operations.February 28, 2022 was primarily attributed to operating at higher volumes. This was partially offset by higher steel and other input costs and an increase in warranty expense during the three months ended February 28, 2022. In addition, many of our customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales price to our customers. While this has no impact to our margin dollars, the increase in revenue and cost of sales has a negative impact from operating at lower production volumes.to our margin as a percentage of revenue.
Manufacturing operating profit decreased $37.1increased $19.6 million or 54.2% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020. The decrease in operating profit was primarily attributed to a decrease in railcar deliveries. This was partially offset by the three months ended May 31, 2021 benefiting from a favorable resolution of warranty and other loss contingencies associated with our international operations. The decrease in operating profit was also partially offset by a decrease in selling and administrative expense as part of our strategic cost control initiatives during the three months ended May 31,February 28, 2021.
Wheels, Repair & Parts Segment
|
| Three Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 80,871 |
|
| $ | 82,024 |
|
| $ | (1,153 | ) |
|
| (1.4 | %) |
Cost of revenue |
| $ | 73,690 |
|
| $ | 75,001 |
|
| $ | (1,311 | ) |
|
| (1.7 | %) |
Margin (%) |
|
| 8.9 | % |
|
| 8.6 | % |
|
| 0.3 | % |
| * |
| |
Operating profit ($) |
| $ | 4,173 |
|
| $ | 3,785 |
|
| $ | 388 |
|
|
| 10.3 | % |
Operating profit (%) |
|
| 5.2 | % |
|
| 4.6 | % |
|
| 0.6 | % |
| * |
|
|
|
Wheels, Repair & Parts revenue decreased $1.2 million or 1.4% for the three months ended May 31, 2021 compared to the three months ended May 31, 2020. The decrease was primarily attributed to lower repair volumes due to lower demand. This was partially offset by higher revenues associated with an increase in scrap metal pricing as we scrap wheels and other components and an increase in parts volumes.
Wheels, Repair & Parts cost of revenue decreased $1.3 million or 1.7% for the three months ended May 31, 2021 compared to the three months ended May 31, 2020. The decrease was primarily due to lower costs associated with a reduction in repair volumes.
Wheels, Repair & Parts margin as a percentage of revenue increased 0.3% for the three months ended May 31, 2021 compared to the three months ended May 31, 2020. The increase in margin was primarily attributed to an increase in scrap metal pricing. This was partially offset by operating with lower repair volumes.
Wheels, Repair & Parts operating profit increased $0.4 million or 10.3% for the three months ended May 31, 2021 compared to the three months ended May 31, 2020. The increase in operating profit was primarily attributed to an increase in railcar deliveries.
30
Maintenance Services Segment
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 86.6 |
|
| $ | 71.6 |
|
| $ | 15.0 |
|
|
| 20.9 | % |
Cost of revenue |
| $ | 81.7 |
|
| $ | 66.7 |
|
| $ | 15.0 |
|
|
| 22.5 | % |
Margin (%) |
|
| 5.7 | % |
|
| 6.8 | % |
|
| (1.1 | %) |
| * |
| |
Operating profit ($) |
| $ | 2.9 |
|
| $ | 2.4 |
|
| $ | 0.5 |
|
|
| 20.8 | % |
Operating profit (%) |
|
| 3.3 | % |
|
| 3.4 | % |
|
| (0.1 | %) |
| * |
|
* Not meaningful
Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.
Maintenance Services revenue increased $15.0 million or 20.9% for the three months ended February 28, 2022 compared to the three months ended February 28, 2021. The increase was primarily attributed to higher volumes due to increased demand. The increase was also due to higher revenues associated with an increase in scrap metal pricing and volume as we scrap wheels and other components.
Maintenance Services cost of revenue increased $15.0 million or 22.5% for the three months ended February 28, 2022 compared to the three months ended February 28, 2021. The increase was primarily due to higher costs associated with an increase in volumes and an increase in material and labor costs.
Maintenance Services margin as a percentage of revenue decreased 1.1% for the three months ended February 28, 2022 compared to the three months ended February 28, 2021. The decrease in sellingmargin percentage was primarily attributed to higher material and administrative expense as part of our strategic cost control initiativeslabor costs during the three months ended May 31, 2021. These wereFebruary 28, 2022. This was partially offset by a reductionan increase in repair volumes.scrap metal pricing.
Maintenance Services operating profit increased $0.5 million or 20.8% for the three months ended February 28, 2022 compared to the three months ended February 28, 2021. The increase in operating profit was primarily attributed to an increase in volumes and scrap metal pricing. This was partially offset by higher material and labor costs during the three months ended February 28, 2022.
31
Leasing & Management Services Segment
|
| Three Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
|
| Three Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue |
| $ | 27,333 |
|
| $ | 27,526 |
|
| $ | (193 | ) |
|
| (0.7 | %) |
| $ | 40.5 |
| $ | 22.5 |
| $ | 18.0 |
| 80.0 | % | ||||
Cost of revenue |
| $ | 8,857 |
|
| $ | 17,232 |
|
| $ | (8,375 | ) |
|
| (48.6 | %) |
| $ | 11.3 |
| $ | 9.5 |
| $ | 1.8 |
| 18.9 | % | ||||
Margin (%) |
|
| 67.6 | % |
|
| 37.4 | % |
|
| 30.2 | % |
| * |
|
| 72.1 | % |
| 57.8 | % |
| 14.3 | % |
| * |
| |||||
Operating profit ($) |
| $ | 12,280 |
|
| $ | 11,837 |
|
| $ | 443 |
|
|
| 3.7 | % |
| $ | 47.6 |
| $ | 7.0 |
| $ | 40.6 |
| 580.0 | % | ||||
Operating profit (%) |
|
| 44.9 | % |
|
| 43.0 | % |
|
| 1.9 | % |
| * |
|
| 117.5 | % |
| 31.1 | % |
| 86.4 | % |
| * |
|
|
|
The* Not meaningful
Our Leasing & Management Services segment generates revenue from leasing railcars from itsour lease fleet which includes GBX Leasing, providing various management services, syndication revenue associated with leases attached to new railcar sales, interim rent on leased railcars for syndication and the sale of railcars purchased from third parties with the intent to resell. The gross proceeds from the sale of these railcars are recorded in revenue and the costs of purchasing these railcars are recorded in cost of revenue.In February 2021 we announced a refined leasing strategy to grow our owned portfolio of leased railcars built by Greenbrier. We are executing the strategy through GBX Leasing, a newly formed joint venture which is more than 90% owned by Greenbrier. We consolidate GBX Leasing for financial reporting purposes within the
Leasing & Services segment.
Leasing &Management Services revenue decreased $0.2increased $18.0 million or 0.7%80.0% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The decreaseincrease was primarily attributed to lower interim rent on leased railcars forhigher syndication during the three months ended May 31, 2021 and a decreaserevenue from an increase in the salevolume of railcars which we had purchasednew railcar sales with leases attached and higher leasing revenue primarily from third parties with the intent to resell. This was partially offset by revenue associated with a lease transfer fee on previously syndicated railcars during the three months ended May 31, 2021.addition of GBX Leasing's fleet.
Leasing & Management Services cost of revenue decreased $8.4increased $1.8 million or 48.6%18.9% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The decreaseincrease was primarily due to a decrease in the volume of railcars sold that we purchased from third parties, lower transportation costs and a decrease inhigher costs from a decline in management services volume.the addition of GBX Leasing's fleet.
Leasing & Management Services margin as a percentage of revenue increased 30.2%14.3% for the three months ended May 31, 2021February 28, 2022 compared to the three months ended May 31, 2020.February 28, 2021. The increase in margin percentage was primarily attributed to the benefit associated with a lease transfer fee on previously syndicated railcars duringhigher syndication activity.
Leasing & Management Services operating profit increased $40.6 million for the three months ended May 31,February 28, 2022 compared to the three months ended February 28, 2021. Margin asThe increase was primarily attributed to a percentagehigher net gain on disposition of equipment and higher syndication activity.
32
Selling and Administrative Expense
|
| Three Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Selling and administrative expense |
| $ | 54.7 |
|
| $ | 43.4 |
|
| $ | 11.3 |
|
|
| 26.0 | % |
Selling and administrative expense was $54.7 million or 8.0% of revenue for the three months ended May 31, 2020 was negatively impacted by higher sales of railcars that we purchased from third parties which have lower margin percentages.
Leasing & Services operating profit increased $0.4February 28, 2022 compared to $43.4 million or 3.7% for the three months ended May 31, 2021 compared to the three months ended May 31, 2020. The increase was primarily attributed to the benefit associated with a lease transfer fee during the three months ended May 31, 2021. This was partially offset by a reduction in net gain on disposition of equipment.
Selling and Administrative Expense
|
| Three Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||
Selling and administrative expense |
| $ | 49,239 |
|
| $ | 49,494 |
|
| $ | (255 | ) |
|
| (0.5 | %) |
Selling and administrative expense was $49.2 million or 10.9% of revenue for the three months ended May 31, 2021 compared to $49.5 million or 6.5%14.7% of revenue for the prior comparable period. The $0.3$11.3 million decreaseincrease was primarily attributed to a decreasean increase in the administrative fees paid to our joint venture partner in Mexicoemployee related costs due to lower levels of activity and a decrease in other controllable spending categories as part of our strategic cost control and liquidity initiatives. This was partially offset by an increase inhigher incentive compensation expense associated with the year-to-datecurrent year financial performance. The increase was also due to higher costs for legal, consulting and travel associated with increased business activity.
Net Gain (Loss) on Disposition of Equipment
Net loss on disposition of equipment was $0.2 million for the three months ended May 31, 2021 compared to net gain on disposition of equipment of $8.8 million for the prior comparable period.
Net gain (loss) on disposition of equipment primarily includes the sale of assets from our lease fleet (Equipment on operating leases, net) thatand disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to accommodate customer demand and to manage risk and liquidity andliquidity.
Net gain on disposition of property, plantequipment was $25.1 million and equipment.$0.1 million for the three months ended February 28, 2022 and 2021, respectively. The increase in Net gain on disposition of equipment was primarily attributed to sales of assets from our lease fleet during the three months ended February 28, 2022.
Other Costs
Interest and foreign exchange expense was composed of the following:
|
| Three Months Ended May 31, |
|
| Increase |
| ||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
| |||||||||||||||
|
| Three Months Ended |
|
| Increase |
| ||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
| |||||||||||||||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest and other expense |
| $ | 10,881 |
|
| $ | 10,698 |
|
| $ | 183 |
|
| $ | 12.0 |
| $ | 9.9 |
| $ | 2.1 |
| ||
Foreign exchange gain |
|
| (677 | ) |
|
| (3,136 | ) |
|
| 2,459 |
|
|
| (0.2 | ) |
|
| (0.3 | ) |
|
| 0.1 |
|
|
| $ | 10,204 |
|
| $ | 7,562 |
|
| $ | 2,642 |
|
| $ | 11.8 |
|
| $ | 9.6 |
|
| $ | 2.2 |
|
The $2.6$2.2 million increase in interest and foreign exchange expense from the prior comparable period was primarily attributed to the change in the Brazilian Real’s foreign exchange rate relative to the U.S. Dollar.
Net Loss on Extinguishment of Debt
Net loss on extinguishment of debt was $4.8 million for the three months ended May 31, 2021, which relatesFebruary 28, 2022 compared to the retirementthree months ended February 28, 2021 was primarily attributed to an increase in interest expense from higher levels of $207.1 million of our 2.875% convertible notes due 2024 and $50 million of our 2.25% convertible notes due 2024.borrowings.
Income Tax
For the three months ended May 31,February 28, 2022, we had income tax expense of $3.2 million on pre-tax income of $13.4 million for an effective tax rate of 24%. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution. Tax expense for the three months ended February 28, 2022 included net favorable discrete items.
For the three months ended February 28, 2021, we had an income tax benefit of $6.9$21.8 million on a pre-tax incomeloss of $10.7$35.3 million. The tax benefit for the three months ended May 31,February 28, 2021 primarily related to accelerated depreciation and the impact of the CARES Act which allowsallowed us to carry back tax losses to years when tax rates were higher, resulting in a tax benefit. The tax benefit is derived from the US Federal tax rate differential between the 2016 tax rate of 35% and our current rate of 21%. The effective tax rate for the three months ended May 31, 2020 was 41.2%.
The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax benefit (expense). benefit.
33
Earnings (Loss) From Unconsolidated Affiliates
Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the after-tax results from these unconsolidated affiliates.affiliates on an after-tax basis.
Earnings from unconsolidated affiliates was $2.4 million for the three months ended May 31, 2021 compared to $1.0 million for the three months ended May 31, 2020. The increase in earningsFebruary 28, 2022 compared to loss from unconsolidated affiliates was primarily related to higher earnings in our Brazil operations.
Noncontrolling Interest
Net earnings attributable to noncontrolling interest was $0.3of $0.4 million for the three months ended May 31, 2021February 28, 2021. The increase was primarily related to higher sales volumes in our Brazil operations.
Noncontrolling Interest
Net loss attributable to noncontrolling interest was $1.6 million for the three months ended February 28, 2022 compared to $8.1$4.8 million infor the prior comparable period, whichthree months ended February 28, 2021. Net loss attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations.
Nine34
Six Months Ended May 31, 2021February 28, 2022 Compared to the NineSix Months Ended May 31, 2020February 28, 2021
Overview
Revenue, Cost of revenue, Margin and Earnings (loss) from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.
|
| Nine Months Ended May 31, |
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||
Revenue: |
|
|
|
|
|
|
|
|
Manufacturing |
| $ | 852,755 |
|
| $ | 1,800,317 |
|
Wheels, Repair & Parts |
|
| 218,050 |
|
|
| 259,857 |
|
Leasing & Services |
|
| 77,949 |
|
|
| 95,590 |
|
|
|
| 1,148,754 |
|
|
| 2,155,764 |
|
Cost of revenue: |
|
|
|
|
|
|
|
|
Manufacturing |
|
| 775,125 |
|
|
| 1,567,014 |
|
Wheels, Repair & Parts |
|
| 203,341 |
|
|
| 241,266 |
|
Leasing & Services |
|
| 36,814 |
|
|
| 61,428 |
|
|
|
| 1,015,280 |
|
|
| 1,869,708 |
|
Margin: |
|
|
|
|
|
|
|
|
Manufacturing |
|
| 77,630 |
|
|
| 233,303 |
|
Wheels, Repair & Parts |
|
| 14,709 |
|
|
| 18,591 |
|
Leasing & Services |
|
| 41,135 |
|
|
| 34,162 |
|
|
|
| 133,474 |
|
|
| 286,056 |
|
Selling and administrative |
|
| 136,371 |
|
|
| 158,455 |
|
Net gain on disposition of equipment |
|
| (765 | ) |
|
| (19,431 | ) |
Earnings (loss) from operations |
|
| (2,132 | ) |
|
| 147,032 |
|
Interest and foreign exchange |
|
| 30,875 |
|
|
| 33,023 |
|
Net loss on extinguishment of debt |
|
| 4,763 |
|
|
| — |
|
Earnings (loss) before income taxes and earnings from unconsolidated affiliates |
|
| (37,770 | ) |
|
| 114,009 |
|
Income tax benefit (expense) |
|
| 35,998 |
|
|
| (37,878 | ) |
Earnings (loss) before earnings from unconsolidated affiliates |
|
| (1,772 | ) |
|
| 76,131 |
|
Earnings from unconsolidated affiliates |
|
| 1,257 |
|
|
| 3,764 |
|
Net earnings (loss) |
|
| (515 | ) |
|
| 79,895 |
|
Net (earnings) loss attributable to noncontrolling interest |
|
| 1,215 |
|
|
| (30,825 | ) |
Net earnings attributable to Greenbrier |
| $ | 700 |
|
| $ | 49,070 |
|
Diluted earnings per common share |
| $ | 0.02 |
|
| $ | 1.47 |
|
|
| Six Months Ended |
| |||||
(in millions, except per share amounts) |
| 2022 |
|
| 2021 |
| ||
Revenue: |
|
|
|
|
|
| ||
Manufacturing |
| $ | 1,008.2 |
|
| $ | 506.0 |
|
Maintenance Services |
|
| 159.0 |
|
|
| 137.2 |
|
Leasing & Management Services |
|
| 66.3 |
|
|
| 55.4 |
|
|
|
| 1,233.5 |
|
|
| 698.6 |
|
Cost of revenue: |
|
|
|
|
|
| ||
Manufacturing |
|
| 956.6 |
|
|
| 482.7 |
|
Maintenance Services |
|
| 152.9 |
|
|
| 129.7 |
|
Leasing & Management Services |
|
| 21.6 |
|
|
| 27.9 |
|
|
|
| 1,131.1 |
|
|
| 640.3 |
|
Margin: |
|
|
|
|
|
| ||
Manufacturing |
|
| 51.6 |
|
|
| 23.3 |
|
Maintenance Services |
|
| 6.1 |
|
|
| 7.5 |
|
Leasing & Management Services |
|
| 44.7 |
|
|
| 27.5 |
|
|
|
| 102.4 |
|
|
| 58.3 |
|
Selling and administrative |
|
| 99.0 |
|
|
| 87.1 |
|
Net gain on disposition of equipment |
|
| (33.6 | ) |
|
| (1.0 | ) |
Earnings (loss) from operations |
|
| 37.0 |
|
|
| (27.8 | ) |
Interest and foreign exchange |
|
| 24.4 |
|
|
| 20.7 |
|
Earnings (loss) before income taxes and earnings (loss) from |
|
| 12.6 |
|
|
| (48.5 | ) |
Income tax (expense) benefit |
|
| (1.8 | ) |
|
| 29.1 |
|
Earnings (loss) before earnings (loss) from |
|
| 10.8 |
|
|
| (19.4 | ) |
Earnings (loss) from unconsolidated affiliates |
|
| 6.0 |
|
|
| (1.2 | ) |
Net earnings (loss) |
|
| 16.8 |
|
|
| (20.6 | ) |
Net loss attributable to noncontrolling interest |
|
| 6.8 |
|
|
| 1.5 |
|
Net earnings (loss) attributable to Greenbrier |
| $ | 23.6 |
|
| $ | (19.1 | ) |
Diluted earnings (loss) per common share |
| $ | 0.70 |
|
| $ | (0.58 | ) |
Performance for our segments is evaluated based on operating profit or loss. 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) benefit (expense) for either external or internal reporting purposes.
|
| Nine Months Ended May 31, |
| |||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||||||||||
|
| Six Months Ended |
| |||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
| ||||||||||
Operating profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Manufacturing |
| $ | 23,811 |
|
| $ | 167,693 |
|
| $ | 14.1 |
| $ | (12.3 | ) | |
Wheels, Repair & Parts |
|
| 6,406 |
|
|
| 8,219 |
| ||||||||
Leasing & Services |
|
| 24,590 |
|
|
| 34,407 |
| ||||||||
Maintenance Services |
| 1.8 |
| 2.2 |
| |||||||||||
Leasing & Management Services |
| 64.8 |
| 17.1 |
| |||||||||||
Corporate |
|
| (56,939 | ) |
|
| (63,287 | ) |
|
| (43.7 | ) |
|
| (34.8 | ) |
|
| $ | (2,132 | ) |
| $ | 147,032 |
|
| $ | 37.0 |
|
| $ | (27.8 | ) |
35
Consolidated Results
|
| Nine Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
|
| Six Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue |
| $ | 1,148,754 |
|
| $ | 2,155,764 |
|
| $ | (1,007,010 | ) |
|
| (46.7 | %) |
| $ | 1,233.5 |
| $ | 698.6 |
| $ | 534.9 |
| 76.6 | % | ||||
Cost of revenue |
| $ | 1,015,280 |
|
| $ | 1,869,708 |
|
| $ | (854,428 | ) |
|
| (45.7 | %) |
| $ | 1,131.1 |
| $ | 640.3 |
| $ | 490.8 |
| 76.7 | % | ||||
Margin (%) |
|
| 11.6 | % |
|
| 13.3 | % |
|
| (1.7 | %) |
| * |
|
| 8.3 | % |
| 8.3 | % |
| (0.0 | %) |
| * |
| |||||
Net earnings attributable to Greenbrier |
| $ | 700 |
|
| $ | 49,070 |
|
| $ | (48,370 | ) |
|
| (98.6 | %) | ||||||||||||||||
Net earnings (loss) attributable to |
| $ | 23.6 |
| $ | (19.1 | ) |
| $ | 42.7 |
| 223.6 | % |
* 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 46.7% decrease76.6% increase in revenue for the ninesix months ended May 31, 2021February 28, 2022 as compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily due to a 52.6% decrease99.2% increase in Manufacturing revenue. The decreaseincrease in Manufacturing revenue was primarily attributed to a 52.0% decreasean 84.1% increase in railcar deliveries.
The 45.7% decrease76.7% increase in cost of revenue for the ninesix months ended May 31, 2021February 28, 2022 as compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily due to a 50.5% decrease98.2% increase in Manufacturing cost of revenue. The decreaseincrease in Manufacturing cost of revenue was primarily attributed to a 52.0% decreasean 84.1% increase in railcar deliveries.deliveries and higher steel and other input costs during the six months ended February 28, 2022.
Margin as a percentage of revenue was 11.6% and 13.3%8.3% for both the ninesix months ended May 31, 2021February 28, 2022 and May 31, 2020, respectively.2021. The overall margin as a percentage of revenue was positively impacted by an increase in Manufacturing margin from 4.6% to 5.1% primarily attributed to operating at higher volumes during the six months ended February 28, 2022. The overall margin as a percentage of revenue was also positively impacted by an increase in Leasing & Management Services margin percentage from 49.6% to 67.4% primarily attributed to higher syndication activity during the six months ended February 28, 2022. The overall margin as a percentage of revenue was negatively impacted by a decrease in ManufacturingMaintenance Services margin percentage from 5.5% to 9.1% from 13.0%3.8% primarily attributed to operating at lower volumeshigher material and increasedlabor costs associated with operating our manufacturing facilities in the COVID-19 pandemic during the ninesix months ended May 31, 2021.February 28, 2022.
Net earnings attributable to Greenbrier is impacted by our operating activities and noncontrolling interest primarily associated with our 50% joint ventures at certain of our Mexican railcar manufacturing facilities and our 75% interest in Greenbrier-Astra Rail, both of which we consolidate for financial reporting purposes.
The $48.4$42.7 million decreaseincrease in net earnings attributable to Greenbrier for the ninesix months ended May 31, 2021February 28, 2022 as compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily attributable to a decrease in the after-tax margin due to a reductionthe following:
These were partially offset by aby:
36
Manufacturing Segment
|
| Six Months Ended |
|
| Increase |
|
| % |
| |||||||
(In millions, except railcar deliveries) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 1,008.2 |
|
| $ | 506.0 |
|
| $ | 502.2 |
|
|
| 99.2 | % |
Cost of revenue |
| $ | 956.6 |
|
| $ | 482.7 |
|
| $ | 473.9 |
|
|
| 98.2 | % |
Margin (%) |
|
| 5.1 | % |
|
| 4.6 | % |
|
| 0.5 | % |
| * |
| |
Operating profit (loss) ($) |
| $ | 14.1 |
|
| $ | (12.3 | ) |
| $ | 26.4 |
|
|
| 214.6 | % |
Operating profit (loss) (%) |
|
| 1.4 | % |
|
| (2.4 | %) |
|
| 3.8 | % |
| * |
| |
Deliveries |
|
| 8,100 |
|
|
| 4,400 |
|
|
| 3,700 |
|
|
| 84.1 | % |
* Not meaningful
Our Manufacturing segment primarily representsgenerates revenue from manufacturing a wide range of freight railcars and from the conversion of existing or in-service railcars through our joint venture partner's sharefacilities in North America and Europe. We also manufacture a broad range of ocean-going and river barges for transporting merchandise between ports within the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations. United States.
Manufacturing Segment
|
| Nine Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 852,755 |
|
| $ | 1,800,317 |
|
| $ | (947,562 | ) |
|
| (52.6 | %) |
Cost of revenue |
| $ | 775,125 |
|
| $ | 1,567,014 |
|
| $ | (791,889 | ) |
|
| (50.5 | %) |
Margin (%) |
|
| 9.1 | % |
|
| 13.0 | % |
|
| (3.9 | %) |
| * |
| |
Operating profit ($) |
| $ | 23,811 |
|
| $ | 167,693 |
|
| $ | (143,882 | ) |
|
| (85.8 | %) |
Operating profit (%) |
|
| 2.8 | % |
|
| 9.3 | % |
|
| (6.5 | %) |
| * |
| |
Deliveries |
|
| 7,200 |
|
|
| 15,000 |
|
|
| (7,800 | ) |
|
| (52.0 | %) |
|
|
Manufacturing revenue decreased $947.6increased $502.2 million or 52.6%99.2% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decreaseincrease in revenue was primarily attributed to a 52.0% decreasean 84.1% increase in railcar deliveries. The increase was also due to the additional revenue associated with an increase in steel and other input costs during the six months ended February 28, 2022, as many of our customer contracts include price escalation provisions when certain of our manufacturing costs increase.
Manufacturing cost of revenue decreased $791.9increased $473.9 million or 50.5%98.2% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decreaseincrease in cost of revenue was primarily attributed to a 52.0% decreasean 84.1% increase in the volume of railcar deliveries.deliveries and higher steel and other input costs during the six months ended February 28, 2022.
Manufacturing margin as a percentage of revenue decreased 3.9%increased 0.5% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The increase in margin percentage for the six months ended February 28, 2022 was primarily attributed to operating at higher volumes. This was partially offset by higher steel and other input costs during the six months ended February 28, 2022. In addition, many of our customer contracts include price escalation provisions. When certain of our manufacturing costs increase, we are able to increase the sales price to our customers. While this has no impact to our margin dollars, the increase in revenue and cost of sales has a negative impact to our margin as a percentage of revenue.
Manufacturing operating profit increased $26.4 million for the six months ended February 28, 2022 compared to the six months ended February 28, 2021. The increase in operating profit was primarily attributed to an increase in railcar deliveries.
37
Maintenance Services Segment
|
| Six Months Ended |
|
| Increase |
|
| % |
| |||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 159.0 |
|
| $ | 137.2 |
|
| $ | 21.8 |
|
|
| 15.9 | % |
Cost of revenue |
| $ | 152.9 |
|
| $ | 129.7 |
|
| $ | 23.2 |
|
|
| 17.9 | % |
Margin (%) |
|
| 3.8 | % |
|
| 5.5 | % |
|
| (1.7 | %) |
| * |
| |
Operating profit ($) |
| $ | 1.8 |
|
| $ | 2.2 |
|
| $ | (0.4 | ) |
|
| (18.2 | %) |
Operating profit (%) |
|
| 1.1 | % |
|
| 1.6 | % |
|
| (0.5 | %) |
| * |
|
* Not meaningful
Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.
Maintenance Services revenue increased $21.8 million or 15.9% for the six months ended February 28, 2022 compared to the six months ended February 28, 2021. The increase was primarily attributed to higher volumes due to increased demand and an increase in scrap metal pricing and volume as we scrap wheels and other components.
Maintenance Services cost of revenue increased $23.2 million or 17.9% for the six months ended February 28, 2022 compared to the six months ended February 28, 2021. The increase was primarily due to higher costs associated with an increase in volumes and an increase in material and labor costs.
Maintenance Services margin as a percentage of revenue decreased 1.7% for the six months ended February 28, 2022 compared to the six months ended February 28, 2021. The decrease in margin percentage was primarily attributed to operating at lower volumeshigher material and increasedlabor costs associated with operating our manufacturing facilities in the COVID-19 pandemic during the ninesix months ended May 31, 2021.
Manufacturing operating profit decreased $143.9 million or 85.8% for the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020. The decrease in operating profit was primarily attributed to a decrease in railcar deliveries and increased costs associated with operating our manufacturing facilities during the COVID-19 pandemic during the nine months ended May 31, 2021. These were partially offset by a decrease in selling and administrative expense as part of our strategic cost control initiatives during the nine months ended May 31, 2021.
Wheels, Repair & Parts Segment
|
| Nine Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||
Revenue |
| $ | 218,050 |
|
| $ | 259,857 |
|
| $ | (41,807 | ) |
|
| (16.1 | %) |
Cost of revenue |
| $ | 203,341 |
|
| $ | 241,266 |
|
| $ | (37,925 | ) |
|
| (15.7 | %) |
Margin (%) |
|
| 6.7 | % |
|
| 7.2 | % |
|
| (0.5 | %) |
| * |
| |
Operating profit ($) |
| $ | 6,406 |
|
| $ | 8,219 |
|
| $ | (1,813 | ) |
|
| (22.1 | %) |
Operating profit (%) |
|
| 2.9 | % |
|
| 3.2 | % |
|
| (0.3 | %) |
| * |
|
|
|
Wheels, Repair & Parts revenue decreased $41.8 million or 16.1% for the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020. The decrease was primarily due to lower wheelset, component and repair volumes due to lower demand. This was partially offset by higher revenues associated with an increase in scrap metal pricing as we scrap wheels and other components.
Wheels, Repair & Parts cost of revenue decreased $37.9 million or 15.7% for the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020. The decrease was primarily due to lower costs associated with a reduction in wheelset, component and repair volumes.
Wheels, Repair & Parts margin as a percentage of revenue decreased 0.5% for the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020. The decrease in margin percentage was primarily attributed to operating at lower volumes and increased costs associated with operating our facilities during the COVID-19 pandemic during the nine months ended May 31, 2021.February 28, 2022. This was partially offset by an increase in scrap metal pricing.
Wheels, Repair & PartsMaintenance Services operating profit decreased $1.8$0.4 million or 22.1%18.2% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decrease in operating profit was primarily attributed to a reduction in volumeshigher material and increasedlabor costs associated with operating our facilities during the COVID-19 pandemic. These weresix months ended February 28, 2022. This was partially offset by a decreasehigher volumes and an increase in selling and administrative expense as part of our strategic cost control initiatives during the nine months ended May 31, 2021.scrap metal pricing.
38
Leasing & Management Services Segment
|
| Nine Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
|
| Six Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Revenue |
| $ | 77,949 |
|
| $ | 95,590 |
|
| $ | (17,641 | ) |
|
| (18.5 | %) |
| $ | 66.3 |
| $ | 55.4 |
| $ | 10.9 |
| 19.7 | % | ||||
Cost of revenue |
| $ | 36,814 |
|
| $ | 61,428 |
|
| $ | (24,614 | ) |
|
| (40.1 | %) |
| $ | 21.6 |
| $ | 27.9 |
| $ | (6.3 | ) |
| (22.6 | %) | |||
Margin (%) |
|
| 52.8 | % |
|
| 35.7 | % |
|
| 17.1 | % |
| * |
|
| 67.4 | % |
| 49.6 | % |
| 17.8 | % |
| * |
| |||||
Operating profit ($) |
| $ | 24,590 |
|
| $ | 34,407 |
|
| $ | (9,817 | ) |
|
| (28.5 | %) |
| $ | 64.8 |
| $ | 17.1 |
| $ | 47.7 |
| 278.9 | % | ||||
Operating profit (%) |
|
| 31.5 | % |
|
| 36.0 | % |
|
| (4.5 | %) |
| * |
|
| 97.7 | % |
| 30.9 | % |
| 66.8 | % |
| * |
|
|
|
The* Not meaningful
Our Leasing & Management Services segment generates revenue from leasing railcars from itsour lease fleet which includes GBX Leasing, providing various management services, syndication revenue associated with leases attached to new railcar sales, interim rent on leased railcars for syndication and the sale of railcars purchased from third parties with the intent to resell. The gross proceeds from the sale of these railcars are recorded in revenue and the costs of purchasing these railcars are recorded in cost of revenue.In February 2021 we announced a refined leasing strategy to grow our owned portfolio of leased railcars built by Greenbrier. We are executing the strategy through GBX Leasing, a newly formed joint venture which is more than 90% owned by Greenbrier. We consolidate GBX Leasing for financial reporting purposes within the
Leasing & Services segment.
Leasing &Management Services revenue decreased $17.6increased $10.9 million or 18.5%19.7% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decreaseincrease was primarily attributed to higher syndication revenue from an increase in the volume of new railcar sales with leases attached and higher leasing revenue primarily from the addition of GBX Leasing's fleet. These were partially offset by a decrease in the sale of railcars which we had purchased from third parties with the intent to resell and lower interim rent on leased railcars for syndication during the nine months ended May 31, 2021.resell.
Leasing & Management Services cost of revenue decreased $24.6$6.3 million or 40.1%22.6% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decrease was primarily due to a decrease in the volumelower volumes of railcars sold that we purchased from third parties and lower transportation costs.parties. This was partially offset by an increase in costs from the addition of GBX Leasing's fleet.
Leasing & Management Services margin as a percentage of revenue increased 17.1%17.8% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The increase in margin percentage was primarily attributed to higher syndication activity. In addition, the benefit associated with a lease transfer fee on previously syndicated railcars duringmargin percentage for the ninesix months ended May 31, 2021. Margin as a percentage of revenue for the nine months ended May 31, 2020February 28, 2021 was negatively impacted by higher sales of railcars that we purchased from third parties which have lower margin percentages.
Leasing & Management Services operating profit decreased $9.8increased $47.7 million or 28.5%278.9% for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020.February 28, 2021. The decreaseincrease was primarily attributed to an $18.2 million reduction ina higher net gain on disposition of equipment partially offset by the benefit associated with a lease transfer fee during the nine months ended May 31, 2021.and higher syndication activity.
39
Selling and Administrative Expense
|
| Nine Months Ended May 31, |
|
| Increase |
|
| % |
| |||||||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
|
| Six Months Ended |
|
| Increase |
| % |
| ||||||||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
|
| Change |
| ||||||||||||||||||||
Selling and administrative expense |
| $ | 136,371 |
|
| $ | 158,455 |
|
| $ | (22,084 | ) |
|
| (13.9 | %) |
| $ | 99.0 |
| $ | 87.1 |
| $ | 11.9 |
| 13.7 | % |
Selling and administrative expense was $136.4$99.0 million or 11.9%8.0% of revenue for the ninesix months ended May 31, 2021February 28, 2022 compared to $158.5$87.1 million or 7.4%12.5% of revenue for the prior comparable period. The $22.1$11.9 million decreaseincrease was primarily attributed to a decline inhigher costs for legal, consulting and travel associated with increased business activity. The increase was also attributed to higher employee related costs resulting from headcount reductions, a decrease in other controllable spending categories as part of our strategic cost control and liquidity initiatives and a decrease in the administrative fees paid to our joint venture partner in Mexico due to lower levels of activity.an increase in incentive compensation expense associated with current year financial performance.
Net Gain on Disposition of Equipment
Net gain on disposition of equipment was $0.8 million for the nine months ended May 31, 2021 compared to $19.4 million for the prior comparable period.
Net gain on disposition of equipment primarily includes the sale of assets from our lease fleet (Equipment on operating leases, net) thatand disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to accommodate customer demand and to manage risk and liquidity; andliquidity.
Net gain on disposition of property, plantequipment was $33.6 million and equipment.$1.0 million for the six months ended February 28, 2022 and 2021, respectively. The increase in Net gain on disposition of equipment was primarily attributed to sales of assets from our lease fleet during the six months ended February 28, 2022.
Other Costs
Interest and foreign exchange expense was composed of the following:
|
| Nine Months Ended May 31, |
|
| Increase |
| ||||||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| (Decrease) |
| |||||||||||||||
|
| Six Months Ended |
|
| Increase |
| ||||||||||||||||||
(in millions) |
| 2022 |
|
| 2021 |
|
| (Decrease) |
| |||||||||||||||
Interest and foreign exchange: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Interest and other expense |
| $ | 31,274 |
|
| $ | 31,266 |
|
| $ | 8 |
|
| $ | 23.3 |
| $ | 20.4 |
| $ | 2.9 |
| ||
Foreign exchange (gain) loss |
|
| (399 | ) |
|
| 1,757 |
|
|
| (2,156 | ) | ||||||||||||
Foreign exchange loss |
|
| 1.1 |
|
|
| 0.3 |
|
|
| 0.8 |
| ||||||||||||
|
| $ | 30,875 |
|
| $ | 33,023 |
|
| $ | (2,148 | ) |
| $ | 24.4 |
|
| $ | 20.7 |
|
| $ | 3.7 |
|
The $2.1$3.7 million decreaseIncrease in interest and foreign exchange expense fromfor the prior comparable periodsix months ended February 28, 2022 compared to the six months ended February 28, 2021 was primarily attributed to an increase in interest expense from higher levels of borrowings.
Income Tax
For the changesix months ended February 28, 2022, we had income tax expense of $1.8 million on pre-tax income of $12.6 million for an effective tax rate of 14%. The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year. The effective tax rate in any quarter can also be affected positively or negatively by adjustments that are required to be reported in the Mexican Peso’s and Brazilian Real’s foreign exchange rate relative to the U.S. Dollar.
Net Loss on Extinguishmentspecific quarter of Debt
Net loss on extinguishment of debt was $4.8 millionresolution. Tax expense for the ninesix months ended May 31, 2021, which relatesFebruary 28, 2022 included net favorable discrete items including amendments to the retirement of $207.1 million of our 2.875% convertible notes due 2024 and $50 million of our 2.25% convertible notes due 2024.prior year tax returns.
Income Tax
For the ninesix months ended May 31,February 28, 2021, we had an income tax benefit of $36.0$29.1 million on a pre-tax loss of $37.8$48.5 million. The tax benefit for the ninesix months ended May 31,February 28, 2021 primarily related to accelerated depreciation and the impact of the CARES Act which allowsallowed us to carry back tax losses to years when tax rates were higher, resulting in a tax benefit. The tax benefit is derived from the US Federal tax rate differential between the 2016 tax rate of 35% and our current rate of 21%.
The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in Earnings (loss) before income taxes and earnings (loss) from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax benefit (expense). benefit.
40
Earnings (Loss) From Unconsolidated Affiliates
Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the after-tax results from these unconsolidated affiliates.affiliates on an after-tax basis.
Earnings from unconsolidated affiliates was $1.3$6.0 million for the ninesix months ended May 31, 2021February 28, 2022 compared to $3.8loss from unconsolidated affiliates of $1.2 million for the ninesix months ended May 31, 2020.February 28, 2021. The decrease in earnings from unconsolidated affiliatesincrease was primarily related to a decrease in earnings from our investment in Axis, a joint venture that manufactures and sells axles to its joint venture partners, and a decrease in earningshigher sales volumes in our Brazil operations.
Noncontrolling Interest
Net loss attributable to noncontrolling interest was $1.2$6.8 million for the ninesix months ended May 31, 2021February 28, 2022 compared to $1.5 million for the six months ended February 28, 2021. Net earningsloss attributable to noncontrolling interest of $30.8 million in the prior comparable period, which primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations.
41
Liquidity and Capital Resources
|
| Nine Months Ended May 31, |
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||
Net cash provided by (used in) operating activities |
| $ | (123,838 | ) |
| $ | 89,032 |
|
Net cash provided by (used in) investing activities |
|
| (49,292 | ) |
|
| 32,968 |
|
Net cash provided by (used in) financing activities |
|
| (41,953 | ) |
|
| 301,168 |
|
Effect of exchange rate changes |
|
| 9,885 |
|
|
| (17,693 | ) |
Increase (decrease) in cash and cash equivalents and restricted cash |
| $ | (205,198 | ) |
| $ | 405,475 |
|
|
| Six Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Net cash used in operating activities |
| $ | (220.3 | ) |
| $ | (94.8 | ) |
Net cash used in investing activities |
|
| (52.4 | ) |
|
| (34.0 | ) |
Net cash provided by (used in) financing activities |
|
| 204.8 |
|
|
| (114.6 | ) |
Effect of exchange rate changes |
|
| (1.0 | ) |
|
| 3.4 |
|
Decrease in cash and cash equivalents and restricted cash |
| $ | (68.9 | ) |
| $ | (240.0 | ) |
We have been financed through cash generated from operations and borrowings. At May 31, 2021,February 28, 2022 cash and cash equivalents and restricted cash were $636.9$602.5 million, a decrease of $205.2$68.9 million from $842.1$671.4 million at August 31, 2020.2021.
Cash Flows From Operating Activities
The change in cash provided by (used in)used in operating activities for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily due to a net changeincrease in working capital as we increaseassociated with increased production rates and a decreasefrom higher steel and other input costs.
Cash Flows From Investing Activities
Cash used in earnings during the nine months ended May 31, 2021 due to lower volumes of operating activities.
Cash provided by (used in) investing activities primarily related to capital expenditures net of proceeds from the sale of assets and investment activity with our unconsolidated affiliates. The change in cash provided by (used in)used in investing activities for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily attributable to a reductionan increase in capital expenditures partially offset by an increase in proceeds from the sale of assets and ancompared to the prior year. The increase in capital expenditures.
Capital expenditures totaled $62.8 million and $55.3 million forduring the ninesix months ended May 31, 2021 and 2020, respectively. February 28, 2022 primarily related to additions to our lease fleet as part of our leasing strategy.
|
| Six Months Ended |
| |||||
(in millions) |
| 2022 |
|
| 2021 |
| ||
Capital expenditures: |
|
|
|
|
|
| ||
Leasing & Management Services |
| $ | 183.6 |
|
| $ | 35.8 |
|
Manufacturing |
|
| 12.2 |
|
|
| 10.1 |
|
Maintenance Services |
|
| 2.2 |
|
|
| 4.5 |
|
Total capital expenditures (gross) |
| $ | 198.0 |
|
| $ | 50.4 |
|
Proceeds from sales of assets |
|
| (148.6 | ) |
|
| (11.3 | ) |
Total capital expenditures (net of proceeds) |
| $ | 49.4 |
|
| $ | 39.1 |
|
Capital expenditures for 2021 primarily relate to additions to our lease fleet and on-going investments into the safety and productivity of our facilities. Leasing & Services and corporate capital expenditures were approximately $41.5 million and $6.6 million for the nine months ended May 31, 2021 and 2020, respectively. Manufacturing capital expenditures were approximately $14.9 million and $40.3 million for the nine months ended May 31, 2021 and 2020, respectively. Wheels, Repair & Parts capital expenditures were approximately $6.4 million and $8.4 million for the nine months ended May 31, 2021 and 2020, respectively.
Proceeds from the sale of assets which primarily relatedrelate to sales of railcars from our lease fleet within Leasing & Services, were approximately $12.2 million and $78.5 million for the nine months ended May 31, 2021 and 2020, respectively.Management Services. Assets from our lease fleet are periodically sold in the normal course of business to accommodate customer demand and to manage risk and liquidity. Proceeds from sales of assets are expected to be approximately $150 million for 2022.
Capital expenditures for 2022 are expected to be approximately $275 million for Leasing & Management Services, approximately $55 million for Manufacturing and approximately $10 million for Maintenance Services. Capital expenditures for 2022 primarily relate to additions to our lease fleet reflecting our enhanced leasing strategy and continued investments into the safety and productivity of our facilities.
Cash Flows From Financing Activities
The change in cash provided by (used in) financing activities for the ninesix months ended May 31, 2021February 28, 2022 compared to the ninesix months ended May 31, 2020February 28, 2021 was primarily attributed to repayments ofproceeds from debt, net of proceeds, and the repurchase of common stock.repayments. During the ninesix months ended May 31, 2021,February 28, 2022 we refinanced certain debt by issuing $373.8issued asset backed securities of $323.3 million, of new convertible notes due 2028 and retiring a total of $257.1 million of convertible notes due 2024.used proceeds to pay down our GBXL credit facility.
42
Dividend & Share Repurchase Program
A quarterly dividend of $0.27 per share was declared on July 9, 2021.March 29, 2022.
The Board of Directors has authorized our company to repurchase shares of our common stock. The share repurchase program has an expiration date of January 31, 2023. The amount remaining for repurchase was $100.0 million as of May 31, 2021.February 28, 2022. 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 program may be modified, suspended or discontinued at any time without prior notice. The share repurchase program does not obligate us to acquire any specific number of shares in any period. There were no shares repurchased under the share repurchase program during the ninesix months ended May 31, 2021February 28, 2022 and 2020.2021.
Cash, Borrowing Availability and Credit Facilities
As of February 28, 2022, we had $586.8 million in Cash and cash equivalents and $216.8 million in available borrowings. Our significant cash balance is part of our strategy to maintain strong liquidity to respond to current uncertainties.
Senior secured credit facilities, consisting of four components, aggregated to $1.04$1.1 billion as of May 31, 2021.February 28, 2022. We had an aggregate of $221.3$216.8 million available to draw down under committed credit facilities as of May 31, 2021.February 28, 2022. This
amount consists of $148.5$154.7 million available on the North American credit facility, $32.8$17.1 million on the European credit facilities and $40.0$45.0 million on the Mexican credit facilities.
As of May 31, 2021,February 28, 2022, a $600.0 million revolving line of credit, maturing June 2024,August 2026, secured by substantially all of our U.S. assets in the U.S. not otherwise pledged as security for term loans or the warehouse credit facility, was availableexisted to provide working capital and interim financing of equipment, principally for the Company’s our U.S. and Mexican operations. Advances under this North American credit facility bear interest at LIBOR plus 1.50% or Prime plus 0.50% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.
As of May 31, 2021,February 28, 2022, a $300.0$350.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing, a joint venture in which we own approximately 90%95%. Advances under this facility bear interest at LIBOR plus 2.0%. The warehouse credit facility converts to a term loan in April 2023 whichand matures in April 2025.
As of May 31, 2021, there were $96.6 million in outstanding borrowings associated with this facility.
As of May 31, 2021,February 28, 2022, lines of credit totaling $71.4$74.3 million secured by certain of our European assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.2% to WIBOR plus 1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.1%, were available for working capital needs of our European manufacturing operations. The European lines of credit include $36.6$36.9 million of facilities which are guaranteed by us. European credit facilities are regularly renewed. Currently, these European credit facilities have maturities that range from August 2021June 2022 through September 2022.October 2023.
As of May 31, 2021,February 28, 2022, our Mexican railcar manufacturing operations had threefour lines of credit totaling $70.0 million.$120.0 million for working capital needs. The first line of credit provides up to $30.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 3.75% to 4.25%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2024. The second line of credit provides up to $35.0 million, of which we and our joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 3.70%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through June 2023. The third line of credit provides up to $50.0 million and matures in October 2024. Advances under this facility bear interest at LIBOR plus 4.25%. The fourth line of credit provides up to $5.0 million and matures in September 2022. Advances under this facility bear interest at LIBOR plus 2.95% and are to be used for working capital needs..
As of May 31, 2021, outstanding
43
Credit facility balances:
(in millions) |
| February 28, |
|
| August 31, |
| ||
|
|
|
|
|
|
| ||
North America |
| $ | 160.0 |
|
| $ | 160.0 |
|
Mexico |
|
| 75.0 |
|
|
| 15.0 |
|
Europe |
|
| 57.2 |
|
|
| 50.2 |
|
GBX Leasing |
|
| - |
|
|
| 147.0 |
|
Total Revolving notes |
| $ | 292.2 |
|
| $ | 372.2 |
|
Outstanding commitments under the senior secured credit facilities consisted of $160.0 million in borrowings and $25.2 million in letters of credit under the North American credit facility $38.6included letters of credit which totaled $6.5 million outstanding under the European credit facilities and $30.0$8.4 million outstanding under the Mexican credit facilities.as of February 28, 2022 and August 31, 2021, respectively.
Other Information
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 financing leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of May 31, 2021,February 28, 2022, we were in compliance with all such restrictive covenants.
From time to time, we may seek to repurchase or otherwise retire or exchange securities, including outstanding convertible notes, borrowings and equity securities, and take other steps to reduce our debt, extend the maturities of 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 retirements, repurchases or exchanges of one note or security for another note or security (now or hereafter existing), if any, will depend on a number of factors, including, but not limited to, prevailing market conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable. The amounts involved in any such transactions may, individually or in the aggregate, be material and may involve all or a portion of a particular series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other indebtedness which remain outstanding. We repurchased $20.0 million of our company’s common stock during the three and nine months ended May 31, 2021.
These shares were repurchased, in privately negotiated transactions, as part of our debt refinancing in April 2021 and were not associated with a publicly announced plan or program.
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.
To mitigate the exposure to changes in interest rates, we have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $314.7 million of variable rate debt to fixed rate debt. Subsequent to quarter end, we entered into an interest rate swap agreement to fix the remaining 50% floating portion of our $200.0 million senior term debt associated with our Leasing & Management Services segment.
We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit facilities and long-term financings, to be sufficient to fund expected debt repayments, working capital needs, planned capital expenditures, additional investments in our unconsolidated affiliates and dividends during the next twelve months.
Off-Balance Sheet Arrangements
We do not currently have off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our Consolidated Financial Statements.
44
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 -The asset and liability method is used to account for income taxes. We are required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for each tax jurisdiction to determine the amount of deferred tax assets and liabilities. Deferred income taxes are provided for the temporary effects of differences between assets and liabilities recognized for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. We recognize liabilities for uncertain tax positions based on whether evidence indicates that it is more likely than not that the position will be sustained on audit.
It is inherently difficult and subjective to estimate such amounts, as this requires us to estimate the probability of various possible outcomes. We reevaluate thesewhether a valuation allowance or uncertain tax positions onposition is necessary. In making this assessment, management may analyze future taxable income, reversing temporary differences and/or ongoing tax planning strategies. Should a quarterly basis.change in circumstances lead to a change in judgment about the realizability of deferred tax assets in future years, the Company would adjust related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. Changes in tax law or court interpretations may result in the recognition of a tax benefit or an additional charge to the tax provision.
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.
Judgments used in determining if a liability is estimable are subjective and based on known facts and our historic experience. If further developments in or resolution of an environmental matter result in facts and circumstances that differ from those assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. 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.
Revenue recognition - We measure revenue at the amounts that reflect the consideration to which we expect to be entitled in exchange for transferring control of goods and services to customers. We recognize revenue either at the point in time or over the period of time that performance obligations to customers are satisfied. Payment terms vary by segment and product type and are generally due within normal commercial terms. Our contracts with customers may include multiple performance obligations (e.g. railcars, maintenance, management services, etc.). For such arrangements, we allocate revenues to each performance obligation based on its relative standalone selling price. We have disaggregated revenue from contracts with customers into categories which describe the principal activities from which we generate our revenues.
Manufacturing
Railcars are manufactured in accordance with contracts with customers. We recognize revenue upon our customers’ acceptance of the completed railcars at a specified delivery point. From time to time, we enter into multi-year supply agreements. Each railcar delivery is considered a distinct performance obligation, such that the amounts that are recognized as revenue following railcar delivery are generally not subject to change.45
We typically recognize marine vessel manufacturing revenue over time using the cost input method, based on progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. This method best depicts our performance in completing the construction of the marine vessel for the customer and is consistent with the percentage of completion method used prior to the adoption of Topic 606: Contracts with Customers (Topic 606).
Wheels, Repair & Parts
We operate a network of wheel, repair and parts shops in North America that provide complete wheelset reconditioning and railcar repair services.
Wheels revenue is recognized when wheelsets are shipped to the customer or when consumed by customers in the case of consignment arrangements. Parts revenue is recognized upon shipment of the parts to the customers.
Repair revenue is typically recognized over time using the cost input method, based on progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total expected costs. This method best depicts our performance in repairing the railcars for the customer. Repair services are typically completed in less than 90 days.
Leasing & Services
Through our existing lease fleet and our GBX Leasing joint venture, we own a fleet of new and used railcars which are leased to third-party customers. Lease revenue is recognized over the lease-term in the period in which it is earned.
Syndication transactions represent new and used railcars which have been placed on lease to a customer and which we intend to sell to an investor with the lease attached. At the time of such sale, revenue and cost of revenue associated with railcars that we have manufactured are recognized in the Manufacturing segment; while revenue and cost of revenue associated with railcars which were obtained from a third-party with the intent to resell and subsequently sold, are recognized in the Leasing & Services segment.
We enter into multi-year contracts to provide management and maintenance services to customers for which revenue is generally recognized on a straight-line basis over the contract term as a stand-ready obligation. Costs to fulfill these contracts are recognized as incurred.
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.
In accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles–Goodwill and Other (ASC 350), the Company evaluates goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The Company uses a two-step process to assess the realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, the Company analyzes changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required. If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company will proceed to the quantitative second step where the fair value of a reporting unit is calculated based on weighted income and market-based approaches.
If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit. We performed our annual goodwill impairment test during the third quarter of 2021 and we concluded that goodwill for all reporting units was not impaired.
As of May 31, 2021,February 28, 2022, our goodwill balance was $133.1$130.0 million of which $89.8$87.0 million related to our Manufacturing segment and $43.3$43.0 million related to our Wheels, Repair & PartsMaintenance Services segment. Our Manufacturing segment includes the North America Manufacturing reporting unit with a goodwill balance of $56.7$56.6 million and the Europe Manufacturing reporting unit with a goodwill balance of $33.1$30.4 million.
Pursuant to the authoritative guidance, we make certain judgments and assumptions to determine our reporting units, which determines the carrying values for each reporting unit. Judgments related to qualitative factors include changes in economic considerations, market and industry trends, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit.
46
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 forecasted foreign currency sales and expenses. At May 31, 2021February 28, 2022 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $147.7$122.0 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 of 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 May 31, 2021,February 28, 2022, net assets of foreign subsidiaries aggregated $377.1$380.8 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $37.7$38.1 million, or 2.9%2.7% of Total equity - Greenbrier. 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 $241.4$314.7 million of variable rate debt to fixed rate debt. As a result,Notwithstanding these interest rate swap agreements, we are still exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At May 31, 2021, 54%February 28, 2022, 71% of our outstanding debt had fixed rates and 46%29% had variable rates. At May 31, 2021,February 28, 2022, a uniform 10% increase in variable interest rates would result in approximately $0.7 million of additional annual interest expense.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Principal Executive Officer and Principal Financial and Accounting Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (the Exchange Act). Based on that evaluation, our Principal Executive Officer and Principal Financial and Accounting 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 Principal Executive Officer and Principal Financial and Accounting 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 May 31, 2021February 28, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
47
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is hereby incorporated by reference the information disclosed in Note 1415 to Consolidated Financial Statements, Part I of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 20202021 and our subsequent Quarterly ReportsReport on Form 10-Q. Except as set forth below, there have been no material changes in the Risk Factors described in our most recent Annual Report on Form 10-K for the year ended August 31, 2020 and subsequent Quarterly ReportsReport on Form 10-Q.
The COVID-19 coronavirus pandemic, governmental reaction toInflation and price volatility in the pandemic, and related economic disruptionsglobal economy could continue to negatively impact our business liquidity and financial position, results of operations, stock price, and ability to convert backlog to revenue.operations.
With widespread administration of the COVID-19 vaccine, economic activity in our core markets of North America and Europe has increased. Nevertheless, the pandemic has not yet been fully contained and the number of its victims and the extent of negative impact on the global economy cannot be foreseen. We currently identify the following factors as the most significant risks to our business due to COVID-19, governmental actions, and economic conditions.
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The longer the pandemic continues, the more likely that more of the foregoing risks will be realized and that other negative impacts on our business will occur, some of which we cannot now foresee.
Additionally, the reopening of the economy presents its own risks to our business. Mismatch of supply and demand, interruptions of supply lines, inefficient or overloaded logistics platforms, among other factors may cause the markets for the inputs to our business to fail to operate effectively or efficiently (including sectoral price inflation). There is no guarantee that we will be able to absorb fully such additional costs in the prices for our goods and services. Labor shortages in the geographies where we operate could prevent us from converting backlog to revenue. General inflation, including wage inflation, rises inrising energy prices, interest rates and wages, currency volatility as well asand monetary, fiscal and policy interventions by national or regional governments in anticipation of or reaction to such events could have negative impacts on our business by increasing our operating costs and our borrowing costs as well as decreasing the capital available for our customers to purchase our goods and services. General inflation in the United States, Europe and other geographies has risen to levels not experienced in recent decades. In addition to secular inflation, prices for goods and services in our industry are unusually volatile. Although a portion of our operating costs are contractual with escalation clauses, we may need to absorb some costs. Additionally, inflation and price volatility may cause our customers to reduce or delay orders for our goods and services.
Our business may be negatively impacted as a result of armed conflict in Ukraine.
In February 2022, the Russian Federation commenced a military invasion of Ukraine. We cannot predict the impacts of the armed conflict in Ukraine, the economic sanctions imposed on Russia, and the related economic and geopolitical instability. The risks to our business that may emerge include, among others, transportation disruptions in Europe, heightened inflation, cyber disruptions or attacks, higher manufacturing and borrowing costs, disruptions in supply chains and availability of raw materials, interruptions in manufacturing operations and disruptions in credit markets. All of these factors and others could disrupt our business directly and could disrupt the business of our customers thereby reducing or delaying orders of our goods and services. Prolonged civil unrest, political instability or uncertainty, military activities, or broad-based sanctions could have an adverse effect on our operations and business outlook.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The Board of Directors has authorized the Company to repurchase shares of the Company’s common stock. The share repurchase program has an expiration date of January 31, 2023. The amount remaining for repurchase was $100.0 million as of May 31, 2021.
Shares repurchasedFebruary 28, 2022. There were no share repurchases during the three months ended May 31, 2021 were as follows:February 28, 2022 under this program.
Period |
| Total Number of Shares Purchased |
|
| Average Price Paid Per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
March 1, 2021 – March 31, 2021 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 100,000,000 |
|
April 1, 2021 – April 30, 2021 |
|
| 468,823 |
| (1) | $ | 42.66 |
|
|
| — |
|
| $ | 100,000,000 |
|
May 1, 2021 – May 31, 2021 |
|
| — |
|
|
| — |
|
|
| — |
|
| $ | 100,000,000 |
|
|
|
| 468,823 |
|
|
|
|
|
|
| — |
|
|
|
|
|
(1) These shares were repurchased, in privately negotiated transactions, as part ofItem 5. Other Information
As previously announced, Lorie L. Tekorius became the Company’s debt refinancing in April 2021President and were not associated withChief Executive Officer, effective as of March 1, 2022. On January 7, 2022, the Compensation Committee and Board of Directors approved a publicly announced plan or program.new annual base salary for Ms. Tekorius of $900,000 effective on March 1, 2022.
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Item 6. Exhibits
|
|
|
| |
10.37 | ||
10.38 | ||
| ||
| ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
104 | Cover Page Interactive Data File (Formatted as inline XBRL and contained in Exhibit 101). |
SIGNATURES
49
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: |
| By: | /s/ Adrian J. Downes | |
Adrian J. Downes | ||||
Senior Vice President, | ||||
Chief Financial Officer and Chief Accounting Officer | ||||
(Principal Financial Officer and Principal Accounting Officer) |
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