e10vkza
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549-1004
Form 10-K/A
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þ Annual
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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For the fiscal year ended August 31, 2006
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or
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o Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
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for the transition period
from to
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Commission File No. 1-13146
THE GREENBRIER COMPANIES,
INC.
(Exact name of Registrant as specified in its charter)
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Oregon |
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3743 |
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93-0816972 |
(State or other jurisdiction)
of incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer Identification No.) |
CO-REGISTRANTS AND SUBSIDIARY GUARANTORS
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Autostack Company LLC |
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Oregon |
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4741 |
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93-0981840 |
Greenbrier-Concarril, LLC
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Delaware |
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3743 |
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93-1262344 |
Greenbrier Leasing Company LLC
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Oregon |
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4741 |
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31-0789836 |
Greenbrier Leasing L.P.
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Oregon |
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4741 |
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91-1960693 |
Greenbrier Leasing Limited Partner, LLC
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Delaware |
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4741 |
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93-1266038 |
Greenbrier Management Services, LLC
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Delaware |
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4741 |
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93-1266040 |
Greenbrier Railcar, LLC
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Delaware |
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4741 |
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93-0971066 |
Gunderson LLC
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Oregon |
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3743 |
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93-0180205 |
Gunderson Marine LLC
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Oregon |
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3743 |
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93-1127982 |
Gunderson Rail Services LLC
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Oregon |
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4789 |
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93-1123815 |
Gunderson Specialty Products, LLC
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Delaware |
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3743 |
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93-0180205 |
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The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego Oregon
97035-8612
(503) 684-7000 |
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Autostack Company LLC
One Centerpointe Drive, Suite 200
Lake Oswego Oregon
97035-8612
(503) 684-7000 |
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Greenbrier-Concarril, LLC
One Centerpointe Drive, Suite 200
Lake Oswego Oregon
97035-8612
(503) 684-7000 |
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Greenbrier Leasing Company LLC
One Centerpointe Drive, Suite 200
Lake Oswego Oregon
97035-8612
(503) 684-7000 |
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Greenbrier Leasing, L.P.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon
97035-8612
(503) 684-7000
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Greenbrier Leasing
Limited Partner, LLC
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon
97035-8612
(503) 684-7000 |
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Greenbrier Management
Services, LLC
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon
97035-8612
(503) 684-7000 |
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Greenbrier Railcar LLC
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon
97035-8612
(503) 684-7000 |
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Gunderson LLC
4350 NW Front Avenue
Portland, Oregon 97210
(503) 972-5700
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Gunderson Marine LLC
4350 NW Front Avenue
Portland, Oregon 97210
(503) 972-5700 |
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Gunderson Rail Services LLC
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon
97035-8612
(503) 684-7000 |
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Gunderson Specialty
Products, LLC
4350 NW Front Avenue
Portland, Oregon
(503) 972-5700 |
(Address, including zip code and telephone number
including area code of registrants principal executive
offices)
Securities registered pursuant to Section 12(b) of the Act:
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(Title of Each Class)
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(Name of Each Exchange on Which Registered) |
Common Stock without par value
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No X
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes No X
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K is
not contained herein, and will not be contained, to the best of
Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any
amendment to this
Form 10-K.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2 of the
Exchange Act (check one).
Large accelerated
filer Accelerated
filer X Non-accelerated
filer
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Exchange
Act). Yes No X
Aggregate market value of the Registrants Common Stock
held by non-affiliates as of February 28, 2006 (based on
the closing price of such shares on such date) was $598,437,126.
The number of shares outstanding of the Registrants Common
Stock on October 25, 2006 was 15,963,535, without par value.
DOCUMENTS INCORPORATED BY
REFERENCE
Parts of Registrants Proxy Statement dated
November 20, 2006 prepared in connection with the Annual
Meeting of Stockholders to be held on January 9, 2007 are
incorporated by reference into Parts II and III of
this Report.
EXPLANATORY NOTE
We are filing this Amendment No. 1 on Form 10-K/A (this Amendment) to our Annual Report on Form
10-K for the fiscal year ended August 31, 2006, which was originally filed on November 2, 2006 (the
Original Filing), to add the certification of our Chief Executive Officer under section 906 of
the Sarbanes-Oxley Act of 2002 (Exhibit 32.1), which was inadvertently omitted from the Original
Filing as a result of a printers error. Our consolidated financial statements for the periods
presented have not been restated or changed in any manner from those reported in the Original
Filing.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this Amendment
amends and restates in its entirety the Original Filing, including all exhibits, and contains new
certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. This Amendment continues
to speak as of the date of the Original Filing, and we have not updated the disclosure contained
herein to reflect events that have occurred since the filing of the Original Filing. Accordingly,
this Amendment should be read in conjunction with our other filings, if any, made with the United
States Securities and Exchange Commission subsequent to the filing of the Original Filing,
including any amendments to those filings.
The Greenbrier Companies,
Inc.
Form 10-K
TABLE OF CONTENTS
2 The
Greenbrier Companies 2006 Annual Report
PART I
Introduction
We are one of the leading designers, manufacturers and marketers
of railroad freight car equipment in North America and Europe
and a leading provider of leasing and other services to the
railroad and related transportation industries in North America.
Our mission is to provide complete freight car solutions to our
customers through a comprehensive set of high quality freight
car products and related services.
In North America, we operate an integrated business model that
combines freight car manufacturing, repair and refurbishment,
leasing and fleet management services to provide customers with
a comprehensive set of freight car solutions. This model allows
us to utilize synergies between our various business activities
and to generate enhanced returns by providing creative solutions
to a customers freight car needs, while generating profits
from multiple elements of the transaction.
We operate in two primary business segments: manufacturing and
leasing & services. Financial information about our
business segments for the years ended August 31, 2006, 2005
and 2004 is located in Note 22 to our Consolidated
Financial Statements.
We are a corporation formed in 1981. Our principal executive
offices are located at One Centerpointe Drive, Suite 200,
Lake Oswego, Oregon 97035, our telephone number is
(503) 684-7000 and our internet website is located at
http://www.gbrx.com.
Products and Services
Manufacturing
North American Railcar Manufacturing - We are
the leading North American manufacturer of intermodal railcars
with an average market share of approximately 60% over the last
five years. In addition to our strength in intermodal railcars,
we manufacture a broad array of other railcar types in North
America and have demonstrated an ability to capture high market
shares in several of the car types we produce. We have commanded
an average market share of approximately 40% in flat cars and
30% in boxcars over the last five years. We also may manufacture
new railcars through the use of subcontractors. The primary
products produced for the North American market are:
Intermodal Railcars - We manufacture a comprehensive
range of intermodal railcars. Our most important product is our
articulated double-stack railcars. The double-stack railcar is
designed to transport containers stacked two-high on a single
platform.
An articulated double-stack railcar is comprised of up to five
platforms each of which is linked by a common set of wheels and
axles.
Our comprehensive line of articulated and non-articulated
double-stack intermodal railcars offers varying load capacities
and configurations. The double-stack railcar provides
significant operating and capital savings over other types of
intermodal railcars. These savings are the result of:
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increased train density (two containers are carried within the
same longitudinal space conventionally used to carry one trailer
or container); |
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reduced railcar weight of up to 50% per container; |
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easier terminal handling characteristics; |
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reduced equipment costs of up to 40% less than the cost of
providing the same carrying capacity with conventional equipment; |
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superior ride quality compared to conventional equipment,
leading to reduced damage claims; and |
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increased fuel efficiency resulting from weight reduction and
improved aerodynamics. |
The Greenbrier Companies 2006
Annual
Report 3
Our current double-stack products include:
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Unit sizes carried(1) |
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Number of |
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Well |
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Cargo |
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Product |
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Type |
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wells |
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size |
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type |
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20 |
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40 |
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48 |
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53 |
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Trailer |
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Maxi-Stack I
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Articulated |
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5 |
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40 |
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Container |
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Maxi-Stack IV
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Articulated |
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3 |
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Container |
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All Purpose Husky
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Stand-alone or |
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Stack 53
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connected |
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drawbar |
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(1) |
Carrying capability may be dependent on unit size being carried
in the adjoining well. |
Conventional Railcars - We produce a wide range of
boxcars, which are used in forest products, automotive,
perishables and general merchandise applications. We also
produce a variety of covered hopper cars for the grain, cement
and plastics industries as well as gondolas and coil cars for
the steel and metals markets and various other conventional
railcar types. Our flat car products include center partition
cars for the forest products industry, bulkhead flat cars, flat
cars for automotive transportation and solid waste service flat
cars.
European Railcar Manufacturing - Our European
manufacturing operation produces a variety of railcar types,
including a comprehensive line of pressurized tank cars for
liquid petroleum gas and ammonia and non-pressurized tank cars
for light oil, chemicals and other products. In addition, we
produce flat cars, coil cars for the steel and metals market,
coal cars for both the continental European and United Kingdom
markets, gondolas, sliding wall cars and rolling highway cars.
Although no formal statistics are available for the European
market, we believe we are one of the largest new freight car
manufacturers with an estimated market share in excess of 20%.
Railcar Repair, Refurbishment and Component Parts
Manufacturing - We believe we operate one of the
largest repair and refurbishment networks in North America,
operating in 13 locations as of August 31, 2006. Our
network of railcar repair and refurbishment shops competes in
heavy railcar repair and refurbishment and routine railcar
maintenance. We are actively engaged in the repair and
refurbishment of railcars for third parties, as well as our own
leased and managed fleet. Subsequent to year end, we purchased
four additional repair and refurbishment facilities through our
acquisition of Rail Car America, Inc. (RCA).
We also perform wheel and axle servicing through our four wheel
shops in North America. In addition, we produce boxcar sliding
doors and roof products as well as sideframes, bolsters,
couplers and yokes. Subsequent to year end, we entered the
railcar cushioning unit business through our acquisition of RCA
and its American Hydraulics division.
Marine Vessel Fabrication - Our Portland,
Oregon manufacturing facility, located on a deep-water port on
the Willamette River, includes marine facilities with the
largest side-launch ways on the West Coast. The marine
facilities also enhance steel plate burning and fabrication
capacity providing flexibility for railcar production. We
manufacture ocean going conventional deck barges, double-hull
tank barges, railcar/deck barges, barges for aggregates and
other heavy industrial products and ocean-going dump barges. We
have increased our barge capacity by over 40% as a result of our
recently completed expansion project that included additional
crane capacity and increased production space.
4 The
Greenbrier Companies 2006 Annual Report
Leasing &
Services
Leasing - Our relationships with financial
institutions, combined with our ownership of a lease fleet of
approximately 9,000 railcars, enables us to offer flexible
financing programs including traditional direct finance leases,
operating leases and car hire leases to our customers.
Frequently, we originate leases with railroads or shippers,
remarket them to financial institutions and subsequently provide
management services under multi-year agreements.
As equipment owner, we participate principally in the operating
lease segment of the market. The majority of our leases are
full service leases whereby we are responsible for
maintenance, taxes and administration. Maintenance of the fleet
is provided, in part, through our own facilities and engineering
and technical staff.
Assets from our owned lease fleet are periodically sold to take
advantage of market conditions, manage risk and maintain
liquidity.
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Fleet Profile(1) |
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As of August 31, 2006 |
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Owned |
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Managed |
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Total |
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Units(2) |
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Units |
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Units |
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Customer Profile:
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Class I Railroads
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4,233 |
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113,544 |
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117,777 |
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Non-Class I Railroads
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1,635 |
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11,682 |
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13,317 |
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Shipping Companies
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2,800 |
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3,038 |
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5,838 |
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Leasing Companies
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261 |
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7,056 |
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7,317 |
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Enroute to Customer Location
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122 |
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122 |
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Off-Lease
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260 |
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260 |
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Total Units
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9,311 |
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135,320 |
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144,631 |
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(1) |
Each platform of a railcar is treated as a separate unit. |
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(2) |
Percent of owned units on lease is 97.2%; average age of owned
units is 16 years; average remaining lease term is
3.3 years. |
Approximately 500 units in our owned lease fleet were
acquired through a 1990 agreement with Union Pacific Railroad
Company (Union Pacific) which contains a fixed-price purchase
option exercisable upon lease expiration. Union Pacific has
notified us of its intention to exercise this option as leases
expire over the next year on all remaining railcars in this
program.
Management Services - Our management services
business offers a broad range of services that enhance our
ability to generate lease transactions. These services include
railcar maintenance management, railcar accounting services such
as billing and revenue collection, car hire receivable and
payable administration and railcar remarketing. We currently own
or provide management services for a fleet of approximately
145,000 railcars in North America for railroads, shippers,
carriers and other leasing and transportation companies.
Backlog
The following table depicts our reported railcar backlog in
number of railcars and estimated future sales value attributable
to such backlog at the end of the periods shown:
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August 31, |
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2006 |
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2005 |
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2004 |
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New railcar backlog
units(1)
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14,700 |
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9,600 |
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13,100 |
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Estimated value (in millions)
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$ |
1,000 |
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$ |
550 |
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$ |
760 |
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(1) |
Each platform of a railcar is treated as a separate unit. |
The backlog for 2006 includes 12,000 units that will be
delivered to the customer over a multi-year period ending in
calendar year 2010. Approximately 7,700 units under this
contract are for delivery beyond fiscal and calendar 2007 and
are subject to our fulfillment of certain competitive conditions.
The backlog is based on customer purchase or lease orders that
we believe are firm and does not include production for our own
lease fleet. Customer orders, however, may be subject to
cancellation and other customary industry terms and conditions.
Historically, little variation has been experienced between the
number of railcars ordered and the number of railcars actually
delivered. The backlog is not necessarily indicative of future
results of operations.
Customers
Our manufacturing and leasing & services customers
include Class I railroads, regional and short-line
rail-roads, other leasing companies, shippers, carriers and
other transportation companies. We have strong, long-term
relationships with many of our customers.
The Greenbrier Companies 2006
Annual
Report 5
We believe that our customers preference for high quality
products, our technological leadership in developing innovative
products and competitive pricing of our railcars have helped us
maintain our long standing relationships with our customers.
In 2006, revenue from two customers, Burlington Northern and
Santa Fe Railway Company (BNSF) and TTX Company (TTX)
accounted for approximately 29% and 17% of total revenue and 30%
and 19% of manufacturing revenue. One customer, Mitsui Rail
Capital, accounted for slightly more than 10% of total
manufacturing revenue. Approximately 27% of leasing &
services revenue was from BNSF.
Raw Materials and
Components
Our products require a supply of materials including steel and
specialty components such as brakes, wheels and axles. Specialty
components purchased from third parties represent approximately
half of the cost of an average freight car. Our customers often
specify particular components and suppliers of such components.
Although the number of alternative suppliers of certain
specialty components has declined in recent years, there are at
least two suppliers for most such components and we are not
reliant on any one supplier for any component. Inventory levels
are continually monitored to ensure adequate support of
production. We periodically make advance purchases to avoid
possible shortages of material due to capacity limitations of
component suppliers and possible price increases. We do not
typically enter into binding long-term contracts with suppliers
because we rely on established relationships with major
suppliers to ensure the availability of raw materials and
specialty items.
Certain materials and components continue to be in short supply,
including castings, wheels, axles and couplers, which could
potentially impact production at our new railcar and
refurbishment facilities. In an effort to mitigate shortages and
reduce supply chain costs, we have entered into strategic
alliances for the global sourcing of certain components,
increased our replacement parts business and continue to pursue
strategic opportunities to protect and enhance our supply chain.
Competition
There are currently six major railcar manufacturers competing in
North America. We believe one of these producers builds railcars
principally for its own fleet and the other producers compete
with us principally in the general railcar market. We compete on
the basis of reputation, quality, price, reliability of delivery
and customer service and support.
We believe that the top five European manufacturers, including
us, maintain over 80% market share. European freight car
manufacturers are largely located in central and eastern Europe
where labor rates are lower and work rules are more flexible.
In railcar leasing & services, there are about twenty
institutions that provide products and services similar to ours.
Many of them are also customers which buy leased railcars and
new railcars from our manufacturing facilities. More than half
of these institutions have resources greater than us. We compete
primarily on the basis of reputation, quality, price, delivery,
service offerings and deal structuring ability. We believe our
strong servicing capability, integrated with our manufacturing,
repair shops, railcar specialization and expertise in particular
lease structures provide a strong competitive position.
Marketing and Product
Development
In North America, we utilize an integrated marketing and sales
effort to coordinate relationships in our manufacturing and
leasing & services operations. We provide our customers
with a diverse range of equipment and financing alternatives
designed to satisfy each customers unique needs, whether
the customer is buying new equipment, refurbishing existing
equipment or seeking to outsource the maintenance or management
of equipment. These custom programs may involve a combination of
railcar products, leasing, refurbishing and remarketing
services. In addition, we provide customized maintenance
management, equipment management and accounting services.
In Europe, we maintain relationships with customers through a
network of country specific sales representatives. Our
engineering and technical staff work closely with their customer
counterparts on the design and certification of railcars. Many
European railroads are state owned and are subject to European
Union (EU) regulations covering tendering of government
contracts.
Through our customer relationships, insights are derived into
the potential need for new products and services. Marketing and
engineering personnel collaborate to evaluate opportunities and
identify and develop new products. Research and development
costs incurred for new product development during
6 The
Greenbrier Companies 2006 Annual Report
2006, 2005 and 2004 were $2.2 million, $1.9 million
and $3.0 million.
Patents and Trademarks
We have a number of United States (U.S.) and
non-U.S. patents
of varying duration and pending applications, registered
trademarks, copyrights and trade names that are important to our
products and product development efforts. The protection of our
intellectual property is important to our business. We have
implemented a proactive program aimed at protecting our
intellectual property and the results from our research and
development.
Environmental Matters
We are subject to national, state, provincial and local
environmental laws and regulations concerning, among other
matters, air emissions, wastewater discharge, solid and
hazardous waste disposal and employee health and safety. Prior
to acquiring manufacturing facilities, we usually conduct
investigations to evaluate the environmental condition of
subject properties and may negotiate contractual terms for
allocation of environmental exposure arising from prior uses. We
endeavor to maintain compliance with applicable environmental
laws and regulations. Environmental studies have been conducted
of our owned and leased properties that indicate additional
investigation and some remediation on certain properties may be
necessary. Our Portland, Oregon manufacturing facility is
located adjacent to the Willamette River. The United States
Environmental Protection Agency (EPA) has classified
portions of the river bed, including the portion fronting our
facility, as a federal National Priority List or
Superfund site due to sediment contamination (the
Portland Harbor Site). We, and more than 60 other parties, have
received a General Notice of potential liability
from the EPA relating to the Portland Harbor Site. The letter
advised us that we may be liable for the costs of investigation
and remediation (which liability may be joint and several with
other potentially responsible parties) as well as for natural
resource damages resulting from releases of hazardous substances
to the site. At this time, ten private and public entities
including us, have signed an Administrative Order on Consent to
perform a remedial investigation/feasibility study of the
Portland Harbor Site under EPA oversight, and four additional
entities have not signed such consent, but are nevertheless
contributing money to the effort. The study is expected to be
completed in 2009. In May 2006, the EPA notified several
additional entities, including other federal agencies that it is
prepared to issue unilateral orders compelling additional
participation in the remedial investigation. In addition, we
have entered into a Voluntary Clean-Up Agreement with the Oregon
Department of Environmental Quality in which we agreed to
conduct an investigation of whether, and to what extent, past or
present operations at our Portland property may have released
hazardous substances to the environment. Under this oversight,
we also are conducting groundwater remediation relating to a
historical spill on our property which antedates our ownership.
Because these environmental investigations are still underway,
we are unable to determine the amount of our ultimate liability
relating to these matters. Based on the results of the pending
investigations and future assessments of natural resource
damages, we may be required to incur costs associated with
additional phases of investigation or remedial action, and we
may be liable for damages to natural resources. In addition, we
may be required to perform periodic maintenance dredging in
order to continue to launch vessels from our launch ways in
Portland, Oregon on the Willamette River, and the rivers
classification as a Superfund site could result in some
limitations on future dredging and launch activities. Any of
these matters could adversely affect our business and results of
operations, or the value of our Portland property.
Regulation
The Federal Railroad Administration in the United States and
Transport Canada in Canada administer and enforce laws and
regulations relating to railroad safety. These regulations
govern equipment and safety appliance standards for freight cars
and other rail equipment used in interstate commerce. The
Association of American Railroads (AAR) promulgates a wide
variety of rules and regulations governing the safety and design
of equipment, relationships among railroads and other railcar
owners with respect to railcars in interchange, and other
matters. The AAR also certifies railcar builders and component
manufacturers that provide equipment for use on North American
railroads. These regulations require us to maintain our
certifications with the AAR as a railcar builder and component
manufacturer, and products sold and leased by us in North
America must meet AAR, Transport Canada and Federal Railroad
Administration standards.
Harmonization of the EU regulatory framework is an ongoing
process. The regulatory environment in
The Greenbrier Companies 2006
Annual
Report 7
Europe consists of a combination of EU regulations and country
specific regulations.
Employees
As of August 31, 2006, we had 3,661 full-time
employees, consisting of 3,533 employees in manufacturing and
128 employees in leasing & services. At our
manufacturing facility in Trenton, Nova Scotia, Canada, 557
employees are covered by collective bargaining agreements that
expired in October 2006 and are currently being negotiated. At
the manufacturing facility in Swidnica, Poland, 400 employees
are represented by unions. In addition, under our services
agreement with Bombardier, 931 union employees work at our
Mexico facility. A discretionary bonus program is maintained for
salaried and most hourly employees not covered by collective
bargaining agreements. A stock incentive plan and a stock
purchase plan are available for certain North American
employees. We believe that our relations with our employees are
generally good.
Subsequent to year end, approximately 500 employees at our
manufacturing facility in Canada were laid off due to a
suspension of operations upon completion of an order.
Approximately 400 employees were added at various locations
throughout the United States, with the acquisition of the assets
of RCA in September 2006.
Additional Information
We are a reporting company and file annual, quarterly, special
reports, proxy statements and other information with the
Securities and Exchange Committee (SEC). You may read and copy
these materials at the Public Reference Room maintained by the
SEC at Room 1580, 100 F Street N.E., Washington, D.C.
20549. You may call the SEC at
1-800-SEC-0330 for more
information on the operation of the public reference room. The
SEC maintains an Internet site at http://www.sec.gov that
contains reports, proxy and information statements and other
information regarding issuers that file electronically with the
SEC. Copies of our annual, quarterly, special reports, Audit
Committee Charter, Compensation Committee Charter, Nominating/
Corporate Governance Committee Charter and the Companys
Corporate Governance Guidelines are available on our web site at
http://www.gbrx.com or free of charge by contacting our Investor
Relations Department at The Greenbrier Companies, Inc., One
Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035.
Item 1a. RISK
FACTORS
Risks Related to Our
Business
During economic downturns or a rising interest rate
environment, the cyclical nature of our business results in
lower demand for our products and reduced revenue.
The railcar business is cyclical. Overall economic conditions
and the purchasing habits of railcar buyers have a significant
effect upon our railcar manufacturing and leasing businesses due
to the impact on demand for new, refurbished, used and leased
products. As a result, during downturns, we operate with a lower
level of backlog and may temporarily shut down production at
some or all of our facilities. Economic conditions that result
in higher interest rates increase the cost of new leasing
arrangements, which could cause some of our leasing customers to
lease fewer of our railcars or demand shorter terms. An economic
downturn or increase in interest rates may reduce demand for
railcars, resulting in lower sales volumes, lower prices, lower
lease utilization rates and decreased profits or losses.
The failure of the railcar business to grow as forecasted
by industry analysts may have an adverse effect on our financial
condition and results of operations.
Our future success depends in part upon continued growth in the
railcar industry. If growth rates do not materialize as
forecasted by industry analysts, railcar replacement rates do
not increase or industry demand for railcar products does not
continue at current levels due to price increases or other
reasons, our financial condition and results of operations could
be adversely affected.
We compete in a highly competitive and concentrated
industry, and this competition or industry consolidation may
adversely impact our financial results.
We face aggressive competition by a concentrated group of
competitors in all geographic markets and each industry sector
in which we operate. Some of these companies have significantly
greater resources than we have. The effect of this competition
could reduce our revenues and margins, limit our ability to
grow, increase pricing pressure on our products, and otherwise
affect our financial results. In addition, because of the
concentrated nature of our competitors, customers and suppliers,
we face a heightened risk that further consolidation in the
8 The
Greenbrier Companies 2006 Annual Report
industry among or between our competitors, customers and
suppliers could adversely affect our revenues, cost of revenues
and profitability.
We derive a significant amount of our revenue from a
limited number of customers, the loss of one or more of which
could have an adverse effect on our business.
A significant portion of our revenue is generated from two major
customers. Although we have some long-term contractual
relationships with our major customers, we cannot assure you
that our customers will continue to use our products or services
or that they will continue to do so at historical levels. In
addition, due to our production schedule, any customer may
account for a significantly higher percentage of our total
manufacturing or leasing revenue in any given period. A
reduction in the purchase or leasing of our products or a
termination of our services by one or more of our major
customers could have an adverse effect on our business and
operating results.
Fluctuations in the availability and price of steel and
other raw materials could have an adverse effect on our ability
to manufacture and sell our products on a cost-effective
basis.
A significant portion of our business depends upon the adequate
supply of steel at competitive prices and a small number of
suppliers provide a substantial amount of our requirements. The
cost of steel (including scrap metal) and all other materials
used in the production of our railcars represents over
two-thirds of our direct manufacturing costs per railcar.
Our businesses depend upon the adequate supply of other raw
materials, including castings and specialty components, at
competitive prices. Although we believe we have multiple sources
for these raw materials, the number of suppliers has generally
declined while global demand has increased. We cannot assure you
that we will continue to have access to suppliers of necessary
components for manufacturing railcars. Our ability to meet
demand for our products could be adversely affected by the loss
of access to any of these suppliers, the inability to arrange
alternative access to any materials, or suppliers limiting
allocation of materials to us. In addition, raw material
shortages and allocations may result in inefficient operations
and an inventory build-up, which could negatively affect our
working capital position.
If the price of steel or other raw materials were to increase
and we were unable to increase our selling prices or have
adequate protection in our contracts to do so or reduce
operating costs to offset the price increases, our margins would
be adversely affected. The loss of suppliers or their inability
to meet our price, quality, quantity and delivery requirements
could have an adverse effect on our ability to manufacture and
sell our products on a cost-effective basis.
Our backlog may not be necessarily indicative of the level
of our future revenues.
Our new railcar backlog is the number of railcars for which we
have written orders from our customers in various periods, and
estimated potential revenue attributable to the backlog.
Although we believe backlog is an indicator of our future
revenues, our reported backlog may not be converted to sales in
any particular period and actual sales from such contracts may
not equal our backlog estimates. Backlog includes approximately
12,000 units that will be delivered to the customer over a
multi-year period. Approximately 7,700 units under this
contract are for delivery beyond calendar 2007 and are subject
to our fulfillment of certain competitive conditions. Therefore,
our backlog may not necessarily be indicative of the level of
our future revenues.
The timing of our lease remarketing and railcar sales may
cause significant differences in our quarterly results and
liquidity.
We may build railcars in anticipation of a customer order, or
that are leased to a customer and ultimately sold to a third
party. The difference in timing of production of the railcars
and the sale could cause a fluctuation in our quarterly results
and liquidity As a result, comparisons of our quarterly
revenues, income and liquidity between quarterly periods within
one year and between comparable periods in different years may
not be meaningful and should not be relied upon as indicators of
our future performance.
A change in our product mix, failure of our new products
or technologies to achieve market acceptance or introduction of
products by our competitors could have an adverse effect on our
profitability and competitive position.
We manufacture and repair a variety of railcars. The demand for
specific types of these railcars varies from time to time. These
shifts in demand may affect
The Greenbrier Companies 2006
Annual
Report 9
our margins and could have an adverse effect on our
profitability.
We continue to introduce new railcar products and technologies.
We cannot ensure that new products or technologies will achieve
sustained market acceptance or that the railcars can be
profitably manufactured and sold. In addition, new technologies,
changes in product mix or the introduction of new railcars and
product offerings by our competitors could render our products
obsolete or less competitive. As a result, our ability to
compete effectively could be harmed.
We may be unable to remarket leased railcars on favorable
terms upon lease termination or realize the expected residual
values, which could reduce our revenue and decrease our overall
return.
We re-lease or sell railcars we own upon the expiration of
existing lease terms. The total rental payments we receive under
our operating leases do not fully amortize the acquisition costs
of the leased equipment, which exposes us to risks associated
with remarketing the railcars. Our ability to remarket leased
railcars profitably is dependent upon several factors,
including, among others, market and industry conditions, cost of
and demand for newer models, costs associated with the
refurbishment of the railcars and interest rates. Our inability
to re-lease or sell leased railcars on favorable terms could
result in reduced revenues and decrease our overall return.
A reduction in negotiated or arbitrated car hire rates
could reduce future car hire revenue.
A significant portion of our leasing and services revenue is
derived from car hire, which is a fee that a
railroad pays for the use of railcars owned by other railroads
or third parties. Until 1992, the Interstate Commerce Commission
directly regulated car hire rates by prescribing a formula for
calculating these rates. The system of government prescribed
rates has been superseded by a system known as deprescription,
whereby railcar owners and users have the right to negotiate car
hire rates. If the railcar owner and railcar user cannot come to
an agreement on a car hire rate, then either party has the right
to call for arbitration, in which either the owners or
users rate is selected by the arbitrator to be effective
for a one-year period. Substantially all railcars in our fleet
are subject to deprescription. There is a risk that car hire
rates could be negotiated or arbitrated to lower levels in the
future. A reduction in car hire rates could reduce future car
hire revenue and adversely affect our financial results. Car
hire revenue amounted to $25.3 million, $25.3 million and
$27.2 million in 2006, 2005 and 2004.
Risks related to our operations outside of the United
States could adversely impact our operating results.
Our operations outside of the United States are subject to the
risks associated with cross-border business transactions and
activities. Political, legal, trade or economic changes or
instability could limit or curtail our foreign business
activities and operations. Some foreign countries in which we
operate have regulatory authorities that regulate railroad
safety, railcar design and railcar component part design,
performance and manufacturing. If we fail to obtain and maintain
certifications of our railcars and railcar parts within the
various foreign countries where we operate, we may be unable to
market and sell our railcars in those countries. In addition,
unexpected changes in regulatory requirements, tariffs and other
trade barriers, more stringent rules relating to labor or the
environment, adverse tax consequences and price exchange
controls could limit operations and make the manufacture and
distribution of our products difficult. The uncertainty of the
legal environment in these and other areas could limit our
ability to enforce our rights effectively. Any international
expansion or acquisition that we undertake could amplify these
risks related to operating outside of the United States.
Fluctuations in foreign currency exchange rates may lead
to increased costs and lower profitability.
Outside of the United States, we operate in Canada, Mexico,
Germany and Poland, and our
non-U.S. businesses
conduct their operations in local currencies and other regional
currencies. We also source materials worldwide. Fluctuation in
exchange rates may affect demand for our products in foreign
markets or our cost competitiveness and may adversely affect our
profitability. Although we attempt to mitigate a portion of our
exposure to changes in currency rates through currency rate
hedges, similar financial instruments and other activities,
these efforts cannot fully eliminate the risks associated with
the foreign currencies. In addition, some of our borrowings are
in foreign currency, giving rise to risk from fluctuations in
exchange rates. A material or adverse change in exchange rates
could result in significant deterioration of profits or in
losses for us.
10 The
Greenbrier Companies 2006 Annual Report
We have potential exposure to environmental liabilities,
which may increase costs or have an adverse effect on results of
operations.
We are subject to extensive national, state, provincial and
local environmental laws and regulations concerning, among other
things, air emissions, water discharge, solid and hazardous
substances handling and disposal and employee health and safety.
These laws and regulations are complex and frequently change. We
may incur unexpected costs, penalties and other civil and
criminal liability if we fail to comply with environmental laws.
We also may incur costs or liabilities related to off-site waste
disposal or cleaning up soil or groundwater contamination at our
properties. In addition, future environmental laws and
regulations may require significant capital expenditures or
changes to our operations.
Our Portland facility is located adjacent to a portion of the
Willamette River that has been designated as a federal
National Priority List or Superfund site
due to sediment contamination. We, and more than 60 other
parties, have received a General Notice of potential
liability related to the Portland facility. The letter advised
that we may be liable for the cost of investigation and
remediation (which liability may be joint and several with other
potential responsible parties) as well as natural resource
damages resulting from the release of hazardous substances to
the site. As a result of the above described matters, we have
incurred, and expect to incur in the future, costs associated
with an EPA-mandated remedial investigation and the State of
Oregons mandate to control groundwater discharges. Because
this work is still underway, we are unable to determine the
amount of our ultimate liability relating to these matters. In
addition, we may be required to perform periodic maintenance
dredging in order to continue to launch vessels from our launch
ways on the river, and the rivers classification as a
Superfund site could result in some limitations on future
dredging and launch activities. The outcome of these matters
could have an adverse effect upon our business, results of
operations and on our ability to realize value from a potential
sale of the land.
Our manufacturers warranties expose us to
potentially significant claims.
We offer our customers limited warranties for many of our
products. Accordingly, we may be subject to significant warranty
claims in the future, such as multiple claims based on one
defect repeated throughout our production process or claims for
which the cost of repairing the defective part is highly
disproportionate to the original cost of the part. These types
of warranty claims could result in costly product recalls,
customers seeking monetary damages, significant repair costs and
damage to our reputation.
If warranty claims are not recoverable from third-party
component manufacturers due to their poor financial condition or
other reasons, we may be subject to warranty claims and other
risks for using these materials on our railcars.
We may be liable for physical damage or product liability
claims that exceed our insurance coverage.
The nature of our business subjects us to physical damage and
product liability claims, especially in connection with the
repair and manufacture of products that carry hazardous or
volatile materials. We maintain reserves and liability insurance
coverage at commercially reasonable levels compared to
similarly-sized heavy equipment manufacturers. However, an
unusually large physical damage or product liability claim or a
series of claims based on a failure repeated throughout our
production process may exceed our insurance coverage or result
in damage to our reputation.
Some of our employees belong to labor unions and strikes
or work stoppage could adversely affect our operations.
We are a party to collective bargaining agreements with various
labor unions in Canada and Poland, representing approximately
25% of our workforce, and the agreement with the labor union in
Canada expires in October 2006. Disputes with regard to the
terms of these agreements or our potential inability to
negotiate acceptable contracts with these unions in the future
could result in, among other things, strikes, work stoppages or
other slowdowns by the affected workers. We cannot assure you
that our relations with our workforce will remain positive or
that union organizers will not be successful in future attempts
to organize at some of our other facilities. If our workers were
to engage in a strike, work stoppage or other slowdown, or other
employees were to become unionized or the terms and conditions
in future labor agreements were renegotiated, we could
experience a significant disruption of our operations and higher
ongoing labor costs. In addition, we could face higher labor
costs in the future as a result of severance or other charges
associated with lay-offs, shutdowns or reductions in the size
and scope of our operations.
The Greenbrier Companies 2006
Annual
Report 11
Shortages of skilled labor may adversely impact our
operations.
We depend on skilled labor in the manufacture of railcars. Some
of our facilities are located in areas where demand for skilled
laborers often exceeds supply. Shortages of some types of
skilled laborers such as welders may restrict our ability to
increase production rates and increase our labor costs.
Our level of indebtedness and terms of our indebtedness
could adversely affect our business, financial condition and
liquidity.
We expect to incur substantial indebtedness, in part, to finance
the acquisition of Meridian Rail Holdings Corp. and its
subsidiaries. The majority of our long-term debt is
non-amoritizing with a balloon payment. There can be no
assurance that we will be able to refinance such debt upon
maturity, or if refinanced, that it will be at favorable rates
and terms. If we are not successful in refinancing our balloon
debt, we could experience liquidity issues that would have a
significant impact on our financial condition. If we are unable
to successfully refinance our debt, we cannot assure you that we
will have adequate liquidity to fund our ongoing cash needs. In
addition, our high level of indebtedness could limit our ability
to borrow additional amounts of money for working capital,
capital expenditures, or other purposes. It could also limit our
ability to use operating cash flow in other areas of our
business because we must dedicate a substantial portion of these
funds to service debt. The high amount of debt increases our
vulnerability to general adverse economic and industry
conditions and could limit our ability to capitalize on business
opportunities and to react to competitive pressures.
We depend on a third party to provide most of the labor
services for our Mexico operations and if such third party fails
to provide the labor, it could adversely effect our
operations.
In Mexico, we depend on a third party to provide us with most of
the labor services for our Mexico operations under a services
agreement with a term of four years expiring on December 1,
2008, with two three-year options to renew. All of the labor
provided is subject to collective bargaining agreements with the
third party, over which we have no control. If the third party
fails to provide us with the services required by our agreement
for any reason, including labor stoppages or strikes or a sale
of facilities owned by the third party, our operations could be
adversely affected. In addition, we do not have significant
experience in hiring labor in Mexico and, if required to provide
our own labor, could face significantly higher labor costs,
which also could have an adverse effect on our operations.
Our relationships with our alliance partners may not be
successful, which could adversely affect our business.
In recent years, we have entered into several agreements with
other companies to increase our sourcing alternatives, reduce
costs, and pursue opportunities for growth through design
improvements. We may seek to expand our relationships or enter
into new agreements with other companies. If these relationships
are not successful in the future, our manufacturing costs could
increase, we could encounter production disruptions, or growth
opportunities may not materialize, any of which could adversely
affect our business.
We may have difficulty integrating the operations of any
companies that we acquire, which may adversely affect our
results of operations.
The success of our acquisition strategy will depend upon our
ability to successfully complete acquisitions and integrate any
businesses that we acquire into our existing business. The
integration of acquired business operations including the RCA
acquisition and following the closing of the acquisition of
Meridian and other recent acquisitions could disrupt our
business by causing unforeseen operating difficulties, diverting
managements attention from
day-to-day operations
and requiring significant financial resources that would
otherwise be used for the ongoing development of our business.
The difficulties of integration may be increased by the
necessity of coordinating geographically dispersed
organizations, integrating personnel with disparate business
backgrounds and combining different corporate cultures. In
addition, we may not be effective in retaining key employees or
customers of the combined businesses. We may face integration
issues pertaining to the internal controls and operational
functions of the acquired companies and we also may not realize
cost efficiencies or synergies that we anticipated when
selecting our acquisition candidates. Any of these items could
adversely affect our results of operations.
We may not be able to procure insurance on a
cost-effective basis in the future.
The ability to insure our businesses, facilities and rail assets
are important aspects of our ability to manage
12 The
Greenbrier Companies 2006 Annual Report
risk. As there is only one provider of this insurance to the
railcar industry, there is no guarantee that such insurance will
be available on a cost-effective basis in the future.
An adverse outcome in any pending or future litigation
could negatively impact our business and results of
operations.
We are a defendant of several pending cases in various
jurisdictions. If we are unsuccessful in resolving these claims,
our business and results of operations could be adversely
affected. In addition, future claims that may arise relating to
any pending or new matters could distract managements
attention from business operations and increase our legal and
defense costs, which may also negatively impact our business and
results of operations.
Our failure to comply with regulations imposed by federal
and foreign agencies could negatively affect our financial
results.
Our railcar operations are subject to extensive regulation by
governmental regulatory and industry authorities and by federal
and foreign agencies. These organizations establish rules and
regulations for the railcar industry, including construction
specifications and standards for the design and manufacture of
railcars; mechanical, maintenance and related standards; and
railroad safety. New regulatory rulings and regulations from
these federal or foreign agencies may impact our financial
results and the economic value of our assets. In addition, if
the cost of compliance is too high or we fail to comply with the
requirements and regulations of these agencies, we could face
sanctions and penalties that could negatively affect our
financial results.
Our implementation of a new enterprise resource planning
(ERP) system may result in problems that could negatively
impact our business.
We have hired a third party vendor to assist with the design and
implementation of a company-wide ERP system that supports
substantially all of our operating and financial functions,
including inventory management, billing, customer management,
vendor management, accounting and financial reporting systems.
We intend to begin implementation of the system during 2007. We
may experience problems in connection with such implementations,
including but not limited to, potential bugs in the system,
component or supply delays, training requirements and other
integration challenges and delays. A significant implementation
problem, if encountered, could negatively impact our business by
disrupting our operations. Additionally, a significant problem
with the implementation or ongoing management and operation of
the ERP system could have an adverse effect on our ability to
generate and interpret accurate management and financial reports
and other information on a timely basis, which could have a
material adverse effect on our financial reporting system and
internal controls and adversely effect our ability to manage our
business.
Our governing documents contain some provisions that may
prevent or make more difficult an attempt to acquire us.
Our Articles of Incorporation and Bylaws, as currently in
effect, contain some provisions that may be deemed to have
antitakeover effects, including:
|
|
|
a classified board of directors, with each class containing as
nearly as possible one-third of the total number of members of
the board of directors and the members of each class serving for
staggered three-year terms; |
|
|
a vote of at least 55% of our voting securities to amend some
provisions of our Articles of Incorporation; |
|
|
no less than 120 days advance notice with respect to
nominations of directors or other matters to be voted on by
shareholders other than by or at the direction of the board of
directors; |
|
|
removal of directors only with cause; and |
|
|
the calling of special meetings of stockholders only by the
president, a majority of the board of directors or the holders
of not less than 25% of all votes entitled to be cast on the
matters to be considered at such meeting. |
We also maintain a stockholder rights plan pursuant to which
each stockholder has received a dividend distribution of one
preferred stock purchase right per share of common stock owned.
The stockholder rights plan and the other provisions discussed
above may have antitakeover effects because they may delay,
defer or prevent an unsolicited acquisition proposal that some,
or a majority, of our stockholders might believe to be in their
best interests or in which stockholders might receive a premium
for their common stock over the then-prevailing market price.
The Oregon Control Share Act and business combination law may
limit parties who acquire a significant amount of voting shares
from exercising control over us for specific periods of time.
These
The Greenbrier Companies 2006
Annual
Report 13
acts may length en the period for a proxy contest or for a
person to vote their shares to elect the majority of our Board
and change management.
Failure of any one of our manufacturing facilities to be
competitive could negatively impact our business.
The competitiveness of our individual manufacturing facilities
depends upon a variety of factors, including:
|
|
|
efficiency of the facility and the local work force; |
|
|
prevailing wage rates and labor costs; |
|
|
geographical location in relation to customers and suppliers; |
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|
relative currency values; and |
|
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product mix and suitability of the facility for manufacture of
particular types of railcars. |
The company continually evaluates the competitiveness of each of
its facilities. A decision to close or discontinue operations of
a facility could result in an impairment charge or reduction in
the carrying value of the facility and other related costs on
the Companys consolidated financial statements.
Item 1b. UNRESOLVED STAFF
COMMENTS
None
14 The
Greenbrier Companies 2006 Annual Report
ITEM 2. PROPERTIES
We operate at the following material facilities as of
August 31, 2006:
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Description |
|
Size |
|
Location |
|
Status |
|
Manufacturing Segment |
|
|
|
|
|
|
|
Railcar and marine manufacturing facility and wheel
reconditioning shop |
|
63 acres including 908,000 sq. ft. of manufacturing
space and a 750-ft. side-launch ways for launching ocean going
vessels |
|
Portland, Oregon |
|
Owned |
|
Railcar manufacturing facility |
|
100 acres with 764,000 sq. ft. of manufacturing
space |
|
Trenton, Nova Scotia Canada |
|
Owned |
|
Railcar manufacturing facility |
|
88 acres with 676,000 sq. ft. of manufacturing
space |
|
Swidnica, Poland |
|
Owned |
|
Railcar manufacturing and wheel reconditioning shop |
|
462,000 sq. ft. of manufacturing space, which includes
a 152,000 sq. ft. wheel reconditioning shop |
|
Sahagun, Mexico |
|
Leased |
|
Railcar repair facility |
|
70 acres |
|
Cleburne, Texas |
|
Leased with purchase option |
|
Railcar repair facility |
|
51.7 acres |
|
Kansas City, Missouri |
|
Leased |
|
Railcar repair facility |
|
40 acres |
|
Finley, Washington |
|
Leased with purchase option |
|
Railcar repair facility |
|
32 acres |
|
Dothan, Alabama |
|
Owned |
|
Railcar repair facility |
|
18 acres |
|
Atchison, Kansas |
|
Owned |
|
Railcar repair facility |
|
11.6 acres |
|
Hodge, Louisiana |
|
Owned |
|
Railcar repair facility |
|
5.4 acres |
|
Springfield, Oregon |
|
Leased |
|
Railcar repair facility |
|
0.9 acres |
|
Empire, California |
|
Leased |
|
Railcar repair facility |
|
3.3 acres |
|
Golden, Colorado |
|
Leased |
|
Wheel reconditioning shop |
|
5.6 acres |
|
Tacoma, Washington |
|
Leased |
|
Wheel reconditioning shop |
|
0.5 acres |
|
Pine Bluff, Arkansas |
|
Leased |
|
Leasing & Services
Segment |
|
|
|
|
|
|
|
Executive offices, railcar marketing and leasing activities |
|
37,000 sq. ft. |
|
Lake Oswego, Oregon |
|
Leased |
We believe that our facilities are in good condition and that
the facilities, together with anticipated capital improvements
and additions, are adequate to meet our operating needs for the
foreseeable future. We continually evaluate the need for
expansion and upgrading of our railcar manufacturing and
refurbishment facilities in order to remain competitive and to
take advantage of market opportunities.
The Greenbrier Companies 2006
Annual
Report 15
Item 3. LEGAL
PROCEEDINGS
From time to time, Greenbrier is involved as a defendant in
litigation in the ordinary course of business, the outcome of
which cannot be predicted with certainty. The most significant
litigation is as follows:
On April 20, 2004, BC Rail Partnership initiated litigation
against us in the Supreme Court of Nova Scotia, alleging breach
of contract and negligent manufacture and design of railcars
which were involved in a 1999 derailment. No trial date has been
set.
On November 3, 2004, and November 4, 2004, in the
District Court of Tarrant County, Texas, and in the District
Court of Lancaster County, Nebraska, respectively, litigation
was initiated against us by Burlington Northern Sante Fe (BNSF).
BNSF stayed the Nebraska action electing to proceed in Texas.
BNSF alleges the failure of a supplier-provided component part
on a railcar manufactured by us in 1988, resulted in a
derailment and a chemical spill and claims $14.0 million in
damages. On June 24, 2006, the District Court of Tarrant
County, Texas, entered an order granting our motion for summary
judgment as to all claims. On August 7, 2006, BNSF gave
notice of appeal.
A customer, SEB Finans AB (SEB), and we have raised performance
concerns related to a component that we installed on 372 railcar
units with an aggregate sales value of approximately
$20.0 million produced under a contract with SEB. On
December 9, 2005, SEB filed a Statement of Claim in an
arbitration proceeding in Stockholm, Sweden, against us alleging
that the cars are defective and cannot be used for their
intended purpose. SEB seeks damages in an undisclosed amount and
in addition late delivery penalties in the amount of
1.1 million Euros. In a Statement of Defense and
Counterclaim filed with the Arbitral Tribunal on
February 1, 2006, we denied that there were defects in the
railcar units delivered for which we are liable and filed
counterclaims against SEB in total amounting to approximately
$11.0 million plus interest representing payments in
default under the contract. We believe that applicable law
provides an opportunity to remedy the performance issues and
that an engineering solution is likely. The component supplier
has filed for the United Kingdom equivalent of bankruptcy
protection. Accordingly, our recourse against the supplier may
be of limited or no value. Arbitration hearings tentatively
scheduled for early November have been rescheduled to May 2007
by mutual agreement. The parties continue to discuss alternative
resolutions of the dispute.
Management intends to vigorously defend its position in each of
the open foregoing cases and believes that any ultimate
liability resulting from the above litigation will not
materially affect our Consolidated Financial Statements.
We are involved as a defendant in other litigation initiated in
the ordinary course of business. While the ultimate outcome of
such legal proceedings cannot be determined at this time,
management believes that the resolution of these actions will
not have a material adverse effect on our Consolidated Financial
Statements.
Item 4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANTS COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Our common stock has been traded on the New York Stock Exchange
under the symbol GBX since July 14, 1994. There were
approximately 429 holders of record of common stock as of
October 20, 2006. The following table shows the reported
high and low sales price of our common stock on the New York
Stock Exchange.
|
|
|
|
|
|
|
|
|
|
|
High |
|
Low |
|
2006
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
$ |
34.90 |
|
|
$ |
23.56 |
|
Third quarter
|
|
$ |
46.63 |
|
|
$ |
32.80 |
|
Second quarter
|
|
$ |
40.00 |
|
|
$ |
26.75 |
|
First quarter
|
|
$ |
33.56 |
|
|
$ |
24.67 |
|
2005
|
|
|
|
|
|
|
|
|
Fourth quarter
|
|
$ |
30.70 |
|
|
$ |
25.80 |
|
Third quarter
|
|
$ |
37.15 |
|
|
$ |
25.40 |
|
Second quarter
|
|
$ |
36.99 |
|
|
$ |
25.56 |
|
First quarter
|
|
$ |
29.85 |
|
|
$ |
19.69 |
|
Quarterly dividends of $.08 per share have been declared
since the fourth quarter of 2005. Quarterly dividends of
$.06 per share were declared from the fourth quarter of
2004 through the third quarter of 2005. There is no assurance as
to the payment of future dividends as they are dependent upon
future earnings, capital requirements and our financial
condition.
16 The
Greenbrier Companies 2006 Annual Report
Equity Compensation Plan
Information
The following table provides certain information as of
August 31, 2006 with respect to our equity compensation
plans under which our equity securities are authorized for
issuance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of securities |
|
|
|
Number of securities |
|
|
to be issued |
|
Weighted average |
|
remaining available |
|
|
upon exercise of |
|
exercise price of |
|
for future issuance |
|
|
outstanding options, |
|
outstanding options, |
|
under equity |
Plan Category |
|
warrants and rights |
|
warrants and rights |
|
compensation plans |
|
|
Equity compensation plans approved by security holders
(1)
|
|
|
69,396 |
|
|
$ |
6.96 |
|
|
|
877,816 |
|
|
|
Equity compensation plans not approved by security holders
|
|
|
None |
|
|
|
None |
|
|
|
None |
|
|
|
|
(1) |
Includes the Stock Incentive Plan 2000 (The 2000 Plan) and the
2005 Stock Incentive Plan. |
The Greenbrier Companies 2006
Annual
Report 17
Item 6. SELECTED
FINANCIAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YEARS ENDED AUGUST 31, |
(Dollar amounts in thousands) |
|
2006 |
|
2005 |
|
2004 |
|
2003 |
|
2002 |
|
Statement of Operations
Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
851,289 |
|
|
$ |
941,161 |
|
|
$ |
653,234 |
|
|
$ |
461,882 |
|
|
$ |
295,074 |
|
|
Leasing & services
|
|
|
102,534 |
|
|
|
83,061 |
|
|
|
76,217 |
|
|
|
70,443 |
|
|
|
72,250 |
|
|
|
|
$ |
953,823 |
|
|
$ |
1,024,222 |
|
|
$ |
729,451 |
|
|
$ |
532,325 |
|
|
$ |
367,324 |
|
|
Earnings (loss) from continuing operations
|
|
$ |
39,536 |
|
|
$ |
29,822 |
|
|
$ |
20,039 |
|
|
$ |
4,317 |
|
|
$ |
(26,094 |
) |
Earnings from discontinued operations
|
|
|
62 |
(1) |
|
|
|
|
|
|
739 |
(1) |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$ |
39,598 |
|
|
$ |
29,822 |
|
|
$ |
20,778 |
|
|
$ |
4,317 |
|
|
$ |
(26,094 |
) (2) |
|
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
2.51 |
|
|
$ |
1.99 |
|
|
$ |
1.38 |
|
|
$ |
.31 |
|
|
$ |
(1.85 |
) |
|
Net earnings (loss)
|
|
$ |
2.51 |
|
|
$ |
1.99 |
|
|
$ |
1.43 |
|
|
$ |
.31 |
|
|
$ |
(1.85 |
) |
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
2.48 |
|
|
$ |
1.92 |
|
|
$ |
1.32 |
|
|
$ |
.30 |
|
|
$ |
(1.85 |
) |
|
Net earnings (loss)
|
|
$ |
2.48 |
|
|
$ |
1.92 |
|
|
$ |
1.37 |
|
|
$ |
.30 |
|
|
$ |
(1.85 |
) |
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,751 |
|
|
|
15,000 |
|
|
|
14,569 |
|
|
|
14,138 |
|
|
|
14,121 |
|
|
Diluted
|
|
|
15,937 |
|
|
|
15,560 |
|
|
|
15,199 |
|
|
|
14,325 |
|
|
|
14,121 |
|
Cash dividends paid per share
|
|
$ |
.32 |
|
|
$ |
.26 |
|
|
$ |
.06 |
|
|
|
|
|
|
$ |
.06 |
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
877,314 |
|
|
$ |
671,207 |
|
|
$ |
508,753 |
|
|
$ |
538,948 |
|
|
$ |
527,446 |
|
Notes payable
|
|
$ |
362,314 |
|
|
$ |
214,635 |
|
|
$ |
97,513 |
|
|
$ |
117,989 |
|
|
$ |
144,131 |
|
Subordinated debt
|
|
$ |
2,091 |
|
|
$ |
8,617 |
|
|
$ |
14,942 |
|
|
$ |
20,921 |
|
|
$ |
27,069 |
|
Stockholders equity
|
|
$ |
219,281 |
|
|
$ |
176,059 |
|
|
$ |
139,289 |
|
|
$ |
111,142 |
|
|
$ |
103,139 |
|
|
Other Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New railcar units delivered
|
|
|
11,400 |
|
|
|
13,200 |
|
|
|
10,800 |
|
|
|
6,500 |
|
|
|
4,100 |
|
New railcar units backlog
|
|
|
14,700 |
|
|
|
9,600 |
|
|
|
13,100 |
|
|
|
10,700 |
|
|
|
5,200 |
|
Lease fleet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units managed
|
|
|
135,320 |
|
|
|
128,645 |
|
|
|
122,676 |
|
|
|
114,701 |
|
|
|
35,562 |
|
|
Units owned
|
|
|
9,311 |
|
|
|
9,958 |
|
|
|
10,683 |
|
|
|
12,015 |
|
|
|
14,317 |
|
Cash Flow Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
18,027 |
|
|
$ |
16,318 |
|
|
$ |
7,161 |
|
|
$ |
7,390 |
|
|
$ |
4,294 |
|
|
Leasing & services
|
|
|
122,542 |
|
|
|
52,805 |
|
|
|
35,798 |
|
|
|
4,505 |
|
|
|
18,365 |
|
|
|
|
$ |
140,569 |
|
|
$ |
69,123 |
|
|
$ |
42,959 |
|
|
$ |
11,895 |
|
|
$ |
22,659 |
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
12,618 |
|
|
$ |
12,205 |
|
|
$ |
9,399 |
|
|
|
9,081 |
|
|
|
13,903 |
|
|
Leasing & services
|
|
|
12,635 |
|
|
|
10,734 |
|
|
|
11,441 |
|
|
|
9,630 |
|
|
|
9,594 |
|
|
|
|
$ |
25,253 |
|
|
$ |
22,939 |
|
|
$ |
20,840 |
|
|
$ |
18,711 |
|
|
$ |
23,497 |
|
|
Ratio of earnings to fixed charges
(3)
|
|
|
2.83 |
|
|
|
3.55 |
|
|
|
2.84 |
|
|
|
1.52 |
|
|
|
(0.86 |
) |
|
|
(1) |
Consists of a reduction in loss contingency associated with the
settlement of litigation relating to the logistics business that
was discontinued in 1998. See Note 4 to the Consolidated
Financial Statements. |
(2) |
Includes $11.5 million (net of tax) of special charges,
which principally relate to restructuring and write-down of
European operations. |
(3) |
The ratio of earnings to fixed charges is computed by dividing
earnings before fixed charges by fixed charges. Earnings before
fixed charges consist of earnings (loss) before income tax,
minority interest and equity in unconsolidated subsidiaries,
plus fixed charges. Fixed charges consist of interest expense,
amortization of debt issuance costs and the portion of rental
expense that we believe is representative of the interest
component of lease expense. For the year ended August 31,
2002, there was a deficiency of earnings to fixed charges of
$47.2 million. |
18 The
Greenbrier Companies 2006 Annual Report
Item 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Executive Summary
We currently operate two primary business segments:
manufacturing and leasing & services. These two
business segments are operationally integrated. With operations
in the United States, Canada, Mexico and Europe the
manufacturing segment produces double-stack intermodal railcars,
conventional railcars, tank cars, marine vessels and performs
railcar repair, refurbishment and maintenance activities. We
produce rail castings through an unconsolidated joint venture
and may also manufacture new freight cars through the use of
unaffiliated subcontractors. At August 31, 2006, the
leasing & services segment owned approximately 9,000
railcars and provided management services for approximately
135,000 railcars for railroads, shippers, carriers and other
leasing and transportation companies. Segment performance is
evaluated based on margins.
During 2006, we received several significant new orders and
continue to focus on railcar types where future demand is
anticipated to be robust. Our manufacturing backlog of railcars
for sale and lease as of August 31, 2006 was approximately
14,700 railcars with an estimated value of $1.0 billion
compared to 9,600 railcars valued at approximately
$550.0 million as of August 31, 2005. Current period
backlog includes approximately 12,000 units that will be
delivered to the customer over a multi-year period ending in
2010. Approximately 7,700 units under this contract are for
delivery beyond calendar 2007 and are subject to our fulfillment
of certain competitive conditions. Substantially all of the
current backlog has been priced to cover anticipated material
price increases and surcharges. As these sales prices include an
anticipated pass-through of vendor material price increases and
surcharges, they are not necessarily indicative of increased
margins on future production. There is still risk that material
prices could increase beyond amounts used to price our sale
contracts which would adversely impact margins in our backlog.
Certain materials and components continue to be in short supply,
including castings, wheels, axles and couplers, which could
potentially impact production at our new railcar and
refurbishment facilities. In an effort to mitigate shortages and
reduce supply chain costs, we have entered into strategic
alliances for the global sourcing of certain components and
continue to pursue strategic opportunities to protect and
enhance our supply chain.
We further strengthened our liquidity position with a
$100.0 million convertible note offering in May 2006 and a
$60.0 million senior unsecured debt offering in November
2005. This additional cash gives us the flexibility to execute
on our strategy of growing our core businesses, both organically
and through acquisition.
We have been actively managing our railcar leasing portfolio to
diversify the railcar types, age of equipment, and length of
lease terms. During the year, we sold a portion of our older
assets to take advantage of market conditions. We continue to
grow the lease portfolio with purchases of both new and used
railcars.
In December 2005, all of the Canadian subsidiary shares subject
to mandatory redemption of $3.7 million were redeemed for
$5.3 million. The redemption resulted in a
$0.9 million decrease in accumulated other comprehensive
income and a $0.7 million increase in interest expense.
Subsequent to year end, we purchased substantially all of the
operating assets of Rail Car America, Inc. (RCA), its American
Hydraulics division, and its wholly owned subsidiary, Brandon
Corp. for approximately $34.0 million. RCA is a leading
provider of intermodal and conventional railcar repair services
in North America, operating from four repair facilities
throughout the United States. RCA also reconditions and repairs
end of railcar cushioning units through its American Hydraulics
division and operates a switching railroad in Nebraska through
Brandon Corp. This acquisition is anticipated to further
leverage synergies across our integrated business units, enhance
our intermodal leadership position and expand the geographic
reach of our repair network. Demand for intermodal railcar
repair and maintenance is accelerating as the intermodal fleet
ages, providing strong future growth prospects.
In October 2006, we formed a joint venture with Grupo Industrial
Monclova (GIMSA) to build new railroad freight cars for the
North American marketplace at GIMSAs existing
manufacturing facility, located in Monclova, Mexico. The initial
investment will be less than $10.0 million for one
production line and each party will maintain a 50% interest in
the joint venture. Production is expected to commence in the
second calendar quarter of 2007.
The Greenbrier Companies 2006
Annual
Report 19
In October 2006, we entered into a definitive agreement to
acquire the stock of Meridian Rail Holdings, Corp. for
$227.5 million in cash, plus or minus working capital
adjustments. Meridian is a leading supplier of wheel maintenance
services to the North American freight car industry. Operating
out of six facilities, Meridian supplies replacement wheel sets
and axles to approximately 170 freight car maintenance
locations where worn or damaged wheels, axles, or bearings are
replaced. Meridian also operates a coupler reconditioning
facility and performs railcar repair at one of its wheel
services facilities. The acquisition is expected to close in
November 2006, subject to customary closing conditions.
We have entered into a commitment to increase our revolving line
of credit in the U.S. and Canada to an aggregate of
$275.0 million. The amended five year facility will replace
our existing facility aggregating $150.0 million and will
be used to support the Meridian acquisition and provide working
capital and interim financing of equipment for U.S. and Mexican
operations. It is expected to close on or before the closing of
the Meridian acquisition.
Results of Operations
Overview
Total revenue was $953.8 million, $1.0 billion and
$729.5 million for the years ended August 31, 2006,
2005 and 2004. Net earnings for 2006, 2005 and 2004 were
$39.6 million or $2.48 per diluted common share,
$29.8 million or $1.92 per diluted common share and
$20.8 million or $1.37 per diluted common share.
Manufacturing Segment
Manufacturing revenue includes new railcar, marine,
refurbishment and maintenance activities. New railcar delivery
and backlog information disclosed herein includes all facilities
and orders that may be manufactured by unaffiliated
subcontractors.
Our purchase on December 1, 2004 of Bombardiers
equity interest in the railcar manufacturing joint venture
located in Mexico brought our ownership percentage to 100%. As a
result, the financial results of the subsidiary, formerly
accounted for under the equity method, are consolidated
beginning December 1, 2004.
Manufacturing revenue was $851.3 million,
$941.2 million and $653.2 million for the years ended
2006, 2005 and 2004. Railcar deliveries, which are the primary
source of manufacturing revenue, were approximately
11,400 units in 2006 compared to 13,200 units in 2005
and 10,800 units in 2004. Manufacturing revenue decreased
$89.9 million or 9.6% in 2006 as compared to 2005 primarily
due to lower deliveries resulting from changes in production
rates to meet customer delivery requirements, a slower European
freight car market, increases in internal production and
subcontracted deliveries in the prior period. Manufacturing
revenue increased $288.0 million or 44.1% in 2005 as
compared to 2004 primarily due to $147.6 million of revenue
from our Mexican operation that was accounted for under the
equity method in the prior comparable period and the first
quarter of 2005. The balance of the increase was principally due
to increased deliveries, a higher average railcar sales price
associated with scrap and material surcharges and greater
volumes of subcontracted production.
Manufacturing margin percentage was 11.4% in 2006 compared to
8.8% in 2005. The increase was primarily due to lower costs on
certain materials, operating efficiency improvements at certain
of our facilities and a $3.1 million reduction in warranty
accruals associated with expiration of warranty periods and the
settlement of an outstanding warranty claim. In addition, the
prior period was adversely impacted by production issues in
Europe, surcharges and price increases on materials that could
not be passed onto the customer, temporary production issues at
another facility and inclement weather-related closures.
Manufacturing margin percentage was 8.8% in 2005 compared to
8.9% in 2004. As sales prices and costs increase by the same
amount to cover surcharges, margins as a percentage of revenue
decline. In addition, the benefits of higher margin railcar
types, efficiencies of long production runs and increased
volumes were offset by production issues in Europe, in
particular issues surrounding component parts on one railcar
type.
Leasing & Services
Segment
Leasing & services revenue was $102.5 million,
$83.1 million and $76.2 million for the years ended
2006, 2005 and 2004. The $19.4 million increase in revenue
from 2005 to 2006 was primarily the result of a
$4.1 million increase in gains on sale of assets from the
lease fleet, $11.3 million in net new lease additions,
$2.7 million in interim rentals on assets held for sale and
increased interest income on higher cash balances, partially
offset by lower utilization on certain management agreements.
The $6.9 million increase in revenue in 2005 from 2004 was
primarily
20 The
Greenbrier Companies 2006 Annual Report
the result of a $6.2 million increase in gains on sale of
assets from the lease fleet, higher utilization on managed
equipment, the growth of the operating lease portfolio,
partially offset by the maturation of the direct finance lease
portfolio and reduced car hire revenue associated with lease
terminations.
During 2006, we realized $10.9 million in pre-tax earnings
on the disposition of leased equipment compared to
$6.8 million in 2005 and $0.6 million in 2004. Assets
from our lease fleet are periodically sold in the normal course
of business in order to take advantage of market conditions,
manage risk and maintain liquidity.
Leasing & services margin percentage was 59.0% in 2006
compared to 50.5% in 2005 and 44.6% in 2004. The increase in
2006 was primarily a result of gains on sales from the lease
fleet and interim rental on assets held for sale both of which
have no associated cost of revenue; renewal of leases at higher
lease rates; newer lease equipment with lower maintenance costs;
partially offset by decreased utilization on management
agreements. The prior period included a rate adjustment due to
increased utilization on certain management agreements. Margins
increased in 2005 as a result of gains on sales from the lease
fleet and the impact of the rate adjustments related to
increased utilization on certain management agreements.
Other costs
Selling and administrative expense was $70.9 million,
$57.4 million and $48.3 million in 2006, 2005 and
2004. The $13.5 million increase from 2005 to 2006 is
primarily the result of increases in employee costs which
include new employees, transition costs associated with
succession planning, compensation and benefit increases and
incentive compensation; $2.8 million in amortization of the
value of restricted stock grants; increases in professional fees
associated with strategic initiatives; expenses associated with
improvements to our technology infrastructure; increases in
European research and development costs; partially offset by
reduced legal fees as the prior period included
$2.5 million in legal and professional expenses associated
with litigation and responses related to actions by Alan James,
a former member of the board of directors. The $9.1 million
increase from 2004 to 2005 is primarily the result of the
inclusion of $1.7 million in expenses for our Mexican
operation which was accounted for under the equity method in the
prior comparable period, higher employee related costs including
incentive compensation and increases in professional fees
associated with litigation, compliance with Sarbanes-Oxley
legislation and strategic initiatives.
Interest and foreign exchange expense was $25.4 mil-lion,
$14.8 million and $11.5 million in 2006, 2005 and
2004. The $10.6 million increase from 2005 to 2006 is due
to higher outstanding debt levels, $0.8 million in interest
on the IRS settlement, $0.7 million in interest paid on the
purchase of subsidiary shares subject to mandatory redemption
and $0.8 million in debt issuance costs, partially offset
by foreign exchange fluctuations. Foreign exchange gains of
$1.6 million were recognized in 2006 compared to foreign
exchange losses of $0.8 million in 2005. Increases from
2004 to 2005 were primarily the result of increased debt levels
and foreign exchange losses.
During 2005, we incurred special charges of $2.9 million
consisting of debt prepayment penalties and costs associated
with settlement of interest rate swap agreements on certain debt
that was refinanced with senior unsecured notes. The year ended
August 31, 2004 includes special charges totaling
$1.2 million which consist of a $7.5 million write-off
of the remaining balance of European designs and patents,
partially offset by a $6.3 million reduction of purchase
price liabilities associated with the settlement of arbitration
regarding the acquisition of European designs and patents.
Income Tax
Our effective tax rate was 35.5%, 39.8% and 29.2% for the years
ended August 31, 2006, 2005 and 2004. Tax expense for 2006
includes $2.2 million associated with a settlement with the
IRS in conjunction with completion of an audit of our tax
returns for the years 1999-2002. In addition, 2006 includes a
$3.7 million tax benefit for a realization of a deferred
tax asset at our Mexican subsidiary based on financial
projections that indicated we will more likely than not be able
to fully utilize the net operating loss carryforwards. The 2004
income tax rate was impacted by a $6.3 million non-taxable
purchase price adjustment relating to the purchase of European
designs and patents.
The fluctuations in the effective tax rate are due to the
geographical mix of pre-tax earnings and losses, minimum tax
requirements in certain local jurisdictions and operating losses
for certain operations with no related accrual of tax benefit.
Our tax rate in the United States for the year ended
August 31, 2006 represents a tax rate of 41.0% as
The Greenbrier Companies 2006
Annual
Report 21
compared to 42.0% in the prior comparable periods. The reduction
in United States tax rate is due to reduced state income tax
rates and the current period implementation of the manufacturing
tax deduction included in the American Jobs Creation Act of
2004. All periods include varying tax rates on foreign
operations.
During the year, we reached a settlement with the Internal
Revenue Service (IRS) relating to an audit of our federal income
tax returns for the years ended 1999 through 2002. In connection
with the audit, the IRS reviewed our decision to take a
deduction in the amount of $52.6 million on our 2002
federal tax return relating to our European operations. As a
result of the settlement, we recorded a $3.0 million
after-tax charge, consisting of interest of $0.8 million
and taxes of $2.2 million, in our 2006 Consolidated
Statement of Operations.
Equity in Earnings (Loss) of
Unconsolidated Subsidiaries
Equity in earnings of unconsolidated subsidiaries was
$0.2 million in 2006, a loss of $0.3 million in 2005
and a loss of $2.0 million in 2004. Earnings in 2006
consist entirely of results from our castings joint venture. The
loss in 2005 consists of a $0.7 million loss from our
Mexican railcar manufacturer joint venture, partially offset by
$0.4 million in earnings from our investment in our
castings joint venture. Earnings from the castings joint venture
have declined in the current period due to additional warranty
accruals and closure costs at one of the two joint venture
foundries which operated on a temporary basis until the second
more efficient facility was fully operational. Equity in loss of
the castings joint venture was a loss of $0.8 million in
2004 primarily due to
start-up costs and
temporary plant shutdowns associated with equipment issues.
The Mexican railcar manufacturing joint venture contributed
approximately $0.7 million and $1.2 million to loss
from unconsolidated subsidiaries in 2005 and 2004. As a result
of purchasing our joint venture partners interest in the
venture, the financial results of the entity were consolidated
beginning on December 1, 2004. Accordingly, 2005 loss from
unconsolidated subsidiaries only includes results of the Mexican
operation through November 30, 2004.
Liquidity and Capital
Resources
We have been financed through cash generated from operations and
borrowings. At August 31, 2006, cash increased
$69.7 million to $142.9 million from
$73.2 million at the prior year end. Cash increases were
primarily the result of the issuance of $60.0 million of
senior unsecured notes in November 2005 and $100.0 million
in convertible senior notes in May 2006.
On May 22, 2006, we issued at par $100.0 million
aggregate principal amount of 2.375% convertible senior
notes due 2026. These notes are now publicly registered with the
Securities and Exchange Commission (SEC). Interest will be paid
semiannually in arrears commencing November 15, 2006.
Payment on the notes is guaranteed by substantially all of our
domestic subsidiaries.
On November 21, 2005, we issued at par $60.0 million
aggregate principal amount of
83/8% senior
unsecured notes due 2015. The transaction was an additional
offering under the indenture entered into in connection with our
sale of $175.0 million of senior unsecured notes in May
2005. The $235.0 million combined senior unsecured notes
(the Notes) have identical terms and are now publically
registered with the SEC. Payment on the notes is guaranteed by
substantially all of our domestic subsidiaries. Interest is paid
in arrears on May 15th and November 15th of
each year.
Cash provided by operations for the year ended August 31,
2006, was $39.5 million compared to cash used in operations
of $16.7 million in the prior year. Increases in operating
cash were the result of improved earnings partially offset by
changes in timing of working capital requirements particularly
related to inventory. Inventories at August 31, 2006
increased from August 31, 2005 levels primarily as a result
of the build-up of
inventory for the changeover to new car types and purchases made
to take advantage of favorable pricing and availability of
parts. The increase in usage in cash from 2004 to 2005 is
primarily due to increases in railcars held for sale that were
sold in 2006 and changes in timing of working capital including
longer payment terms on the sale of certain railcars in August
2005.
Cash used in investing activities for the year ended
August 31, 2006 was $111.1 million compared to
$21.3 million in 2005 and $14.8 million in 2004. The
usage was primarily the result of increases in capital
expenditures for the lease fleet offset partially by proceeds
from equipment sales of $28.9 million in 2006,
$32.5 million in 2005 and $16.2 million in 2004 and
$8.4 million of net cash acquired in 2005 in the
acquisition of the remaining joint venture interest in Mexico.
22 The
Greenbrier Companies 2006 Annual Report
Capital expenditures totaled $140.6 million,
$69.1 million and $43.0 million in 2006, 2005 and
2004. Of these capital expenditures, approximately
$122.6 million, $52.8 million and $35.8 million
in 2006, 2005 and 2004 were attributable to leasing &
services operations. Capital expenditures have increased over
the past several years as a result of purchases of railcars to
expand our lease portfolio. Leasing & services capital
expenditures for 2007 are expected to be approximately
$100.0 million. We regularly sell assets from our lease
fleet, some of which may have been purchased within the current
year and included in capital expenditures.
Approximately $18.0 million, $16.3 million and
$7.2 million of capital expenditures for 2006, 2005 and
2004 were attributable to manufacturing operations. Capital
expenditures for manufacturing are expected to be approximately
$20.0 million in 2007.
Cash provided by financing activities of $142.5 million for
the year ended August 31, 2006 compared to cash provided by
financing activities of $97.6 million in 2005 and cash used
in financing activities of $37.6 million in 2004. During
2006, we received $154.6 million in net proceeds from a
senior unsecured debt offering and a convertible debt offering,
repaid $13.2 million in term debt and paid dividends of
$5.0 million. During 2005, we received $169.8 million
in net proceeds from a senior unsecured debt offering, repaid
$67.7 million in term debt and paid dividends of
$3.9 million. Cash usage during 2004 was primarily for
scheduled repayments of borrowings of $35.5 million in term
debt and revolving notes was repaid.
All amounts originating in foreign currency have been translated
at the August 31, 2006 exchange rate for the following
discussion. Credit facilities aggregated $179.9 million as
of August 31, 2006. Available borrowings are based on
defined levels of inventory, receivables, leased equipment and
property, plant and equipment, as well as total debt to
consolidated capitalization, tangible net worth and interest
coverage ratios which at August 31, 2006 levels would
provide for maximum borrowing of $148.4 million of which
$22.4 million is outstanding. A $125.0 million
revolving line of credit is available through June 2010 to
provide working capital and interim financing of equipment for
the United States and Mexican operations. A $27.2 million
line of credit is available through June 2010 for working
capital for Canadian manufacturing operations. Lines of credit
totaling $27.7 million are available principally through
June 2008 for working capital for the European manufacturing
operation. Advances bear interest at rates that depend on the
type of borrowing and the defined ratio of debt to total
capitalization. At August 31, 2006, there were no
borrowings outstanding under the North American credit
facilities and $22.4 million outstanding under the European
manufacturing credit lines.
We have entered into a commitment to increase our revolving line
of credit in the U.S. and Canada aggregating
$275.0 million. The new five-year facility will replace our
existing facility and will be used to support the Meridian
acquisition and provide additional liquidity. It is expected to
close on or before the closing of the Meridian acquisition.
In accordance with customary business practices in Europe, we
have $14.6 million in bank and third party performance,
advance payment and warranty guarantee facilities, all of which
has been utilized as of August 31, 2006. To date no amounts
have been drawn under these performance, advance payment and
warranty guarantees.
We have advanced $1.7 million in long term advances to an
unconsolidated subsidiary which are secured by accounts
receivable and inventory. As of August 31, 2006, this same
unconsolidated subsidiary had $8.3 million in third party
debt for which we have guaranteed 33% or approximately
$2.8 million.
We have outstanding letters of credit aggregating
$2.1 million associated with material purchases and payroll.
Foreign operations give rise to risks from changes in foreign
currency exchange rates. We utilize foreign currency forward
exchange contracts with established financial institutions to
hedge a portion of that risk. No provision has been made for
credit loss due to counter-party non-performance.
Dividends have been paid each quarter since the fourth quarter
of 2004 when dividends of $.06 per share were reinstated.
The dividend was increased to $.08 per share in the fourth
quarter of 2005.
We regularly monitor and evaluate conditions in the capital
markets and may issue additional debt or equity from time to
time. We expect existing funds and cash generated from
operations, together with proceeds from financing activities,
including borrowings under existing credit facilities and long
term financing, to be sufficient to fund dividends, if any,
working capital needs, planned capital expenditures and expected
debt repayments for the foreseeable future.
The Greenbrier Companies 2006
Annual
Report 23
The following table shows our estimated future contractual cash
obligations as of August 31,
2006(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending |
|
|
|
(In thousands) |
|
Total |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
Thereafter |
|
Notes payable
|
|
$ |
362,314 |
|
|
$ |
4,517 |
|
|
$ |
3,978 |
|
|
$ |
4,170 |
|
|
$ |
5,373 |
|
|
$ |
3,299 |
|
|
$ |
340,977 |
|
Interest
|
|
|
231,036 |
|
|
|
23,649 |
|
|
|
23,439 |
|
|
|
23,180 |
|
|
|
22,862 |
|
|
|
22,514 |
|
|
|
115,392 |
|
Purchase commitments
(2)
|
|
|
30,742 |
|
|
|
30,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving notes
|
|
|
22,429 |
|
|
|
22,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
14,743 |
|
|
|
5,718 |
|
|
|
3,658 |
|
|
|
2,537 |
|
|
|
1,189 |
|
|
|
671 |
|
|
|
970 |
|
Participation
|
|
|
13,564 |
|
|
|
9,337 |
|
|
|
3,629 |
|
|
|
330 |
|
|
|
109 |
|
|
|
98 |
|
|
|
61 |
|
Railcar leases
|
|
|
9,102 |
|
|
|
3,943 |
|
|
|
2,656 |
|
|
|
1,351 |
|
|
|
264 |
|
|
|
228 |
|
|
|
660 |
|
|
|
|
$ |
683,930 |
|
|
$ |
100,335 |
|
|
$ |
37,360 |
|
|
$ |
31,568 |
|
|
$ |
29,797 |
|
|
$ |
26,810 |
|
|
$ |
458,060 |
|
|
|
|
(1) |
Subordinated debt is not included as any amounts due are retired
from the sales proceeds of the related railcars. |
|
|
(2) |
Purchase commitments consist of obligations to third parties for
railcar purchases. |
In 1990, we entered into an agreement for the purchase and
refurbishment of over 10,000 used railcars between 1990 and
1997. The agreement provides that, under certain conditions, the
seller will receive a percentage of defined earnings of a
subsidiary, and further defines the period when such payments
are to be made. Such amounts, referred to as participation, are
accrued when earned, charged to leasing & services cost
of revenue, and unpaid amounts are included as participation in
the Consolidated Balance Sheets. Participation expense was
$1.7 million, $1.6 million and $1.7 million in
2006, 2005 and 2004. Payment of participation was
$12.1 million in 2006.
Off Balance Sheet
Arrangements
We do not currently have off balance sheet arrangements that
have or are likely to have a material current or future effect
on our Consolidated Financial Statements.
Critical Accounting
Policies
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires judgment on the part of management to arrive at
estimates and assumptions on matters that are inherently
uncertain. These estimates may affect the amount of assets,
liabilities, revenue and expenses reported in the financial
statements and accompanying notes and disclosure of contingent
assets and liabilities within the financial statements.
Estimates and assumptions are periodically evaluated and may be
adjusted in future periods. Actual results could differ from
those estimates.
Income taxes - For financial reporting purposes,
income tax expense is estimated based on planned tax return
filings. The amounts anticipated to be reported in those filings
may change between the time the financial statements are
prepared and the time the tax returns are filed. Further,
because tax filings are subject to review by taxing authorities,
there is also the risk that a position taken in preparation of a
tax return may be challenged by a taxing authority. If the
taxing authority is successful in asserting a position different
than that taken by us, differences in tax expense or between
current and deferred tax items may arise in future periods. Such
differences, which could have a material impact on our financial
statements, would be reflected in the financial statements when
management considers them probable of occurring and the amount
reasonably estimable. Valuation allowances reduce deferred tax
assets to an amount that will more likely than not be realized.
Our estimates of the realization of deferred tax assets is based
on the information available at the time the financial
statements are prepared and may include estimates of future
income and other assumptions that are inherently uncertain.
Maintenance obligations - We are responsible for
maintenance on a portion of the managed and owned lease fleet
under the terms of maintenance obligations defined in the
underlying lease or management agreements. The estimated
maintenance liability is based on maintenance histories for each
type and age of railcar. These estimates involve judgment as to
the future costs of repairs and the types and timing of repairs
required over the lease term. As we cannot predict with
certainty the prices, timing and volume of maintenance needed in
the future on railcars under long-term leases, this estimate is
uncertain and could be materially different from maintenance
requirements. The
24 The
Greenbrier Companies 2006 Annual Report
liability is periodically reviewed and updated based on
maintenance trends and known future repair or refurbishment
requirements. However, these adjustments could be material in
the future due to the inability to predict future maintenance
requirements.
Warranty accruals - Warranty costs are estimated and
charged to operations to cover a defined warranty period. 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
the amount or timing of future claims, the potential exists for
the difference in any one reporting period to be material.
Initial Adoption of Accounting Policies - On
September 1, 2005, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123R, Share Based
Payment. This statement requires all entities to recognize
compensation expense in an amount equal to the fair value of
share-based payments (stock options and restricted stock)
granted to employees. The implementation did not have a material
effect on the Consolidated Financial Statements as all stock
options were vested prior to August 31, 2005. Restricted
stock grants are currently being recorded as compensation
expense over the vesting period, consistent with prior periods.
Prospective Accounting Changes - In May 2005, the
Financial Accounting Standards Board (FASB) issued
SFAS No. 154, Accounting Changes and Error
Corrections which replaces Accounting Principles Board
(APB) Opinion No. 20, Accounting Changes
andSFAS No. 3, Reporting Accounting Changes in
Interim Financial Statements. This statement requires
retrospective application, unless impracticable, for changes in
accounting principles in the absence of transition requirements
specific to newly adopted accounting principles. This statement
is effective for any accounting changes and corrections of
errors made by us beginning September 1, 2006.
In July 2006, the FASB issued FASB interpretation
(FIN) No. 48, Accounting for Uncertainties in
Income tax - an Interpretation of FASB Statement
No. 109. This interpretation clarifies the accounting
for uncertainties in income taxes. It prescribes a recognition
and measurement threshold for financial statement disclosure of
tax positions taken or expected to be taken on a tax return.
This interpretation is effective for us for the fiscal year
beginning September 1, 2007. Management has not yet
determined the impact on the Consolidated Financial Statements.
Forward Looking
Statements
From time to time, Greenbrier or its representatives have made
or may make forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including,
without limitation, statements as to expectations, beliefs and
strategies regarding the future. Such forward-looking statements
may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive
officer or in various filings made by us with the Securities and
Exchange Commission. These forward-looking statements rely on a
number of assumptions concerning future events. You can identify
these forward-looking statements by forward-looking words such
as expect, anticipate,
believe, intend, plan,
seek, forecast, estimate,
continue, may, will,
would, could, likely and
similar expressions. These forward-looking statements are
subject to risks and uncertainties that are difficult to
predict, may be beyond our control and could cause actual
results to differ materially from those currently anticipated.
Important factors that could cause actual results to differ
materially from those currently anticipated or suggested by
these forward-looking statements and that could adversely affect
our future financial performance and stockholder value are
identified in Risk Factors and may also include the
following:
|
|
|
continued industry demand at current levels for railcar
products, given substantial price increases; |
|
|
industry overcapacity and our manufacturing capacity utilization; |
|
|
ability to utilize beneficial tax strategies; |
|
|
decreases in carrying value of assets due to impairment; |
The Greenbrier Companies 2006
Annual
Report 25
|
|
|
changes in future maintenance requirements; |
|
|
effects of local statutory accounting conventions on compliance
with covenants in certain loan agreements; |
|
|
delays in receipt of orders, risks that contracts may be
canceled during their term or not renewed and that customers may
not purchase as much equipment under existing contracts as
anticipated; and |
|
|
ability to replace maturing lease revenue and earnings with
revenue and earnings from additions to the lease fleet and
management services. |
Any forward-looking statement should be considered in light of
these factors and reflects our belief only at the time the
statement is made. We assume no obligation to update or revise
any forward-looking statements to reflect actual results,
changes in assumptions or changes in other factors affecting the
forward-looking statements.
Item 7a. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange
Risk
We have operations in Canada, Mexico, Germany and Poland that
conduct business in their local currencies as well as other
regional currencies. To mitigate our exposure to transactions
denominated in currencies other than the functional currency of
each entity, we enter into foreign currency forward exchange
contracts to protect the margin on a portion of forecast foreign
currency sales. At August 31, 2006, $32.2 million of
forecast sales were hedged by foreign exchange contracts.
Because of the variety of currencies in which purchases and
sales are transacted and the interaction between currency rates,
it is not possible to predict the impact a movement in a single
foreign currency exchange rate would have on future operating
results. We believe the exposure to foreign exchange risk is not
material.
In addition to exposure to transaction gains or losses, we are
also exposed to foreign currency exchange risk related to the
net asset position of our foreign subsidiaries. At
August 31, 2006, net assets of foreign subsidiaries
aggregated $39.6 million and a uniform 10% strengthening of
the United States dollar relative to the foreign currencies
would result in a decrease in stock-holders equity of
$4.0 million, 1.8% of total stock-holders equity.
This calculation assumes that each exchange rate would change in
the same direction relative to the United States dollar.
Interest Rate Risk
We have managed our floating rate debt with interest rate swap
agreements, effectively converting $13.4 million of
variable rate debt to fixed rate debt. At August 31, 2006,
the exposure to interest rate risk is limited since 92% of our
debt has fixed rates. As a result, we are only exposed to
interest rate risk relating to our revolving debt and a portion
of term debt. At August 31, 2006, a uniform 10% increase in
interest rates would result in approximately $0.2 million
of additional annual interest expense.
26 The
Greenbrier Companies 2006 Annual Report
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Balance
Sheets
AUGUST 31,
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
2006 |
|
2005 |
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
142,894 |
|
|
$ |
73,204 |
|
|
Restricted cash
|
|
|
2,056 |
|
|
|
93 |
|
|
Accounts and notes receivable
|
|
|
115,565 |
|
|
|
122,957 |
|
|
Inventories
|
|
|
163,151 |
|
|
|
121,698 |
|
|
Railcars held for sale
|
|
|
35,216 |
|
|
|
59,421 |
|
|
Investment in direct finance leases
|
|
|
6,511 |
|
|
|
9,974 |
|
|
Equipment on operating leases
|
|
|
301,009 |
|
|
|
183,155 |
|
|
Property, plant and equipment
|
|
|
80,034 |
|
|
|
73,203 |
|
|
Other
|
|
|
30,878 |
|
|
|
27,502 |
|
|
|
|
$ |
877,314 |
|
|
$ |
671,207 |
|
|
|
Liabilities and
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
Revolving notes
|
|
$ |
22,429 |
|
|
$ |
12,453 |
|
|
Accounts payable and accrued liabilities
|
|
|
204,793 |
|
|
|
195,258 |
|
|
Participation
|
|
|
11,453 |
|
|
|
21,900 |
|
|
Deferred income tax
|
|
|
37,472 |
|
|
|
31,629 |
|
|
Deferred revenue
|
|
|
17,481 |
|
|
|
6,910 |
|
|
Notes payable
|
|
|
362,314 |
|
|
|
214,635 |
|
|
Subordinated debt
|
|
|
2,091 |
|
|
|
8,617 |
|
|
Subsidiary shares subject to mandatory redemption
|
|
|
|
|
|
|
3,746 |
|
|
Commitments and contingencies (Notes 24 & 25)
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock - without par value; 25,000 shares
authorized; none outstanding
|
|
|
|
|
|
|
|
|
|
Common stock - without par value; 50,000 shares
authorized; 15,954 and 15,479 outstanding at August 31,
2006 and 2005
|
|
|
16 |
|
|
|
15 |
|
|
Additional paid-in capital
|
|
|
71,124 |
|
|
|
62,768 |
|
|
Retained earnings
|
|
|
148,542 |
|
|
|
113,987 |
|
|
Accumulated other comprehensive loss
|
|
|
(401 |
) |
|
|
(711 |
) |
|
|
|
|
219,281 |
|
|
|
176,059 |
|
|
|
|
$ |
877,314 |
|
|
$ |
671,207 |
|
|
The accompanying notes are an integral part of these financial
statements.
The Greenbrier Companies 2006
Annual
Report 27
Consolidated Statements of
Operations
YEARS ENDED AUGUST 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
2006 |
|
2005 |
|
2004 |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
851,289 |
|
|
$ |
941,161 |
|
|
$ |
653,234 |
|
|
Leasing & services
|
|
|
102,534 |
|
|
|
83,061 |
|
|
|
76,217 |
|
|
|
|
|
953,823 |
|
|
|
1,024,222 |
|
|
|
729,451 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
754,421 |
|
|
|
857,950 |
|
|
|
595,026 |
|
|
Leasing & services
|
|
|
42,023 |
|
|
|
41,099 |
|
|
|
42,241 |
|
|
|
|
|
796,444 |
|
|
|
899,049 |
|
|
|
637,267 |
|
Margin
|
|
|
157,379 |
|
|
|
125,173 |
|
|
|
92,184 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
70,918 |
|
|
|
57,425 |
|
|
|
48,288 |
|
|
Interest and foreign exchange
|
|
|
25,396 |
|
|
|
14,835 |
|
|
|
11,468 |
|
|
Special charges
|
|
|
|
|
|
|
2,913 |
|
|
|
1,234 |
|
|
|
|
|
96,314 |
|
|
|
75,173 |
|
|
|
60,990 |
|
Earnings before income tax and equity in unconsolidated
subsidiaries
|
|
|
61,065 |
|
|
|
50,000 |
|
|
|
31,194 |
|
Income tax expense
|
|
|
(21,698 |
) |
|
|
(19,911 |
) |
|
|
(9,119 |
) |
|
Earnings before equity in unconsolidated subsidiaries
|
|
|
39,367 |
|
|
|
30,089 |
|
|
|
22,075 |
|
Equity in earnings (loss) of unconsolidated subsidiaries
|
|
|
169 |
|
|
|
(267 |
) |
|
|
(2,036 |
) |
|
Earnings from continuing operations
|
|
|
39,536 |
|
|
|
29,822 |
|
|
|
20,039 |
|
Earnings from discontinued operations (net of tax)
|
|
|
62 |
|
|
|
|
|
|
|
739 |
|
|
Net earnings
|
|
$ |
39,598 |
|
|
$ |
29,822 |
|
|
$ |
20,778 |
|
|
Basic earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
2.51 |
|
|
$ |
1.99 |
|
|
$ |
1.38 |
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.05 |
|
|
|
|
$ |
2.51 |
|
|
$ |
1.99 |
|
|
$ |
1.43 |
|
|
Diluted earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
2.48 |
|
|
$ |
1.92 |
|
|
$ |
1.32 |
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.05 |
|
|
|
|
$ |
2.48 |
|
|
$ |
1.92 |
|
|
$ |
1.37 |
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
15,751 |
|
|
|
15,000 |
|
|
|
14,569 |
|
Diluted
|
|
|
15,937 |
|
|
|
15,560 |
|
|
|
15,199 |
|
The accompanying notes are an integral part of these financial
statements.
28 The
Greenbrier Companies 2006 Annual Report
Consolidated Statements of
Stockholders Equity
and Comprehensive Income
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Additional |
|
|
|
Other |
|
Total |
(In thousands, except per share |
|
Common Stock |
|
Paid-In |
|
Retained |
|
Comprehensive |
|
Stockholders |
amounts) |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (loss) |
|
Equity |
|
Balance September 1,
2003
|
|
|
14,312 |
|
|
$ |
14 |
|
|
$ |
51,073 |
|
|
$ |
68,165 |
|
|
$ |
(8,110 |
) |
|
$ |
111,142 |
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,778 |
|
|
|
|
|
|
|
20,778 |
|
Translation adjustment (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
444 |
|
|
|
444 |
|
Reclassification of derivative financial instruments recognized
in net earnings (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,865 |
) |
|
|
(3,865 |
) |
Unrealized gain on derivative financial instruments (net of tax
effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,586 |
|
|
|
5,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,943 |
|
Cash dividends ($0.06 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(889 |
) |
|
|
|
|
|
|
(889 |
) |
Stock options exercised
|
|
|
572 |
|
|
|
1 |
|
|
|
6,092 |
|
|
|
|
|
|
|
|
|
|
|
6,093 |
|
|
Balance August 31,
2004
|
|
|
14,884 |
|
|
|
15 |
|
|
|
57,165 |
|
|
|
88,054 |
|
|
|
(5,945 |
) |
|
|
139,289 |
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,822 |
|
|
|
|
|
|
|
29,822 |
|
Translation adjustment (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,653 |
|
|
|
2,653 |
|
Reclassification of derivative financial instruments recognized
in net earnings (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,355 |
) |
|
|
(2,355 |
) |
Unrealized gain on derivative financial instruments (net of tax
effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,936 |
|
|
|
4,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,056 |
|
Net proceeds from equity offering
|
|
|
5,175 |
|
|
|
5 |
|
|
|
127,457 |
|
|
|
|
|
|
|
|
|
|
|
127,462 |
|
Shares repurchased
|
|
|
(5,342 |
) |
|
|
(5 |
) |
|
|
(127,533 |
) |
|
|
|
|
|
|
|
|
|
|
(127,538 |
) |
Cash dividends ($0.26 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,889 |
) |
|
|
|
|
|
|
(3,889 |
) |
Restricted stock awards
|
|
|
353 |
|
|
|
|
|
|
|
10,221 |
|
|
|
|
|
|
|
|
|
|
|
10,221 |
|
Unamortized restricted stock
|
|
|
|
|
|
|
|
|
|
|
(9,980 |
) |
|
|
|
|
|
|
|
|
|
|
(9,980 |
) |
Stock options exercised
|
|
|
409 |
|
|
|
|
|
|
|
3,045 |
|
|
|
|
|
|
|
|
|
|
|
3,045 |
|
Tax benefit of stock options exercised
|
|
|
|
|
|
|
|
|
|
|
2,393 |
|
|
|
|
|
|
|
|
|
|
|
2,393 |
|
|
Balance August 31,
2005
|
|
|
15,479 |
|
|
|
15 |
|
|
|
62,768 |
|
|
|
113,987 |
|
|
|
(711 |
) |
|
|
176,059 |
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,598 |
|
|
|
|
|
|
|
39,598 |
|
Translation adjustment (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,570 |
|
|
|
1,570 |
|
Reclassification of derivative financial instruments recognized
in net earnings (net of tax effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,566 |
) |
|
|
(2,566 |
) |
Unrealized gain on derivative financial instruments (net of tax
effect)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,306 |
|
|
|
1,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,980 |
|
Cash dividends ($0.32 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,043 |
) |
|
|
|
|
|
|
(5,043 |
) |
Restricted stock awards
|
|
|
72 |
|
|
|
|
|
|
|
2,179 |
|
|
|
|
|
|
|
|
|
|
|
2,179 |
|
Unamortized restricted stock
|
|
|
|
|
|
|
|
|
|
|
(1,914 |
) |
|
|
|
|
|
|
|
|
|
|
(1,914 |
) |
Restricted stock amortization
|
|
|
|
|
|
|
|
|
|
|
2,550 |
|
|
|
|
|
|
|
|
|
|
|
2,550 |
|
Stock options exercised
|
|
|
403 |
|
|
|
1 |
|
|
|
2,941 |
|
|
|
|
|
|
|
|
|
|
|
2,942 |
|
Tax benefit of stock options exercised
|
|
|
|
|
|
|
|
|
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
|
2,600 |
|
|
Balance August 31,
2006
|
|
|
15,954 |
|
|
$ |
16 |
|
|
$ |
71,124 |
|
|
$ |
148,542 |
|
|
$ |
(401 |
) |
|
$ |
219,281 |
|
|
The accompanying notes are an integral part of these financial
statements.
The Greenbrier Companies 2006
Annual
Report 29
Consolidated Statements of Cash
Flows
YEARS ENDED AUGUST 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$ |
39,598 |
|
|
$ |
29,822 |
|
|
$ |
20,778 |
|
|
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
(62 |
) |
|
|
|
|
|
|
(739 |
) |
|
|
Deferred income taxes
|
|
|
5,893 |
|
|
|
5,807 |
|
|
|
9,646 |
|
|
|
Tax benefit of stock options exercised
|
|
|
|
|
|
|
2,393 |
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
25,253 |
|
|
|
22,939 |
|
|
|
20,840 |
|
|
|
Gain on sales of equipment
|
|
|
(10,948 |
) |
|
|
(6,797 |
) |
|
|
(629 |
) |
|
|
Special charges
|
|
|
|
|
|
|
|
|
|
|
1,234 |
|
|
|
Other
|
|
|
278 |
|
|
|
651 |
|
|
|
1,332 |
|
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
8,948 |
|
|
|
(32,328 |
) |
|
|
(37,786 |
) |
|
|
|
Inventories
|
|
|
(37,517 |
) |
|
|
15,403 |
|
|
|
(22,355 |
) |
|
|
|
Railcars held for sale
|
|
|
156 |
|
|
|
(38,495 |
) |
|
|
14,097 |
|
|
|
|
Other
|
|
|
2,577 |
|
|
|
(5,167 |
) |
|
|
2,940 |
|
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
5,487 |
|
|
|
3 |
|
|
|
30,956 |
|
|
|
|
Participation
|
|
|
(10,447 |
) |
|
|
(15,207 |
) |
|
|
(18,794 |
) |
|
|
|
Deferred revenue
|
|
|
10,326 |
|
|
|
4,285 |
|
|
|
(37,495 |
) |
|
|
Net cash provided by (used in) operating activities
|
|
|
39,542 |
|
|
|
(16,691 |
) |
|
|
(15,975 |
) |
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments received under direct finance leases
|
|
|
2,048 |
|
|
|
5,733 |
|
|
|
9,461 |
|
|
Proceeds from sales of equipment
|
|
|
28,863 |
|
|
|
32,528 |
|
|
|
16,217 |
|
|
Investment in and advances to unconsolidated subsidiaries
|
|
|
550 |
|
|
|
92 |
|
|
|
(2,240 |
) |
|
Acquisition of joint venture interest
|
|
|
|
|
|
|
8,435 |
|
|
|
|
|
|
Decrease (increase) in restricted cash
|
|
|
(1,958 |
) |
|
|
1,007 |
|
|
|
4,757 |
|
|
Capital expenditures
|
|
|
(140,569 |
) |
|
|
(69,123 |
) |
|
|
(42,959 |
) |
|
|
Net cash used in investing activities
|
|
|
(111,066 |
) |
|
|
(21,328 |
) |
|
|
(14,764 |
) |
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in revolving notes
|
|
|
8,965 |
|
|
|
2,514 |
|
|
|
(14,030 |
) |
|
Proceeds from notes payable
|
|
|
154,567 |
|
|
|
169,752 |
|
|
|
|
|
|
Repayments of notes payable
|
|
|
(13,191 |
) |
|
|
(67,691 |
) |
|
|
(21,539 |
) |
|
Repayments of subordinated debt
|
|
|
(6,526 |
) |
|
|
(6,325 |
) |
|
|
(5,979 |
) |
|
Dividends
|
|
|
(5,042 |
) |
|
|
(3,889 |
) |
|
|
(889 |
) |
|
Net proceeds from equity offering
|
|
|
|
|
|
|
127,462 |
|
|
|
|
|
|
Re-purchase and retirement of stock
|
|
|
|
|
|
|
(127,538 |
) |
|
|
|
|
|
Stock options exercised and restricted stock awards
|
|
|
5,757 |
|
|
|
3,286 |
|
|
|
6,093 |
|
|
Excess tax benefit of stock options exercised
|
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
Purchase of subsidiarys shares subject to mandatory
redemption
|
|
|
(4,636 |
) |
|
|
|
|
|
|
(1,277 |
) |
|
|
Net cash provided by (used in) financing activities
|
|
|
142,494 |
|
|
|
97,571 |
|
|
|
(37,621 |
) |
|
|
Effect of exchange rate changes
|
|
|
(1,280 |
) |
|
|
1,542 |
|
|
|
3,172 |
|
Increase (decrease) in cash and cash equivalents
|
|
|
69,690 |
|
|
|
61,094 |
|
|
|
(65,188 |
) |
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
73,204 |
|
|
|
12,110 |
|
|
|
77,298 |
|
|
End of period
|
|
$ |
142,894 |
|
|
$ |
73,204 |
|
|
$ |
12,110 |
|
|
Cash paid during the period
for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
24,406 |
|
|
$ |
10,187 |
|
|
$ |
11,376 |
|
Income taxes
|
|
$ |
21,256 |
|
|
$ |
12,287 |
|
|
$ |
5,892 |
|
Non cash activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfer of railcars held for sale to equipment on operating
leases
|
|
$ |
23,955 |
|
|
$ |
|
|
|
$ |
|
|
Supplemental disclosure of
subsidiary acquired:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets acquired, net of cash
|
|
$ |
|
|
|
$ |
(19,051 |
) |
|
$ |
|
|
|
Liabilities assumed
|
|
|
|
|
|
|
19,529 |
|
|
|
|
|
|
Investment previously recorded for unconsolidated joint venture
|
|
|
|
|
|
|
7,957 |
|
|
|
|
|
|
|
Cash acquired
|
|
$ |
|
|
|
$ |
8,435 |
|
|
$ |
|
|
|
The accompanying notes are an integral part of these financial
statements.
30 The
Greenbrier Companies 2006 Annual Report
Notes to Consolidated Financial
Statements
Note 1 - Nature of
Operations
The Greenbrier Companies, Inc. and Subsidiaries (Greenbrier or
the Company) currently operates in two primary business
segments: manufacturing and leasing & services. The two
business segments are operationally integrated. With operations
in the United States, Canada, Mexico and Europe, the
manufacturing segment produces double-stack intermodal railcars,
conventional railcars, tank cars, marine vessels and performs
railcar repair, refurbishment and maintenance activities. The
Company also produces rail castings through an unconsolidated
joint venture and also manufactures new freight cars through the
use of unaffiliated subcontractors. The leasing &
services segment owns approximately 9,000 railcars and
provides management services for approximately
135,000 railcars for railroads, shippers and other leasing
and transportation companies.
Note 2 - Summary of
Significant Accounting Policies
Principles of consolidation - The financial
statements include the accounts of the Company and its
majority-owned subsidiaries. All significant intercompany
transactions and balances are eliminated upon consolidation.
Investments in and long-term advances to joint ventures in which
the Company has a 50% or less ownership interest are accounted
for by the equity method and included in other assets.
Unclassified Balance Sheet - The balance sheets of
the Company are presented in an unclassified format as a result
of significant leasing activities for which the current or
noncurrent distinction is not relevant. In addition, the
activities of the leasing & services and manufacturing
segments are so intertwined that in the opinion of management,
any attempt to separate the respective balance sheet categories
would not be meaningful and may lead to the development of
misleading conclusions by the reader.
Foreign currency translation - Operations outside
the United States prepare financial statements in currencies
other than the United States dollar. Revenues and expenses are
translated at average exchange rates for the year, while assets
and liabilities are translated at year-end exchange rates.
Translation adjustments are accumulated as a separate component
of stockholders equity in other comprehensive income
(loss), net of tax.
Cash and cash equivalents - Cash is temporarily
invested primarily in bankers acceptances, United States
Treasury bills, commercial paper and money market funds. All
highly-liquid investments with a maturity of three months or
less at the date of acquisition are considered cash equivalents.
Accounts Receivable - Accounts receivable are stated
net of allowance for doubtful accounts of $3.1 million and
$2.5 million as of August 31, 2006 and 2005.
Inventories - Inventories are valued at the lower of
cost (first-in,
first-out or average cost) or market.
Work-in-process
includes material, labor and overhead.
Railcars held for sale - Railcars held for sale
consist of new railcars in transit to delivery point or on lease
with the intent to sell and used railcars that will either be
sold or refurbished, placed on lease and then sold.
Equipment on operating leases - Equipment on
operating leases is stated at cost. Depreciation to estimated
salvage value is provided on the straight-line method over the
estimated useful lives of up to thirty-five years.
Property, plant and equipment - Property, plant and
equipment is stated at cost. Depreciation is provided on the
straight-line method over estimated useful lives which are as
follows:
|
|
|
|
|
|
|
Depreciable Life | |
|
|
| |
Buildings and improvements
|
|
|
10-25 years |
|
Machinery & equipment
|
|
|
3-15 years |
|
Other
|
|
|
3-7 years |
|
Intangible assets - Loan fees are capitalized and
amortized as interest expense over the life of the related
borrowings. Goodwill is not significant and is included in other
assets. Goodwill is tested for impairment at least annually and
more frequently if material changes in events or circumstances
arise. Impairment would result in a write-down to fair market
value as necessary.
Impairment of long-lived assets - When changes in
circumstances indicate the carrying amount of certain long-lived
assets may not be recoverable, the assets will be evaluated for
impairment. If the forecast
The Greenbrier Companies 2006
Annual
Report 31
undiscounted future cash flows are less than the carrying amount
of the assets, an impairment charge to reduce the carrying value
of the assets to fair value will be recognized in the current
period.
Maintenance obligations - The Company is responsible
for maintenance on a portion of the managed and owned lease
fleet under the terms of maintenance obligations defined in the
underlying lease or management agreement. The estimated
liability is based on maintenance histories for each type and
age of railcar. The liability, included in accounts payable and
accrued liabilities, is reviewed periodically and updated based
on maintenance trends and known future repair or refurbishment
requirements.
Warranty accruals - Warranty accruals are estimated
and charged to operations to cover a defined warranty period.
The estimated warranty cost is based on history of warranty
claims for each particular product type. For new product types
without a warranty history, preliminary estimates are based on
historical information for similar product types. The warranty
accruals, included in accounts payable and accrued liabilities,
are reviewed periodically and updated based on warranty trends.
Contingent rental assistance - The Company has
entered into contingent rental assistance agreements on certain
railcars, subject to leases, that have been sold to third
parties. These agreements guarantee the purchasers a minimum
lease rental, subject to a maximum defined rental assistance
amount, over remaining periods that range from one to six years.
A liability is established when management believes that it is
probable that a rental shortfall will occur and the amount can
be estimated. All existing rental assistance agreements were
entered into prior to December 31, 2002. Any future
contracts would use the guidance required by Financial
Accounting Standards Board (FASB) Interpretation
(FIN) 45.
Income taxes - The liability method is used to
account for income taxes. Deferred income taxes are provided for
the temporary effects of differences between assets and
liabilities recognized for financial statement and income tax
reporting purposes. Valuation allowances reduce deferred tax
assets to an amount that will more likely than not be realized.
The Company also provides for income tax contingencies when
management considers them probable of occurring and reasonably
estimable.
Accumulated other comprehensive income (loss)
-Accumulated other comprehensive income (loss) represents
net earnings (loss) plus all other changes in net assets from
non-owner sources.
Revenue recognition - Revenue is recognized when
persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the price is fixed or
determinable and collectibility is reasonably assured.
Railcars are generally manufactured, repaired or refurbished
under firm orders from third parties. Revenue is recognized when
railcars are completed, accepted by an unaffiliated customer and
contractual contingencies removed. Marine revenues are either
recognized on the percentage of completion method during the
construction period or on the completed contract method based on
the terms of the contract. Direct finance lease revenue is
recognized over the lease term in a manner that produces a
constant rate of return on the net investment in the lease.
Operating lease revenue is recognized as earned under the lease
terms. Certain leases are operated under car hire arrangements
whereby revenue is earned based on utilization, car hire rates
and terms specified in the lease agreement. Car hire revenue is
reported from a third party source two months in arrears;
however, such revenue is accrued in the month earned based on
estimates of use from historical activity and is adjusted to
actual as reported. Such adjustments historically have not been
significant from the estimate.
Research and development - Research and development
costs are expensed as incurred. Research and development costs
incurred for new product development during 2006, 2005 and 2004
were $2.2 million, $1.9 million and $3.0 million.
32 The
Greenbrier Companies 2006 Annual Report
Forward exchange contracts - Foreign operations give
rise to risks from changes in foreign currency exchange rates.
Forward exchange contracts with established financial
institutions are utilized to hedge a portion of such risk.
Realized and unrealized gains and losses are deferred in other
accumulated comprehensive income (loss) and recognized in
earnings concurrent with the hedged transaction or when the
occurrence of the hedged transaction is no longer considered
probable. Even though forward exchange contracts are entered
into to mitigate the impact of currency fluctuations, certain
exposure remains which may affect operating results.
Interest rate instruments - Interest rate swap
agreements are utilized to reduce the impact of changes in
interest rates on certain debt. The net cash amounts paid or
received under the agreements are accrued and recognized as an
adjustment to interest expense.
Net earnings per share - Basic earnings per common
share (EPS) excludes the potential dilution that would occur if
additional shares were issued upon exercise of outstanding stock
options, while diluted EPS takes this potential dilution into
account using the treasury stock method.
Stock-based compensation - Prior to the adoption of
SFAS 123R on September 1, 2005, compensation expense
for employee stock options was measured using the method
prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. In accordance with APB Opinion
No. 25, Greenbrier did not recognize compensation expense
for employee stock options because options were only granted
with an exercise price equal to the fair value of the stock on
the effective date of grant. If the Company had elected to
recognize compensation expense using a fair value approach, the
pro forma net earnings and earnings per share would have been as
follows:
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
2005 |
|
2004 |
|
Net earnings, as reported
|
|
$ |
29,822 |
|
|
$ |
20,778 |
|
Total stock-based employee compensation expense determined under
fair value based method for all awards, net of tax
(1)
|
|
|
(235 |
) |
|
|
(319 |
) |
|
Net earnings, pro forma
|
|
$ |
29,587 |
|
|
$ |
20,459 |
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
1.99 |
|
|
$ |
1.43 |
|
|
|
Pro forma
|
|
$ |
1.97 |
|
|
$ |
1.40 |
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
|
As reported
|
|
$ |
1.92 |
|
|
$ |
1.37 |
|
|
|
Pro forma
|
|
$ |
1.90 |
|
|
$ |
1.35 |
|
|
|
|
(1) |
Compensation expense was determined using the
Black-Scholes-Merton option-pricing model which was developed to
estimate value of independently traded options.
Greenbriers options are not independently traded. |
All stock options were vested prior to September 1, 2005
and accordingly no compensation expense was recognized for stock
options for the year ended August 31, 2006.
The value, at the date of grant, of stock awarded under
restricted stock grants is amortized as compensation expense
over the vesting period of two to five years. Compensation
expense recognized related to restricted stock grants for 2006
and 2005 was $2.7 million and $0.2 million. No
restricted stock grants were awarded prior to 2005.
Management estimates - The preparation of financial
statements in accordance with generally accepted accounting
principles requires judgment on the part of management to arrive
at estimates and assumptions on matters that are inherently
uncertain, including evaluating the remaining life and
recoverability of long-lived assets. These estimates may affect
the amount of assets, liabilities, revenue and expenses reported
in the financial statements and accompanying notes. Estimates
and assumptions are periodically evaluated and may be adjusted
in future periods. Actual results could differ from these
estimates.
Reclassifications - Certain reclassifications have
been made to prior years Consolidated Financial Statements
to conform with the 2006 presentation.
The Greenbrier Companies 2006
Annual
Report 33
Initial Adoption of Accounting Policies - On
September 1, 2005, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 123R,
Share Based Payment. This statement requires all entities
to recognize compensation expense in an amount equal to the fair
value of share-based payments (stock options and restricted
stock) granted to employees. The implementation did not have a
material effect on the Companys Consolidated Financial
Statements as all stock options were vested prior to
August 31, 2005. Restricted stock grants are currently
being recorded as compensation expense over the vesting period,
consistent with prior periods.
Prospective Accounting Changes - In May 2005, the
Financial Accounting Standards Board (FASB) issued
SFAS No. 154, Accounting Changes and Error
Corrections which replaces Accounting Principles Board
(APB) Opinion No. 20, Accounting Changes and
SFAS No. 3, Reporting Accounting Changes in Interim
Financial Statements. This statement requires retrospective
application, unless impracticable, for changes in accounting
principles in the absence of transition requirements specific to
newly adopted accounting principles. This statement is effective
for any accounting changes and corrections of errors made by the
Company beginning September 1, 2006.
In July 2006, the FASB issued FASB interpretation
(FIN) No. 48, Accounting for Uncertainties in
Income Tax - an Interpretation of FASB Statement
No. 109. This interpretation clarifies the accounting
for uncertainties in income taxes. It prescribes a recognition
and measurement threshold for financial statement disclosure of
tax positions taken or expected to be taken on a tax return.
This interpretation is effective for the Company for the fiscal
year beginning September 1, 2007. Management has not yet
determined the impact on the Consolidated Financial Statements.
Note 3 -
Acquisitions
In September 1998 Greenbrier entered into a joint venture with
Bombardier Transportation (Bombardier) to build railroad freight
cars at a portion of Bombardiers existing manufacturing
facility in Sahagun, Mexico. Each party held a 50%
non-controlling interest in the joint venture. In December 2004,
Greenbrier acquired Bombardiers interest and will pay
Bombardier a purchase price of $9.0 million over five years
and as a result of the allocation of the purchase price among
assets and liabilities, recorded $1.3 million in goodwill.
Greenbrier leases a portion of the plant from Bombardier and has
entered into a service agreement under which Bombardier provides
labor and other services. These operations, previously accounted
for under the equity method, were consolidated for financial
reporting purposes beginning in December 2004.
The following unaudited pro forma financial information for the
years ended August 31, 2005 and 2004 was prepared as if the
transaction to acquire Bombardiers equity in the Mexican
operations had occurred at the beginning of each period
presented:
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
2005 |
|
2004 |
|
Revenue
|
|
$ |
1,052,914 |
|
|
$ |
793,775 |
|
Net earnings
|
|
$ |
28,633 |
|
|
$ |
18,110 |
|
Basic earnings per share
|
|
$ |
1.91 |
|
|
$ |
1.24 |
|
Diluted earnings per share
|
|
$ |
1.84 |
|
|
$ |
1.19 |
|
The unaudited pro forma financial information is not necessarily
indicative of what actual results would have been had the
transaction occurred at the beginning of each period presented.
In December 2005, all of the Canadian subsidiary shares subject
to mandatory redemption of $3.7 million were redeemed for
$5.3 million. The redemption resulted in a
$0.9 million decrease in accumulated other comprehensive
income and interest expense of $0.7 million.
34 The
Greenbrier Companies 2006 Annual Report
Note 4 - Discontinued
Operations
In August 2004, the Company reached a settlement agreement on
litigation initiated in 1998 by the former shareholders of
InterAmerican Logistics, Inc. (InterAmerican) which was acquired
in 1996 as part of the Companys transportation logistics
segment. The litigation alleged that Greenbrier violated the
agreements pursuant to which it acquired ownership of
InterAmerican. A plan to dispose of the transportation logistics
segment, which included InterAmerican, was adopted in 1997 and
completed in 1998 and accordingly, results of operations for
InterAmerican were reclassified to discontinued operations at
that time. Upon final disposition in 1998, the balance of the
liability for loss on discontinued operations remained pending
resolution of this litigation. In August 2004, the litigation
was settled resulting in the recognition of a $1.3 million
pre-tax gain on discontinued operations ($0.7 million, net
of tax) as a result of reversal of substantially all of the
remaining contingent liability. A small accrual remained to
cover additional expenses. In 2006, the remaining liability of
$0.1 million (net of tax) was reversed as all expenses had
been paid.
Note 5 - Special
Charges
The results of operations for the year ended August 31,
2005 include special charges of $2.9 million for debt
prepayment penalties and costs associated with settlement of
interest rate swap agreements on $55.7 million in notes
payable that were refinanced through a $175.0 million
senior unsecured note offering.
The results of operations for the year ended August 31,
2004 include special charges totaling $1.2 million which
consist of a $7.5 million write-off of the remaining
balance of European designs and patents partially offset by a
$6.3 million reduction of purchase price liabilities
associated with the settlement of arbitration on the acquisition
of European designs and patents.
Note 6 -
Inventories
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Manufacturing supplies and raw materials
|
|
$ |
49,631 |
|
|
$ |
33,653 |
|
|
Work-in-process
|
|
|
118,555 |
|
|
|
91,637 |
|
|
Lower of cost or market adjustment
|
|
|
(5,035 |
) |
|
|
(3,592 |
) |
|
|
|
$ |
163,151 |
|
|
$ |
121,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Lower of cost or market
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$ |
3,592 |
|
|
$ |
3,811 |
|
|
$ |
3,268 |
|
Charge to cost of revenue
|
|
|
1,976 |
|
|
|
1,398 |
|
|
|
1,617 |
|
Usage
|
|
|
(670 |
) |
|
|
(2,055 |
) |
|
|
(1,238 |
) |
Currency translation effect
|
|
|
137 |
|
|
|
258 |
|
|
|
164 |
|
Acquisition
|
|
|
|
|
|
|
180 |
|
|
|
|
|
|
Balance at end of period
|
|
$ |
5,035 |
|
|
$ |
3,592 |
|
|
$ |
3,811 |
|
|
Note 7 - Investment in
Direct Finance Leases
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Future minimum receipts on lease contracts
|
|
$ |
12,792 |
|
|
$ |
8,394 |
|
Maintenance, insurance and taxes
|
|
|
(709 |
) |
|
|
(1,037 |
) |
|
Net minimum lease receipts
|
|
|
12,083 |
|
|
|
7,357 |
|
Estimated residual values
|
|
|
2,049 |
|
|
|
5,899 |
|
Unearned finance charges
|
|
|
(7,621 |
) |
|
|
(3,282 |
) |
|
|
|
$ |
6,511 |
|
|
$ |
9,974 |
|
|
Future minimum receipts on the direct finance lease contracts
are as follows:
|
|
|
|
|
(In thousands) |
|
|
| |
Year ending August 31,
|
|
|
|
|
2007
|
|
$ |
2,032 |
|
2008
|
|
|
1,432 |
|
2009
|
|
|
1,329 |
|
2010
|
|
|
1,313 |
|
2011
|
|
|
1,313 |
|
Thereafter
|
|
|
5,373 |
|
|
|
|
$ |
12,792 |
|
|
Note 8 - Equipment on
Operating Leases
Equipment on operating leases is reported net of accumulated
depreciation of $75.3 million and $79.6 million as of
August 31, 2006 and 2005. In addition, certain railcar
equipment leased-in by
the Company (see Note 24) is subleased to customers under
non-cancelable operating leases. Aggregate
The Greenbrier Companies 2006
Annual
Report 35
minimum future amounts receivable under all non-cancelable
operating and subleases are as follows:
|
|
|
|
|
(In thousands) |
|
|
|
Year ending August 31,
|
|
|
|
|
2007
|
|
$ |
29,508 |
|
2008
|
|
|
26,253 |
|
2009
|
|
|
17,281 |
|
2010
|
|
|
14,307 |
|
2011
|
|
|
10,588 |
|
Thereafter
|
|
|
28,349 |
|
|
|
|
$ |
126,286 |
|
|
Certain equipment is also operated under daily, monthly or car
hire arrangements. Associated revenues amounted to
$28.6 million, $28.0 million and $30.2 million
for the years ended August 31, 2006, 2005 and 2004.
Note 9 - Property,
Plant and Equipment
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Land and improvements
|
|
$ |
10,386 |
|
|
$ |
9,824 |
|
Machinery and equipment
|
|
|
120,918 |
|
|
|
105,910 |
|
Buildings and improvements
|
|
|
61,524 |
|
|
|
55,973 |
|
Other
|
|
|
14,642 |
|
|
|
16,430 |
|
|
|
|
|
207,470 |
|
|
|
188,137 |
|
Accumulated depreciation
|
|
|
(127,436 |
) |
|
|
(114,934 |
) |
|
|
|
$ |
80,034 |
|
|
$ |
73,203 |
|
|
|
|
Note 10 - |
Investment in Unconsolidated
Subsidiaries |
In June 2003, the Company acquired a minority ownership interest
in a joint venture which produces castings for freight cars.
This joint venture is accounted for under the equity method and
the investment is included in other assets on the Consolidated
Balance Sheets.
Summarized financial data for the castings joint venture is as
follows:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Current assets
|
|
$ |
14,198 |
|
|
$ |
17,135 |
|
Total assets
|
|
$ |
30,418 |
|
|
$ |
33,632 |
|
Current liabilities
|
|
$ |
13,983 |
|
|
$ |
14,931 |
|
Equity
|
|
$ |
7,719 |
|
|
$ |
6,862 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Revenue
|
|
$ |
123,086 |
|
|
$ |
109,801 |
|
|
$ |
55,722 |
|
Net earnings (loss)
|
|
$ |
857 |
|
|
$ |
1,942 |
|
|
$ |
(4,154 |
) |
In December 2004, Greenbrier acquired Bombardiers interest
in our Mexican railcar manufacturing joint venture previously
accounted for under the equity method. Greenbriers share
of the operating results through November 2004 are included as
equity in loss of unconsolidated subsidiaries in the
Consolidated Statements of Operations. Financial results of the
Mexican operations are consolidated for financial reporting
purposes beginning December 1, 2004.
Summarized financial data for the joint venture is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
(In thousands) |
|
November 30, 2004 |
|
August 31, 2004 |
|
Revenue
|
|
$ |
30,067 |
|
|
$ |
75,565 |
|
Net loss
|
|
$ |
(1,576 |
) |
|
$ |
(2,956 |
) |
Greenbrier has purchased railcars from the joint venture for
subsequent sale or for its lease fleet for which the
Companys portion of margin is eliminated upon
consolidation. In addition, the joint venture paid a management
fee to each owner, of which 50% of the fee earned by Greenbrier
was eliminated upon consolidation.
Note 11 - Revolving
Notes
All amounts originating in foreign currency have been translated
at the August 31, 2006 exchange rate for the following
discussion. Credit facilities aggregated $179.9 million as
of August 31, 2006. Available borrowings are based on
defined levels of inventory, receivables, leased equipment and
property, plant and equipment, as well as total debt to
consolidated capitalization, tangible net worth and interest
coverage ratios which at August 31, 2006 levels would
provide for maximum borrowing of $148.4 million of which
$22.4 million is outstanding. A $125.0 million
revolving line of credit is available through June 2010 to
provide working capital and interim financing of equipment for
the United States and Mexican operations. A $27.2 million
line of credit is available through June 2010 for working
capital for Canadian manufacturing operations. Lines of credit
totaling $27.7 million are available principally through
June 2008 for working capital for the European manufacturing
operation. Advances bear interest at variable rates that depend
on the type of borrowing and the defined ratio of debt to total
36 The
Greenbrier Companies 2006 Annual Report
capitalization. At August 31, 2006, there were no
borrowings outstanding under the North American credit
facilities. The European manufacturing credit lines had
$22.4 million outstanding at interest rates of 5.1% and
5.2%.
|
|
Note 12 - |
Accounts Payable and Accrued
Liabilities |
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Trade payables and accrued liabilities
|
|
$ |
141,380 |
|
|
$ |
129,499 |
|
|
Accrued maintenance
|
|
|
22,985 |
|
|
|
25,464 |
|
|
Accrued payroll and related liabilities
|
|
|
24,525 |
|
|
|
17,292 |
|
|
Accrued warranty
|
|
|
14,201 |
|
|
|
15,037 |
|
|
Other
|
|
|
1,702 |
|
|
|
7,966 |
|
|
|
|
$ |
204,793 |
|
|
$ |
195,258 |
|
|
Note 13 - Maintenance
and Warranty Accruals
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Accrued maintenance
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$ |
25,464 |
|
|
$ |
21,264 |
|
|
$ |
18,155 |
|
Charged to cost of revenue
|
|
|
16,210 |
|
|
|
20,152 |
|
|
|
19,968 |
|
Payments
|
|
|
(18,689 |
) |
|
|
(15,952 |
) |
|
|
(16,859 |
) |
|
Balance at end of period
|
|
$ |
22,985 |
|
|
$ |
25,464 |
|
|
$ |
21,264 |
|
|
Accrued warranty
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$ |
15,037 |
|
|
$ |
12,691 |
|
|
$ |
9,511 |
|
Charged to cost of revenue
|
|
|
3,111 |
|
|
|
4,664 |
|
|
|
4,895 |
|
Payments
|
|
|
(4,492 |
) |
|
|
(3,297 |
) |
|
|
(2,186 |
) |
Currency translation effect
|
|
|
545 |
|
|
|
811 |
|
|
|
471 |
|
Acquisition
|
|
|
|
|
|
|
168 |
|
|
|
|
|
|
Balance at end of period
|
|
$ |
14,201 |
|
|
$ |
15,037 |
|
|
$ |
12,691 |
|
|
Note 14 -
Notes Payable
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Senior unsecured notes
|
|
$ |
235,000 |
|
|
$ |
175,000 |
|
Convertible notes
|
|
|
100,000 |
|
|
|
|
|
Term loans
|
|
|
27,314 |
|
|
|
39,479 |
|
Other notes payable
|
|
|
|
|
|
|
156 |
|
|
|
|
$ |
362,314 |
|
|
$ |
214,635 |
|
|
On November 21, 2005, the Company issued, at par, through a
private placement, $60.0 million aggregate principal amount
of
83/8% senior
unsecured notes due 2015. In January 2006, Greenbrier filed a
registration statement with respect to an offer to exchange
these senior unsecured notes for a new issue of identical notes
registered with the Securities and Exchange Commission. In March
2006, the exchange for the registered notes was completed. The
transaction is an additional offering under the indenture
entered into in connection with the Companys sale of
$175.0 million of senior unsecured notes in May 2005. The
$235.0 million combined senior unsecured notes (the Notes)
have identical terms. Payment on the Notes is guaranteed by
substantially all of the Companys domestic subsidiaries.
Interest is paid in arrears on May 15th and
November 15th of each year.
The Greenbrier Companies 2006
Annual
Report 37
On May 22, 2006, the Company issued, at par, through a
private placement, $100.0 million aggregate principal
amount of 2.375% convertible senior notes due 2026.
Interest will be paid semi-annually in arrears commencing
November 15, 2006. Greenbrier also will pay contingent
interest on the notes in certain circumstances commencing with
the six month period beginning May 15, 2013. In July 2006,
Greenbrier filed a registration statement with respect to an
offer to exchange these convertible senior notes for a new issue
of identical notes registered with the Securities and Exchange
Commission. In August 2006, the exchange for the registered
notes was completed. Payment on the convertible notes is
guaranteed by substantially all of the Companys domestic
subsidiaries.
The convertible senior notes will be convertible upon the
occurrence of specified events into cash and shares, if any, of
Greenbriers common stock at an initial conversion rate of
20.8125 shares per $1,000 principal amount of the notes
(which is equal to an initial conversion price of
$48.05 per share). The initial conversion rate is subject
to adjustment upon the occurrence of certain events, as defined.
On or after May 15, 2013, Greenbrier may redeem all or a
portion of the notes at a redemption price equal to 100% of the
principal amount of the notes plus accrued and unpaid interest.
On May 15, 2013, May 15, 2016 and May 15, 2021
and in the event of certain fundamental changes, holders may
require the Company to repurchase all or a portion of their
notes at a price equal to 100% of the principal amount of the
notes plus accrued and unpaid interest.
Term loans are due in varying installments through August 2017
and are generally collateralized by certain property, plant and
equipment. As of August 31, 2006, the effective interest
rates on the term loans ranged from 4.4% to 8.4%.
The revolving and operating lines of credit, along with notes
payable, contain covenants with respect to the Company and
various subsidiaries, the most restrictive of which, among other
things, limit the ability to: incur additional indebtedness or
guarantees; pay dividends; enter into sale leaseback
transactions; create liens; sell assets; engage in transactions
with affiliates; enter into mergers, consolidations or sales of
substantially all the Companys assets; and enter into new
lines of business. The covenants also require certain minimum
levels of tangible net worth, maximum ratios of debt to equity
or total capitalization and minimum levels of interest coverage.
Interest rate swap agreements are utilized to reduce the impact
of changes in interest rates on certain term loans. At
August 31, 2006, such agreements had a notional amount of
$13.4 million and mature between June 2007 and March 2011.
Principal payments on the notes payable are as follows:
|
|
|
|
|
(In thousands) |
|
|
|
Year ending August 31,
|
|
|
|
|
2007
|
|
$ |
4,517 |
|
2008
|
|
|
3,978 |
|
2009
|
|
|
4,170 |
|
2010
|
|
|
5,373 |
|
2011
|
|
|
3,299 |
|
Thereafter
|
|
|
340,977 |
|
|
|
|
$ |
362,314 |
|
|
Note 15 - Subordinated
Debt
Subordinated notes, amounting to $2.1 million and
$8.6 million at August 31, 2006 and 2005, were issued
to the seller of railcars purchased from 1990 to 1997 as part of
an agreement described in Note 25. The notes bear interest
at 9.0%, with the principal due ten years from the date of
issuance of the notes, and are subordinated to all other
liabilities of a subsidiary. The agreement includes an option
that, under certain conditions, provides for the seller to
repurchase the railcars for the original acquisition cost to the
Company at the date the underlying subordinated notes are due.
The Company has received notice from the seller that the
purchase options will be exercised, and amounts due under the
subordinated notes will be retired from the repurchase proceeds
during the next year.
Note 16 - 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 utilized to reduce the impact of changes in
interest rates on certain debt. The Companys foreign
currency forward exchange contracts and interest rate swap
agreements are designated as cash flow hedges, and therefore the
unrealized gains and losses are recorded in accumulated other
comprehensive loss.
38 The
Greenbrier Companies 2006 Annual Report
At August 31, 2006 exchange rates, forward exchange
contracts for the sale of United States dollars aggregated
$28.0 million, sale of Pound Sterling aggregated
$5.2 million and purchase of Euro aggregated
$1.0 million. Adjusting these contracts to the fair value
of these cash flow hedges at August 31, 2006 resulted in an
unrealized pre-tax gain of $0.6 million that was recorded
in the line item accumulated other comprehensive loss. As these
contracts mature at various dates through December 2006, any
such gain or loss remaining will be recognized in manufacturing
revenue along with the related transactions. In the event that
the underlying sales transaction does not occur or does not
occur in the period designated at the inception of the hedge,
the amount classified in accumulated other comprehensive income
(loss) would be reclassified to the current years results
of operations.
At August 31, 2006 exchange rates, interest rate swap
agreements had a notional amount of $13.4 million and
mature between June 2007 and March 2011. The fair value of these
cash flow hedges at August 31, 2006 resulted in an
unrealized pre-tax loss of $0.6 million. The loss is
included in accumulated other comprehensive loss and the fair
value of the contracts is included in accounts payable and
accrued liabilities on the Consolidated Balance Sheet. As
interest expense on the underlying debt is recognized, amounts
corresponding to the interest rate swaps are reclassified from
accumulated other comprehensive income (loss) and charged or
credited to interest expense. At August 31, 2006 interest
rates, approximately $0.1 million would be reclassified to
interest expense in the next 12 months.
Note 17 -
Stockholders Equity
On May 11, 2005, the Company issued 5,175,000 shares
of its common stock at a price of $26.50 per share, less
underwriting commissions, discounts and expenses. Proceeds were
used to purchase 3,504,167 shares from the estate of Alan
James, former member of the board of directors, and
1,837,500 shares from William Furman, President and Chief
Executive Officer.
A stock incentive plan was adopted July 1, 1994 (the 1994
Plan) that provides for granting compensatory and
non-compensatory options to employees and others. No further
grants will be awarded under this plan.
On April 6, 1999, the Company adopted the Stock Incentive
Plan 2000 (the 2000 Plan), under which
1,000,000 shares of common stock were made available for
issuance with respect to options granted to employees,
non-employee directors and consultants of the Company. The 2000
Plan authorized the grant of incentive stock options,
non-statutory stock options, and restricted stock awards, or any
combination of the foregoing. Under the 2000 Plan, the exercise
price for incentive stock options could not be less than the
market value of the Companys common stock at the time the
option is granted. Grants for 2,500 shares remain available
under this plan. In 2005, vesting was accelerated on all
outstanding options on this plan in an effort to reduce
administrative expenses associated with the implementation of
FASB 123R as the remaining unvested portion of options was
immaterial and no further options were expected to be issued. If
the vesting of the options had not been accelerated, the impact
to the Companys Statement of Operations would be an
additional expense of $0.1 million in 2006 with an
after-tax impact of $0.004 per share. The effect would be
minimal for periods after 2006.
In January 2005, the stockholders approved the 2005 Stock
Incentive Plan. The plan provides for the grant of incentive
stock options, nonstatutory stock options, restricted shares,
stock units and stock appreciation rights. The maximum aggregate
number of the Companys common shares available for
issuance under the plan is 1,300,000. During 2006 and 2005, the
Company awarded restricted stock grants totaling 70,820 and
353,864 shares under the 2005 Stock Incentive Plan.
The following table summarizes stock option transactions for
shares under option and the related weighted average option
price:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
Average |
|
|
|
|
Option |
|
|
Shares |
|
Price |
|
Balance at
September 1, 2003
|
|
|
1,480,450 |
|
|
$ |
8.66 |
|
Exercised
|
|
|
(592,200 |
) |
|
|
10.58 |
|
Expired
|
|
|
(4,000 |
) |
|
|
13.63 |
|
|
|
|
|
|
Balance at
August 31, 2004
|
|
|
884,250 |
|
|
|
7.35 |
|
Exercised
|
|
|
(408,930 |
) |
|
|
7.48 |
|
Expired
|
|
|
(2,500 |
) |
|
|
8.75 |
|
|
|
|
|
|
Balance at
August 31, 2005
|
|
|
472,820 |
|
|
|
7.24 |
|
Exercised
|
|
|
(403,424 |
) |
|
|
7.29 |
|
|
|
|
|
|
Balance at
August 31, 2006
|
|
|
69,396 |
|
|
$ |
6.96 |
|
|
|
|
|
|
The Greenbrier Companies 2006
Annual
Report 39
At August 31, 2006 options outstanding have exercise prices
ranging from $4.36 to $9.19 per share, have a remaining
average contractual life of 2.82 years and options to
purchase 69,396 shares were exercisable. On
August 31, 2006 and 2005, 877,816 and 948,636 shares
were available for grant. No shares were available for grant as
of August 31, 2004.
Note 18 - Earnings Per
Share
The shares used in the computation of the Companys basic
and diluted earnings per common share are reconciled as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Weighted average basic common shares outstanding
|
|
|
15,751 |
|
|
|
15,000 |
|
|
|
14,569 |
|
|
Dilutive effect of employee stock options
|
|
|
186 |
|
|
|
560 |
|
|
|
630 |
|
|
|
Weighted average diluted common shares outstanding
|
|
|
15,937 |
|
|
|
15,560 |
|
|
|
15,199 |
|
|
Weighted average diluted common shares outstanding includes the
incremental shares that would be issued upon the assumed
exercise of stock options. No options were anti-dilutive the
years ended August 31, 2006, 2005 and 2004.
Note 19 - Related
Party Transactions
James-Furman & Company Partnership. Alan James,
former member of the Board of Directors, and William Furman,
President and Chief Executive Officer of the Company were
partners in a general partnership, James Furman &
Company (the Partnership), that, among other things, engaged in
the ownership, leasing and marketing of railcars and programs
for refurbishing and marketing of used railcars. As a result of
Mr. James death, the Partnership was dissolved as of
January 28, 2005. In 1989, the Company entered into
presently existing agreements with the Partnership pursuant to
which the Company manages and maintains railcars owned by the
Partnership in exchange for a fixed monthly fee that is no less
favorable to the Company than the fee the Company could obtain
for similar services rendered to unrelated parties. The
maintenance and management fees paid to the Company under such
agreements for the years ended August 31, 2006, 2005 and
2004 aggregated $0.1 million per year. In addition, the
Partnership paid the Company fees of $0.1 million in each
of the years ended August 31, 2006, 2005 and 2004 for
administrative and other services. The management and
maintenance agreements presently in effect between the Company
and the Partnership provide that in remarketing railcars owned
by the Partnership and the Company, as well as by unaffiliated
lessors, the Company will, subject to the business requirements
of prospective lessees and railroad regulatory requirements,
grant priority to that equipment which has been off-lease and
available for the longest period of time. Such agreements also
provide that the Partnership will grant to the Company a right
of first refusal with respect to any opportunity originated by
the Partnership in which the Company may be interested involving
the manufacture, purchase, sale, lease, management, refurbishing
or repair of railcars. The right of first refusal provides that
prior to undertaking any such transaction the Partnership must
offer the opportunity to the Company and must provide the
disinterested, independent members of the Board of Directors a
period of not less than 30 days in which to determine
whether the Company desires to pursue the opportunity. The right
of first refusal in favor of the Company continues for a period
of 12 months after the date that both of Messrs. James
and Furman cease to be officers or directors of the Company. The
disposition of the partnership assets is still in process. Upon
completion of the asset disposition, all agreements between the
Company and the Partnership will be discontinued.
Indebtedness of Management - Since the
beginning of the Companys last fiscal year, only one
director or executive officer of the Company has been indebted
to the Company for an amount in excess of $60 thousand. The
President of the Companys manufacturing operations has a
promissory note payable upon demand with a balance of
$0.1 million as of August 31, 2006. The largest amount
outstanding during the year ended August 31, 2006 under
this note was $0.2 million. The note, secured by a mortgage
on the officers residence, does not bear interest and has
not been amended since its issuance in 1994.
Policy - Greenbriers policy is that all
proposed transactions by the Company with directors, officers,
five percent stockholders and their affiliates be entered into
only if such transactions are on terms no less favorable to
Greenbrier than could be obtained from unaffiliated parties, are
reasonably expected to benefit the Company and are approved by a
majority
40 The
Greenbrier Companies 2006 Annual Report
of the disinterested, independent members of the Companys
Board of Directors.
Purchases from unconsolidated
subsidiaries - The Company purchased railcars
totaling $1.0 million for the three months ended
November 30, 2004 and $31.8 million for the year ended
August 31, 2004 from a 50%-owned joint venture for
subsequent sale or for its own lease fleet. As a result of the
acquisition of the Companys joint venture partners
interest the financial results of the entity were consolidated
beginning on December 1, 2004.
Note 20 - Employee
Benefit Plans
Defined contribution plans are available to substantially all
United States employees. Contributions are based on a percentage
of employee contributions and amounted to $1.3 million,
$1.2 million and $1.2 million for the years ended
August 31, 2006, 2005 and 2004.
Defined benefit pension plans are provided for Canadian
employees covered by collective bargaining agreements. The plans
provide pension benefits based on years of credited service.
Contributions to the plan are actuarially determined and are
intended to fund the net periodic pension cost. Expenses
resulting from contributions to the plans were
$2.5 million, $2.1 million and $1.9 million for
the years ended August 31, 2006, 2005 and 2004.
Nonqualified deferred benefit plans exist for certain employees.
Expenses resulting from contributions to the plans were
$1.8 million, $1.6 million and $1.6 million for
the years ended August 31, 2006, 2005 and 2004.
Note 21 - Income
Taxes
Components of income tax expense (benefit) of continuing
operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
10,619 |
|
|
$ |
15,587 |
|
|
$ |
(35 |
) |
|
State
|
|
|
1,175 |
|
|
|
1,213 |
|
|
|
215 |
|
|
Foreign
|
|
|
3,904 |
|
|
|
328 |
|
|
|
(347 |
) |
|
|
|
|
15,698 |
|
|
|
17,128 |
|
|
|
(167 |
) |
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
9,291 |
|
|
|
(1,344 |
) |
|
|
7,437 |
|
|
State
|
|
|
2,193 |
|
|
|
2,084 |
|
|
|
1,481 |
|
|
Foreign
|
|
|
(5,484 |
) |
|
|
2,043 |
|
|
|
368 |
|
|
|
|
|
6,000 |
|
|
|
2,783 |
|
|
|
9,286 |
|
|
|
|
$ |
21,698 |
|
|
$ |
19,911 |
|
|
$ |
9,119 |
|
|
Income tax expense (benefit) is computed at rates different than
statutory rates. The reconciliation between effective and
statutory tax rates on continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
2004 |
|
Federal statutory rate
|
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State income taxes, net of federal benefit
|
|
|
3.6 |
|
|
|
4.3 |
|
|
|
3.5 |
|
Impact of foreign operations
|
|
|
(8.0 |
) |
|
|
(1.0 |
) |
|
|
(10.0 |
) |
Income tax settlement
|
|
|
4.1 |
|
|
|
|
|
|
|
|
|
Other
|
|
|
0.8 |
|
|
|
1.5 |
|
|
|
0.7 |
|
|
|
|
|
35.5 |
% |
|
|
39.8 |
% |
|
|
29.2 |
% |
|
The Greenbrier Companies 2006
Annual
Report 41
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and deferred tax
liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Deferred participation
|
|
$ |
(814 |
) |
|
$ |
(3,931 |
) |
|
Maintenance and warranty accruals
|
|
|
(8,689 |
) |
|
|
(9,542 |
) |
|
Accrued payroll and related liabilities
|
|
|
(4,020 |
) |
|
|
(5,568 |
) |
|
Deferred revenue
|
|
|
(7,250 |
) |
|
|
(5,754 |
) |
|
Inventories and other
|
|
|
(2,946 |
) |
|
|
(3,871 |
) |
|
Investment and asset tax credit
|
|
|
(3,002 |
) |
|
|
(1,061 |
) |
|
|
|
|
(26,721 |
) |
|
|
(29,727 |
) |
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Accelerated depreciation
|
|
|
60,743 |
|
|
|
57,439 |
|
|
SFAS 133 and translation adjustment
|
|
|
1,745 |
|
|
|
1,902 |
|
|
Other
|
|
|
1,705 |
|
|
|
2,015 |
|
|
Net deferred tax liability
|
|
$ |
37,472 |
|
|
$ |
31,629 |
|
|
United States income taxes have not been provided for
approximately $17.8 million of cumulative undistributed
earnings of several non-United States subsidiaries as Greenbrier
plans to reinvest these earnings indefinitely in operations
outside the United States.
At August 31, 2005, no income tax benefit was recognized
for certain net deferred tax assets due to the uncertainty of
their realization in future years. However, due to the earnings
in 2006 and the level of probable earnings in 2007, the
realization of certain deferred tax assets is more likely than
not and as such $3.7 million was recognized.
42 The
Greenbrier Companies 2006 Annual Report
Note 22 - Segment
Information
Greenbrier operates in two reportable segments: manufacturing
and leasing & services. The accounting policies of the
segments are the same as those described in the summary of
significant accounting policies. Performance is evaluated based
on margin. Intersegment sales and transfers are accounted for as
if the sales or transfers were to third parties.
The information in the following tables is derived directly from
the segments internal financial reports used for corporate
management purposes. Unallocated assets primarily consist of
cash and short-term investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
927,011 |
|
|
$ |
983,818 |
|
|
$ |
644,927 |
|
|
Leasing & services
|
|
|
121,184 |
|
|
|
101,426 |
|
|
|
88,793 |
|
|
Intersegment eliminations
|
|
|
(94,372 |
) |
|
|
(61,022 |
) |
|
|
(4,269 |
) (1) |
|
|
|
$ |
953,823 |
|
|
$ |
1,024,222 |
|
|
$ |
729,451 |
|
|
Margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
96,868 |
|
|
$ |
83,211 |
|
|
$ |
58,208 |
|
|
Leasing & services
|
|
|
60,511 |
|
|
|
41,962 |
|
|
|
33,976 |
|
|
|
|
$ |
157,379 |
|
|
$ |
125,173 |
|
|
$ |
92,184 |
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
342,094 |
|
|
$ |
298,730 |
|
|
$ |
254,044 |
|
|
Leasing & services
|
|
|
390,270 |
|
|
|
299,180 |
|
|
|
241,514 |
|
|
Unallocated
|
|
|
144,950 |
|
|
|
73,297 |
|
|
|
13,195 |
|
|
|
|
$ |
877,314 |
|
|
$ |
671,207 |
|
|
$ |
508,753 |
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
12,618 |
|
|
$ |
12,205 |
|
|
$ |
9,399 |
|
|
Leasing & services
|
|
|
12,635 |
|
|
|
10,734 |
|
|
|
11,441 |
|
|
|
|
$ |
25,253 |
|
|
$ |
22,939 |
|
|
$ |
20,840 |
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
18,027 |
|
|
$ |
16,318 |
|
|
$ |
7,161 |
|
|
Leasing & services
|
|
|
122,542 |
|
|
|
52,805 |
|
|
|
35,798 |
|
|
|
|
$ |
140,569 |
|
|
$ |
69,123 |
|
|
$ |
42,959 |
|
|
The following table summarizes selected geographic information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2006 |
|
2005 |
|
2004 |
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
846,560 |
|
|
$ |
875,261 |
|
|
$ |
558,152 |
|
|
Foreign
|
|
|
107,263 |
|
|
|
148,961 |
|
|
|
171,299 |
|
|
|
|
$ |
953,823 |
|
|
$ |
1,024,222 |
|
|
$ |
729,451 |
|
|
Identifiable assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
679,742 |
|
|
$ |
516,690 |
|
|
$ |
403,914 |
|
|
Canada
|
|
|
50,192 |
|
|
|
48,529 |
|
|
|
39,943 |
|
|
Mexico
|
|
|
80,447 |
|
|
|
48,291 |
|
|
|
366 |
|
|
Europe
|
|
|
66,933 |
|
|
|
57,697 |
|
|
|
64,530 |
|
|
|
|
$ |
877,314 |
|
|
$ |
671,207 |
|
|
$ |
508,753 |
|
|
|
|
(1) |
Includes $33.6 million in revenue associated with railcars
produced in a prior period for which revenue recognition had
been deferred pending removal of contractual contingencies that
were removed in 2004. |
The Greenbrier Companies 2006
Annual
Report 43
Note 23 - Customer
Concentration
In 2006, revenue from two customers was 29% and 17% of total
revenue. Revenue from one customer was 44% of total revenue for
the year ended August 31, 2005 and revenue from two
customers was 39% and 12% of total revenues for the year ended
August 31, 2004. No other customers accounted for more than
10% of total revenues in 2006, 2005 or 2004. Two customers had
balances that individually equaled or exceeded 10% of accounts
receivable and in total represented 32% of the consolidated
balance at August 31, 2006.
Note 24 - Lease
Commitments
Lease expense for railcar equipment leased-in under
non-cancelable leases was $6.7 million, $6.7 million
and $6.6 million for the years ended August 31, 2006,
2005 and 2004. Aggregate minimum future amounts payable under
these non-cancelable railcar equipment leases are as follows:
|
|
|
|
|
(In thousands) |
|
|
|
Year ending August 31,
|
|
|
|
|
2007
|
|
$ |
3,943 |
|
2008
|
|
|
2,656 |
|
2009
|
|
|
1,351 |
|
2010
|
|
|
264 |
|
2011
|
|
|
228 |
|
Thereafter
|
|
|
660 |
|
|
|
|
$ |
9,102 |
|
|
Operating leases for domestic railcar repair facilities, office
space and certain manufacturing and office equipment expire at
various dates through April 2015. Rental expense for facilities,
office space and equipment was $6.8 million,
$4.0 million and $3.6 million for the years ended
August 31, 2006, 2005 and 2004. Aggregate minimum future
amounts payable under these non-cancelable operating leases are
as follows:
|
|
|
|
|
(In thousands) |
|
|
|
Year ending August 31,
|
|
|
|
|
2007
|
|
$ |
5,718 |
|
2008
|
|
|
3,658 |
|
2009
|
|
|
2,537 |
|
2010
|
|
|
1,189 |
|
2011
|
|
|
671 |
|
Thereafter
|
|
|
970 |
|
|
|
|
$ |
14,743 |
|
|
Note 25 - Commitments
and Contingencies
In 1990, an agreement was entered into for the purchase and
refurbishment of over 10,000 used railcars between 1990 and
1997. The agreement provides that, under certain conditions, the
seller will receive a percentage of defined earnings of a
subsidiary, and further defines the period when such payments
are to be made. Such amounts are referred to as participation,
are accrued when earned and charged to leasing &
services cost of revenue. Unpaid amounts are included in
participation in the Consolidated Balance Sheets. Participation
expense was $1.7 million, $1.6 million and
$1.7 million in 2006, 2005 and 2004. Payment of
participation was $12.1 million in 2006 and is estimated to
be $9.3 million in 2007, $3.6 million in 2008,
$0.3 million in 2009, $0.1 million in 2010 and
$0.2 million thereafter.
Environmental studies have been conducted of the Companys
owned and leased properties that indicate additional
investigation and some remediation on certain properties may be
necessary. The Companys Portland, Oregon manufacturing
facility is located adjacent to the Willamette River. The United
States Environmental Protection Agency (EPA) has classified
portions of the river bed, including the portion fronting
Greenbriers facility, as a federal National Priority
List or Superfund site due to sediment
contamination (the Portland Harbor Site). Greenbrier and more
than 60 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 they may be
liable for the costs of investigation and remediation (which
liability may be joint and several with other potentially
responsible parties) as well as for natural resource damages
resulting from releases of hazardous substances to the site. At
this time, ten private and public entities, including the
Company,
44 The
Greenbrier Companies 2006 Annual Report
have signed an Administrative Order on Consent to perform a
remedial investigation/feasibility study of the Portland Harbor
Site under EPA oversight, and four additional entities have not
signed such consent, but are nevertheless contributing money to
the effort. The study is expected to be completed in 2009. In
May 2006, the EPA notified several additional entities,
including other federal agencies that it is prepared to issue
unilateral orders compelling additional participation in the
remedial investigation. In addition, the Company has entered
into a Voluntary Clean-Up Agreement with the Oregon Department
of Environmental Quality in which the Company agreed to conduct
an investigation of whether, and to what extent, past or present
operations at the Portland property may have released hazardous
substances to the environment. The Company is also conducting
groundwater remediation relating to a historical spill on the
property which antedates our ownership.
Because these environmental investigations are still underway,
the Company is unable to determine the amount of ultimate
liability relating to these matters. Based on the results of the
pending investigations and future assessments of natural
resource damages, Greenbrier may be required to incur costs
associated with additional phases of investigation or remedial
action, and may be liable for damages to natural resources. In
addition, the Company may be required to perform periodic
maintenance dredging in order to continue to launch vessels from
its launch ways in Portland, Oregon, on the Willamette River,
and the rivers classification as a Superfund site could
result in some limitations on future dredging and launch
activities. Any of these matters could adversely affect the
Companys business and results of operations, or the value
of its Portland property.
From time to time, Greenbrier is involved as a defendant in
litigation in the ordinary course of business, the outcome of
which cannot be predicted with certainty. The most significant
litigation is as follows:
On April 20, 2004, BC Rail Partnership initiated litigation
against the Company in the Supreme Court of Nova Scotia,
alleging breach of contract and negligent manufacture and design
of railcars which were involved in a 1999 derailment. No trial
date has been set.
On November 3, 2004, and November 4, 2004, in the
District Court of Tarrant County, Texas, and in the District
Court of Lancaster County, Nebraska, respectively, litigation
was initiated against the Company by Burlington Northern
Santa Fe Railway (BNSF). BNSF alleges the failure of a
supplier-provided component part on a railcar manufactured by
Greenbrier in 1988, resulted in a derailment and a chemical
spill. On June 24, 2006, the District Court of Tarrant
County, Texas, entered an order granting the Companys
motion for summary judgment as to all claims. On August 7,
2006, BNSF gave notice of appeal.
Greenbrier and a customer, SEB Finans AB (SEB), have raised
performance concerns related to a component that the Company
installed on 372 railcar units with an aggregate sales value of
approximately $20.0 million produced under a contract with
SEB. On December 9, 2005, SEB filed a Statement of Claim in
an arbitration proceeding in Stockholm, Sweden, against
Greenbrier alleging that the cars are defective and cannot be
used for their intended purpose. SEB seeks damages in an
undisclosed amount and in addition late delivery penalties in
the amount of 1.1 million Euros. In a Statement of Defense
and Counterclaim filed with the Arbitral Tribunal on
February 1, 2006, Greenbrier denied that there were defects
in the railcar units delivered for which Greenbrier is liable
and filed Counterclaims against SEB in total amounting to
approximately $11.0 million plus interest representing
payments in default under the contract. Greenbrier believes that
applicable law provides an opportunity to remedy the performance
issues and that an engineering solution is likely. The component
supplier has filed for the United Kingdom equivalent of
bankruptcy protection. Accordingly, Greenbriers recourse
against the supplier may be of limited or no value. Arbitration
hearings tentatively scheduled for early November have been
rescheduled to May 2007 by mutual agreement. The parties
continue to discuss alternative resolutions of the dispute.
Management intends to vigorously defend its position in each of
the open foregoing cases and believes that any ultimate
liability resulting from the above litigation will not
materially affect the Companys Consolidated Financial
Statements.
The Company is involved as a defendant in other litigation
initiated in the ordinary course of business. While the ultimate
outcome of such legal proceedings cannot be determined at this
time, management believes that the resolution of these actions
will not have a material adverse effect on the Companys
Consolidated Financial Statements.
The Greenbrier Companies 2006
Annual
Report 45
On April 20, 2005, the Company entered into an employment
agreement with Mr. Furman, President and Chief Executive
Officer. The employment agreement provides that Greenbrier pay
Mr. Furman a base salary of $550,000 per year (subject
to increase by the compensation committee of the board of
directors), an annual performance based cash bonus up to 150% of
his base salary, and an annual retirement benefit of $407,000
commencing in November 2004 and continuing until Mr. Furman
reaches age 70. Either party may terminate the employment
agreement at any time upon written notice. The employment
agreement contains a two year noncompete clause limiting
Mr. Furmans activities with competing businesses upon
termination. In the event of his termination following a change
in control, Mr. Furman will be entitled to a lump sum
severance amount equal to three times his base salary and
average bonus, accrued salary and vacation, and continuation for
three years of specified employee benefits.
The Company has entered into contingent rental assistance
agreements, aggregating $11.8 million, on certain railcars
subject to leases that have been sold to third parties. These
agreements guarantee the purchasers a minimum lease rental,
subject to a maximum defined rental assistance amount, over
remaining periods that range from one to six years. A liability
is established and revenue is reduced in the period during which
a determination can be made that it is probable that a rental
shortfall will occur and the amount can be estimated. For the
years ended August 31, 2006, 2005 and 2004 no accruals were
made to cover estimated obligations as the existing liability
was adequate. There is no liability accrued at August 31,
2006. All of these agreements were entered into prior to
December 31, 2002 and have not been modified since. The
accounting for any future rental assistance agreements will
comply with the guidance required by FASB Interpretation
(FIN) 45 which pertains to contracts entered into or
modified subsequent to December 31, 2002.
A portion of leasing & services revenue is derived from
car hire which is a fee that a railroad pays for the
use of railcars owned by other railroads or third parties. Car
hire earned by a railcar is usually made up of hourly and
mileage components. Until 1992, the Interstate Commerce
Commission directly regulated car hire rates by prescribing a
formula for calculating these rates. Government regulation of
car hire rates continues but the system of prescribed rates has
been superseded by a system known as deprescription. A ten-year
period used to phase in this new system ended on January 1,
2003. Deprescription is a system whereby railcar owners and
users have the right to negotiate car hire rates. If the railcar
owner and railcar user cannot come to an agreement on a car hire
rate then either party has the right to call for arbitration. In
arbitration either the owners or users rate is
selected and that rate becomes effective for a one-year period.
There is some risk that car hire rates could be negotiated or
arbitrated to lower levels in the future. This could reduce
future car hire revenue for the Company which amounted to
$25.3 million, $25.3 million and $27.2 million in
2006, 2005 and 2004.
In accordance with customary business practices in Europe, the
Company has $14.6 million in bank and third party
performance, advance payment and warranty guarantee facilities,
all of which have been utilized as of August 31, 2006. To
date no amounts have been drawn under these performance, advance
payment and warranty guarantee facilities.
At August 31, 2006, an unconsolidated subsidiary had
$8.3 million of third party debt, for which the Company has
guaranteed 33% or approximately $2.8 million. In the event
that there is a change in control or insolvency by any of the
three 33% investors that have guaranteed the debt, the remaining
investors share of the guarantee will increase
proportionately.
The Company has outstanding letters of credit aggregating
$2.1 million associated with material purchases and payroll.
Greenbrier has jointly committed with Babcock & Brown
Rail Management, LLC to purchase new rail-cars from unaffiliated
manufacturers to be leased to third party customers.
Greenbriers remaining portion of this commitment is
approximately $30.7 million. All purchases are expected to
be completed by the end of December 2006.
46 The
Greenbrier Companies 2006 Annual Report
Note 26 - Fair Value
of Financial Instruments
The estimated fair values of financial instruments and the
methods and assumptions used to estimate such fair values are as
follows:
|
|
|
|
|
|
|
|
|
|
|
2006 | |
|
|
| |
|
|
Carrying | |
|
Estimated | |
(In thousands) |
|
Amount | |
|
Fair Value | |
| |
Notes payable and subordinated debt
|
|
$ |
364,406 |
|
|
$ |
355,685 |
|
Deferred participation
|
|
$ |
2,078 |
|
|
$ |
1,711 |
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
|
| |
|
|
Carrying | |
|
Estimated | |
(In thousands) |
|
Amount | |
|
Fair Value | |
| |
Notes payable and subordinated debt
|
|
$ |
223,252 |
|
|
$ |
218,541 |
|
Deferred participation
|
|
$ |
9,826 |
|
|
$ |
8,780 |
|
The carrying amount of cash and cash equivalents, accounts and
notes receivable, revolving notes, accounts payable and accrued
liabilities, foreign currency forward contracts and interest
rate swaps is a reasonable estimate of fair value of these
financial instruments. Estimated rates currently available to
the Company for debt with similar terms and remaining maturities
are used to estimate the fair value of notes payable and
subordinated debt. The fair value of deferred participation is
estimated by discounting the estimated future cash payments
using the Companys estimated incremental borrowing rate.
Note 27 - Guarantor/
Non Guarantor
The Notes (see Note 14) issued on May 11, 2005 and
November 21, 2005 are fully and unconditionally and jointly
and severally guaranteed by certain of Greenbriers wholly
owned subsidiaries: Autostack Company LLC, Greenbrier-Concarril,
LLC, Greenbrier Leasing Company LLC, Greenbrier Leasing Partner,
LLC, Greenbrier Management Services, LLC, Greenbrier Leasing
L.P., Greenbrier Railcar LLC, Gunderson LLC, Gunderson Marine
LLC, Gunderson Rail Services LLC and Gunderson Specialty
Products, LLC. No other subsidiaries guarantee the Notes.
The following represents the supplemental consolidated condensed
financial information of Greenbrier and its guarantor and non
guarantor subsidiaries, as of August 31, 2006 and 2005 and
for the years ended August 31, 2006, 2005 and 2004. The
information is presented on the basis of Greenbrier accounting
for its ownership of its wholly owned subsidiaries using the
equity method of accounting. Intercompany transactions of goods
and services between the guarantor and non guarantor
subsidiaries are presented as the sales or transfers were to
third parties.
The Greenbrier Companies 2006
Annual
Report 47
The Greenbrier Companies, Inc.
Condensed Consolidated
Balance Sheet
August 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
133,695 |
|
|
$ |
35 |
|
|
$ |
9,164 |
|
|
$ |
|
|
|
$ |
142,894 |
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
2,056 |
|
|
|
|
|
|
|
2,056 |
|
|
Accounts and notes receivable
|
|
|
65,188 |
|
|
|
29,525 |
|
|
|
20,812 |
|
|
|
40 |
|
|
|
115,565 |
|
|
Inventories
|
|
|
|
|
|
|
62,468 |
|
|
|
100,683 |
|
|
|
|
|
|
|
163,151 |
|
|
Railcars held for sale
|
|
|
|
|
|
|
24,862 |
|
|
|
10,354 |
|
|
|
|
|
|
|
35,216 |
|
|
Investment in direct finance leases
|
|
|
|
|
|
|
6,511 |
|
|
|
|
|
|
|
|
|
|
|
6,511 |
|
|
Equipment on operating leases
|
|
|
|
|
|
|
303,664 |
|
|
|
|
|
|
|
(2,655 |
) |
|
|
301,009 |
|
|
Property, plant and equipment
|
|
|
|
|
|
|
44,013 |
|
|
|
36,021 |
|
|
|
|
|
|
|
80,034 |
|
|
Other
|
|
|
375,944 |
|
|
|
49,259 |
|
|
|
2,044 |
|
|
|
(396,369 |
) |
|
|
30,878 |
|
|
|
|
$ |
574,827 |
|
|
$ |
520,337 |
|
|
$ |
181,134 |
|
|
$ |
(398,984 |
) |
|
$ |
877,314 |
|
|
|
Liabilities and
Stockholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving notes
|
|
$ |
|
|
|
$ |
|
|
|
$ |
22,429 |
|
|
$ |
|
|
|
$ |
22,429 |
|
|
Accounts payable and accrued liabilities
|
|
|
11,146 |
|
|
|
111,764 |
|
|
|
81,842 |
|
|
|
41 |
|
|
|
204,793 |
|
|
Participation
|
|
|
|
|
|
|
11,453 |
|
|
|
|
|
|
|
|
|
|
|
11,453 |
|
|
Deferred income tax
|
|
|
2,704 |
|
|
|
41,091 |
|
|
|
(5,876 |
) |
|
|
(447 |
) |
|
|
37,472 |
|
|
Deferred revenue
|
|
|
1,241 |
|
|
|
11,030 |
|
|
|
5,210 |
|
|
|
|
|
|
|
17,481 |
|
|
Notes payable
|
|
|
341,929 |
|
|
|
6,716 |
|
|
|
13,669 |
|
|
|
|
|
|
|
362,314 |
|
|
Subordinated debt
|
|
|
|
|
|
|
2,091 |
|
|
|
|
|
|
|
|
|
|
|
2,091 |
|
Stockholders
Equity
|
|
|
217,807 |
|
|
|
336,192 |
|
|
|
63,860 |
|
|
|
(398,578 |
) |
|
|
219,281 |
|
|
|
|
$ |
574,827 |
|
|
$ |
520,337 |
|
|
$ |
181,134 |
|
|
$ |
(398,984 |
) |
|
$ |
877,314 |
|
|
48 The
Greenbrier Companies 2006 Annual Report
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Operations
For the year ended
August 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
11,250 |
|
|
$ |
587,740 |
|
|
$ |
491,920 |
|
|
$ |
(239,621 |
) |
|
$ |
851,289 |
|
|
Leasing & services
|
|
|
4,839 |
|
|
|
99,745 |
|
|
|
|
|
|
|
(2,050 |
) |
|
|
102,534 |
|
|
|
|
|
16,089 |
|
|
|
687,485 |
|
|
|
491,920 |
|
|
|
(241,671 |
) |
|
|
953,823 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
10,191 |
|
|
|
515,738 |
|
|
|
467,445 |
|
|
|
(238,953 |
) |
|
|
754,421 |
|
|
Leasing & services
|
|
|
|
|
|
|
42,094 |
|
|
|
|
|
|
|
(71 |
) |
|
|
42,023 |
|
|
|
|
|
10,191 |
|
|
|
557,832 |
|
|
|
467,445 |
|
|
|
(239,024 |
) |
|
|
796,444 |
|
Margin
|
|
|
5,898 |
|
|
|
129,653 |
|
|
|
24,475 |
|
|
|
(2,647 |
) |
|
|
157,379 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
17,258 |
|
|
|
42,116 |
|
|
|
11,545 |
|
|
|
(1 |
) |
|
|
70,918 |
|
|
Interest and foreign exchange
|
|
|
23,432 |
|
|
|
3,266 |
|
|
|
1,244 |
|
|
|
(2,546 |
) |
|
|
25,396 |
|
|
|
|
|
40,690 |
|
|
|
45,382 |
|
|
|
12,789 |
|
|
|
(2,547 |
) |
|
|
96,314 |
|
|
Earnings (loss) before income tax and equity in unconsolidated
subsidiaries
|
|
|
(34,792 |
) |
|
|
84,271 |
|
|
|
11,686 |
|
|
|
(100 |
) |
|
|
61,065 |
|
|
Income tax (expense) benefit
|
|
|
11,169 |
|
|
|
(34,276 |
) |
|
|
1,361 |
|
|
|
48 |
|
|
|
(21,698 |
) |
|
|
|
|
(23,623 |
) |
|
|
49,995 |
|
|
|
13,047 |
|
|
|
(52 |
) |
|
|
39,367 |
|
Equity in earnings (loss) of unconsolidated subsidiaries
|
|
|
63,159 |
|
|
|
8,189 |
|
|
|
|
|
|
|
(71,179 |
) |
|
|
169 |
|
|
Earnings (loss) from continuing operations
|
|
|
39,536 |
|
|
|
58,184 |
|
|
|
13,047 |
|
|
|
(71,231 |
) |
|
|
39,536 |
|
Earnings from discontinued operations (net of tax)
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
Net earnings
|
|
$ |
39,598 |
|
|
$ |
58,184 |
|
|
$ |
13,047 |
|
|
$ |
(71,231 |
) |
|
$ |
39,598 |
|
|
The Greenbrier Companies 2006
Annual
Report 49
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Cash Flows
For the year ended
August 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$ |
39,598 |
|
|
$ |
58,184 |
|
|
$ |
13,047 |
|
|
$ |
(71,231 |
) |
|
$ |
39,598 |
|
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
(62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62 |
) |
|
Deferred income taxes
|
|
|
1,752 |
|
|
|
9,531 |
|
|
|
(5,342 |
) |
|
|
(48 |
) |
|
|
5,893 |
|
|
Depreciation and amortization
|
|
|
56 |
|
|
|
19,510 |
|
|
|
5,759 |
|
|
|
(72 |
) |
|
|
25,253 |
|
|
Gain on sales of equipment
|
|
|
|
|
|
|
(10,942 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
(10,948 |
) |
|
Other
|
|
|
|
|
|
|
99 |
|
|
|
180 |
|
|
|
(1 |
) |
|
|
278 |
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
(37,904 |
) |
|
|
52,998 |
|
|
|
350 |
|
|
|
(6,496 |
) |
|
|
8,948 |
|
|
|
Inventories
|
|
|
|
|
|
|
(8,879 |
) |
|
|
(28,638 |
) |
|
|
|
|
|
|
(37,517 |
) |
|
|
Railcars held for sale
|
|
|
|
|
|
|
(5,356 |
) |
|
|
6,113 |
|
|
|
(601 |
) |
|
|
156 |
|
|
|
Other
|
|
|
(94,487 |
) |
|
|
19,784 |
|
|
|
1,465 |
|
|
|
75,815 |
|
|
|
2,577 |
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
1,664 |
|
|
|
(11,591 |
) |
|
|
15,456 |
|
|
|
(42 |
) |
|
|
5,487 |
|
|
|
Participation
|
|
|
|
|
|
|
(10,447 |
) |
|
|
|
|
|
|
|
|
|
|
(10,447 |
) |
|
|
Deferred revenue
|
|
|
(155 |
) |
|
|
5,644 |
|
|
|
4,837 |
|
|
|
|
|
|
|
10,326 |
|
|
Net cash provided by (used in) operating activities
|
|
|
(89,538 |
) |
|
|
118,535 |
|
|
|
13,227 |
|
|
|
(2,682 |
) |
|
|
39,542 |
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments received under direct finance leases
|
|
|
|
|
|
|
2,048 |
|
|
|
|
|
|
|
|
|
|
|
2,048 |
|
|
Proceeds from sales of equipment
|
|
|
|
|
|
|
28,863 |
|
|
|
|
|
|
|
|
|
|
|
28,863 |
|
|
Investment in and advances to unconsolidated subsidiaries
|
|
|
|
|
|
|
550 |
|
|
|
|
|
|
|
|
|
|
|
550 |
|
|
Decrease in restricted cash
|
|
|
|
|
|
|
|
|
|
|
(1,958 |
) |
|
|
|
|
|
|
(1,958 |
) |
|
Capital expenditures
|
|
|
|
|
|
|
(132,934 |
) |
|
|
(8,412 |
) |
|
|
777 |
|
|
|
(140,569 |
) |
|
Net cash used in investing activities
|
|
|
|
|
|
|
(101,473 |
) |
|
|
(10,370 |
) |
|
|
777 |
|
|
|
(111,066 |
) |
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in revolving notes
|
|
|
|
|
|
|
|
|
|
|
8,965 |
|
|
|
|
|
|
|
8,965 |
|
|
Proceeds from notes payable
|
|
|
154,567 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,567 |
|
|
Repayments of notes payable
|
|
|
(1,143 |
) |
|
|
(11,055 |
) |
|
|
(7,493 |
) |
|
|
6,500 |
|
|
|
(13,191 |
) |
|
Repayments of subordinated debt
|
|
|
|
|
|
|
(6,526 |
) |
|
|
|
|
|
|
|
|
|
|
(6,526 |
) |
|
Dividends
|
|
|
(5,042 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,042 |
) |
|
Stock options exercised and restricted stock awards
|
|
|
5,757 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,757 |
|
|
Excess tax benefit of stock options exercised
|
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,600 |
|
|
Purchase of subsidiarys shares subject to mandatory
redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,636 |
) |
|
|
(4,636 |
) |
|
Net cash provided by (used in) financing activities
|
|
|
156,739 |
|
|
|
(17,581 |
) |
|
|
1,472 |
|
|
|
1,864 |
|
|
|
142,494 |
|
|
Effect of exchange rate changes
|
|
|
(266 |
) |
|
|
81 |
|
|
|
(1,095 |
) |
|
|
|
|
|
|
(1,280 |
) |
Increase (decrease) in cash and cash equivalents
|
|
|
66,935 |
|
|
|
(438 |
) |
|
|
3,234 |
|
|
|
(41 |
) |
|
|
69,690 |
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
66,760 |
|
|
|
473 |
|
|
|
5,930 |
|
|
|
41 |
|
|
|
73,204 |
|
|
End of period
|
|
$ |
133,695 |
|
|
$ |
35 |
|
|
$ |
9,164 |
|
|
$ |
|
|
|
$ |
142,894 |
|
|
50 The
Greenbrier Companies 2006 Annual Report
The Greenbrier Companies, Inc.
Condensed Consolidated
Balance Sheet
August 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries(1) |
|
Subsidiaries(1) |
|
Eliminations |
|
Consolidated |
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
66,760 |
|
|
$ |
473 |
|
|
$ |
5,930 |
|
|
$ |
41 |
|
|
$ |
73,204 |
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
93 |
|
|
|
|
|
|
|
93 |
|
|
Accounts and notes receivable
|
|
|
27,325 |
|
|
|
83,074 |
|
|
|
19,014 |
|
|
|
(6,456 |
) |
|
|
122,957 |
|
|
Inventories
|
|
|
|
|
|
|
53,589 |
|
|
|
68,109 |
|
|
|
|
|
|
|
121,698 |
|
|
Railcars held for sale
|
|
|
|
|
|
|
43,561 |
|
|
|
16,467 |
|
|
|
(607 |
) |
|
|
59,421 |
|
|
Investment in direct finance leases
|
|
|
|
|
|
|
9,974 |
|
|
|
|
|
|
|
|
|
|
|
9,974 |
|
|
Equipment on operating leases
|
|
|
|
|
|
|
185,104 |
|
|
|
|
|
|
|
(1,949 |
) |
|
|
183,155 |
|
|
Property, plant and equipment
|
|
|
8 |
|
|
|
41,165 |
|
|
|
32,030 |
|
|
|
|
|
|
|
73,203 |
|
|
Other
|
|
|
276,072 |
|
|
|
41,707 |
|
|
|
2,707 |
|
|
|
(292,984 |
) |
|
|
27,502 |
|
|
|
|
$ |
370,165 |
|
|
$ |
458,647 |
|
|
$ |
144,350 |
|
|
$ |
(301,955 |
) |
|
$ |
671,207 |
|
|
|
Liabilities and
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving notes
|
|
$ |
|
|
|
$ |
|
|
|
$ |
12,453 |
|
|
$ |
|
|
|
$ |
12,453 |
|
|
Accounts payable and accrued liabilities
|
|
|
9,586 |
|
|
|
122,871 |
|
|
|
62,717 |
|
|
|
84 |
|
|
|
195,258 |
|
|
Participation
|
|
|
|
|
|
|
21,900 |
|
|
|
|
|
|
|
|
|
|
|
21,900 |
|
|
Deferred income tax
|
|
|
952 |
|
|
|
31,560 |
|
|
|
(484 |
) |
|
|
(399 |
) |
|
|
31,629 |
|
|
Deferred revenue
|
|
|
1,396 |
|
|
|
5,387 |
|
|
|
127 |
|
|
|
|
|
|
|
6,910 |
|
|
Notes payable
|
|
|
183,072 |
|
|
|
17,772 |
|
|
|
20,291 |
|
|
|
(6,500 |
) |
|
|
214,635 |
|
|
Subordinated debt
|
|
|
|
|
|
|
8,617 |
|
|
|
|
|
|
|
|
|
|
|
8,617 |
|
|
Subsidiary shares subject to mandatory redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,746 |
|
|
|
3,746 |
|
Stockholders Equity
|
|
|
175,159 |
|
|
|
250,540 |
|
|
|
49,246 |
|
|
|
(298,886 |
) |
|
|
176,059 |
|
|
|
|
$ |
370,165 |
|
|
$ |
458,647 |
|
|
$ |
144,350 |
|
|
$ |
(301,955 |
) |
|
$ |
671,207 |
|
|
|
|
(1) |
A wholly owned Mexican subsidiary is shown as non-guarantor
subsidiary in the current years presentation. In the prior
years presentation such financial information was
consolidated as part of its U.S. parent which is a
guarantor subsidiary. Amounts for 2005, therefore have been
reclassified to conform to the current years presentation.
The net equity investment in the Mexican subsidiary is now shown
an investment in the Mexican subsidiary in other assets category
instead of the individual asset and liability categories. |
The Greenbrier Companies 2006
Annual
Report 51
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Operations
August 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
66,940 |
|
|
$ |
549,058 |
|
|
$ |
490,473 |
|
|
$ |
(165,310 |
) |
|
$ |
941,161 |
|
|
Leasing & services
|
|
|
1,369 |
|
|
|
84,061 |
|
|
|
|
|
|
|
(2,369 |
) |
|
|
83,061 |
|
|
|
|
|
68,309 |
|
|
|
633,119 |
|
|
|
490,473 |
|
|
|
(167,679 |
) |
|
|
1,024,222 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
62,535 |
|
|
|
493,423 |
|
|
|
466,140 |
|
|
|
(164,148 |
) |
|
|
857,950 |
|
|
Leasing & services
|
|
|
|
|
|
|
41,168 |
|
|
|
|
|
|
|
(69 |
) |
|
|
41,099 |
|
|
|
|
|
62,535 |
|
|
|
534,591 |
|
|
|
466,140 |
|
|
|
(164,217 |
) |
|
|
899,049 |
|
Margin
|
|
|
5,774 |
|
|
|
98,528 |
|
|
|
24,333 |
|
|
|
(3,462 |
) |
|
|
125,173 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
14,260 |
|
|
|
32,069 |
|
|
|
10,786 |
|
|
|
310 |
|
|
|
57,425 |
|
|
Interest and foreign exchange
|
|
|
7,405 |
|
|
|
6,459 |
|
|
|
4,198 |
|
|
|
(3,227 |
) |
|
|
14,835 |
|
|
Special charges
|
|
|
|
|
|
|
2,913 |
|
|
|
|
|
|
|
|
|
|
|
2,913 |
|
|
|
|
|
21,665 |
|
|
|
41,441 |
|
|
|
14,984 |
|
|
|
(2,917 |
) |
|
|
75,173 |
|
|
Earnings (loss) before income tax and equity in unconsolidated
subsidiaries
|
|
|
(15,891 |
) |
|
|
57,087 |
|
|
|
9,349 |
|
|
|
(545 |
) |
|
|
50,000 |
|
Income tax (expense) benefit
|
|
|
6,452 |
|
|
|
(23,996 |
) |
|
|
(2,445 |
) |
|
|
78 |
|
|
|
(19,911 |
) |
|
|
|
|
(9,439 |
) |
|
|
33,091 |
|
|
|
6,904 |
|
|
|
(467 |
) |
|
|
30,089 |
|
Equity in earnings (loss) of unconsolidated subsidiaries
|
|
|
39,261 |
|
|
|
2,479 |
|
|
|
|
|
|
|
(42,007 |
) |
|
|
(267 |
) |
|
Net earnings
|
|
$ |
29,822 |
|
|
$ |
35,570 |
|
|
$ |
6,904 |
|
|
$ |
(42,474 |
) |
|
$ |
29,822 |
|
|
52 The
Greenbrier Companies 2006 Annual Report
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Cash Flows
For the year ended
August 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$ |
29,822 |
|
|
$ |
35,570 |
|
|
$ |
6,904 |
|
|
$ |
(42,474 |
) |
|
$ |
29,822 |
|
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
(2,845 |
) |
|
|
(553 |
) |
|
|
9,284 |
|
|
|
(79 |
) |
|
|
5,807 |
|
|
Tax benefit of stock options exercised
|
|
|
2,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,393 |
|
|
Depreciation and amortization
|
|
|
208 |
|
|
|
17,316 |
|
|
|
5,483 |
|
|
|
(68 |
) |
|
|
22,939 |
|
|
Gain on sales of equipment
|
|
|
|
|
|
|
(6,439 |
) |
|
|
|
|
|
|
(358 |
) |
|
|
(6,797 |
) |
|
Other
|
|
|
|
|
|
|
250 |
|
|
|
401 |
|
|
|
|
|
|
|
651 |
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
(95,492 |
) |
|
|
81,788 |
|
|
|
(18,886 |
) |
|
|
262 |
|
|
|
(32,328 |
) |
|
|
Inventories
|
|
|
|
|
|
|
(6,657 |
) |
|
|
21,689 |
|
|
|
371 |
|
|
|
15,403 |
|
|
|
Railcars held for sale
|
|
|
|
|
|
|
(27,522 |
) |
|
|
(11,574 |
) |
|
|
601 |
|
|
|
(38,495 |
) |
|
|
Other
|
|
|
(40,639 |
) |
|
|
(6,399 |
) |
|
|
(136 |
) |
|
|
42,007 |
|
|
|
(5,167 |
) |
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
4,459 |
|
|
|
3,345 |
|
|
|
(7,580 |
) |
|
|
(221 |
) |
|
|
3 |
|
|
|
Participation
|
|
|
|
|
|
|
(15,207 |
) |
|
|
|
|
|
|
|
|
|
|
(15,207 |
) |
|
|
Deferred revenue
|
|
|
1,397 |
|
|
|
2,837 |
|
|
|
51 |
|
|
|
|
|
|
|
4,285 |
|
|
Net cash provided by (used in) operating activities
|
|
|
(100,697 |
) |
|
|
78,329 |
|
|
|
5,636 |
|
|
|
41 |
|
|
|
(16,691 |
) |
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments received under direct finance leases
|
|
|
|
|
|
|
5,733 |
|
|
|
|
|
|
|
|
|
|
|
5,733 |
|
|
Proceeds from sales of equipment
|
|
|
|
|
|
|
32,528 |
|
|
|
|
|
|
|
|
|
|
|
32,528 |
|
|
Investment in and advances to unconsolidated subsidiaries
|
|
|
|
|
|
|
92 |
|
|
|
|
|
|
|
|
|
|
|
92 |
|
|
Acquisition of joint venture interest
|
|
|
|
|
|
|
5,813 |
|
|
|
2,622 |
|
|
|
|
|
|
|
8,435 |
|
|
Decrease in restricted cash
|
|
|
|
|
|
|
|
|
|
|
1,007 |
|
|
|
|
|
|
|
1,007 |
|
|
Capital expenditures
|
|
|
|
|
|
|
(63,183 |
) |
|
|
(5,940 |
) |
|
|
|
|
|
|
(69,123 |
) |
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
(19,017 |
) |
|
|
(2,311 |
) |
|
|
|
|
|
|
(21,328 |
) |
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in revolving notes
|
|
|
|
|
|
|
|
|
|
|
2,514 |
|
|
|
|
|
|
|
2,514 |
|
|
Proceeds from notes payable
|
|
|
169,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169,752 |
|
|
Repayments of notes payable
|
|
|
(1,052 |
) |
|
|
(65,752 |
) |
|
|
(887 |
) |
|
|
|
|
|
|
(67,691 |
) |
|
Repayments of subordinated debt
|
|
|
|
|
|
|
(6,325 |
) |
|
|
|
|
|
|
|
|
|
|
(6,325 |
) |
|
Dividends
|
|
|
(3,889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,889 |
) |
|
Net proceeds from equity offering
|
|
|
127,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,462 |
|
|
Repurchase and retirement of stock
|
|
|
(127,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127,538 |
) |
|
Stock options exercised and restricted stock awards
|
|
|
3,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,286 |
|
|
Net cash provided by (used in) financing activities
|
|
|
168,021 |
|
|
|
(72,077 |
) |
|
|
1,627 |
|
|
|
|
|
|
|
97,571 |
|
|
Effect of exchange rate changes
|
|
|
(564 |
) |
|
|
2,784 |
|
|
|
(678 |
) |
|
|
|
|
|
|
1,542 |
|
Increase (decrease) in cash and cash equivalents
|
|
|
66,760 |
|
|
|
(9,981 |
) |
|
|
4,274 |
|
|
|
41 |
|
|
|
61,094 |
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
|
|
|
|
10,454 |
|
|
|
1,656 |
|
|
|
|
|
|
|
12,110 |
|
|
End of period
|
|
$ |
66,760 |
|
|
$ |
473 |
|
|
$ |
5,930 |
|
|
$ |
41 |
|
|
$ |
73,204 |
|
|
The Greenbrier Companies 2006
Annual
Report 53
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Operations
For the year ended
August 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
28,551 |
|
|
$ |
306,070 |
|
|
$ |
306,984 |
|
|
$ |
11,629 |
|
|
$ |
653,234 |
|
|
Leasing & services
|
|
|
881 |
|
|
|
75,405 |
|
|
|
|
|
|
|
(69 |
) |
|
|
76,217 |
|
|
|
|
|
29,432 |
|
|
|
381,475 |
|
|
|
306,984 |
|
|
|
11,560 |
|
|
|
729,451 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
25,042 |
|
|
|
270,455 |
|
|
|
287,717 |
|
|
|
11,812 |
|
|
|
595,026 |
|
|
Leasing & services
|
|
|
|
|
|
|
42,304 |
|
|
|
|
|
|
|
(63 |
) |
|
|
42,241 |
|
|
|
|
|
25,042 |
|
|
|
312,759 |
|
|
|
287,717 |
|
|
|
11,749 |
|
|
|
637,267 |
|
Margin
|
|
|
4,390 |
|
|
|
68,716 |
|
|
|
19,267 |
|
|
|
(189 |
) |
|
|
92,184 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
12,608 |
|
|
|
24,748 |
|
|
|
10,932 |
|
|
|
|
|
|
|
48,288 |
|
|
Interest and foreign exchange
|
|
|
2,386 |
|
|
|
6,170 |
|
|
|
2,975 |
|
|
|
(63 |
) |
|
|
11,468 |
|
|
Special charges
|
|
|
|
|
|
|
|
|
|
|
1,234 |
|
|
|
|
|
|
|
1,234 |
|
|
|
|
|
14,994 |
|
|
|
30,918 |
|
|
|
15,141 |
|
|
|
(63 |
) |
|
|
60,990 |
|
Earnings (loss) before income tax and equity in unconsolidated
subsidiaries
|
|
|
(10,604 |
) |
|
|
37,798 |
|
|
|
4,126 |
|
|
|
(126 |
) |
|
|
31,194 |
|
Income tax (expense) benefit
|
|
|
6,468 |
|
|
|
(15,906 |
) |
|
|
(26 |
) |
|
|
345 |
|
|
|
(9,119 |
) |
|
|
|
|
(4,136 |
) |
|
|
21,892 |
|
|
|
4,100 |
|
|
|
219 |
|
|
|
22,075 |
|
Equity in earnings (loss) of unconsolidated subsidiaries
|
|
|
24,914 |
|
|
|
(822 |
) |
|
|
|
|
|
|
(26,128 |
) |
|
|
(2,036 |
) |
|
Earnings from continuing operations
|
|
|
20,778 |
|
|
|
21,070 |
|
|
|
4,100 |
|
|
|
(25,909 |
) |
|
|
20,039 |
|
Earnings from discontinued operations (net of tax)
|
|
|
|
|
|
|
|
|
|
|
739 |
|
|
|
|
|
|
|
739 |
|
|
Net earnings
|
|
$ |
20,778 |
|
|
$ |
21,070 |
|
|
$ |
4,839 |
|
|
$ |
(25,909 |
) |
|
$ |
20,778 |
|
|
54 The
Greenbrier Companies 2006 Annual Report
The Greenbrier Companies, Inc.
Condensed Consolidated
Statement of Cash Flows
For the year ended
August 31, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
Combined |
|
Non- |
|
|
|
|
|
|
|
|
Guarantor |
|
Guarantor |
|
|
|
|
(In thousands) |
|
Parent |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$ |
20,778 |
|
|
$ |
21,070 |
|
|
$ |
4,839 |
|
|
$ |
(25,909 |
) |
|
$ |
20,778 |
|
Adjustments to reconcile net earnings to net cash provided by
(used in ) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(739 |
) |
|
|
|
|
|
|
(739 |
) |
|
Deferred income taxes
|
|
|
1,220 |
|
|
|
8,200 |
|
|
|
571 |
|
|
|
(345 |
) |
|
|
9,646 |
|
|
Depreciation and amortization
|
|
|
208 |
|
|
|
17,824 |
|
|
|
2,871 |
|
|
|
(63 |
) |
|
|
20,840 |
|
|
Gain on sales of equipment
|
|
|
|
|
|
|
(512 |
) |
|
|
|
|
|
|
(117 |
) |
|
|
(629 |
) |
|
Special charges
|
|
|
|
|
|
|
|
|
|
|
1,234 |
|
|
|
|
|
|
|
1,234 |
|
|
Other
|
|
|
|
|
|
|
896 |
|
|
|
435 |
|
|
|
1 |
|
|
|
1,332 |
|
|
Decrease (increase) in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
6,441 |
|
|
|
(32,065 |
) |
|
|
(12,304 |
) |
|
|
142 |
|
|
|
(37,786 |
) |
|
|
Inventories
|
|
|
|
|
|
|
(21,108 |
) |
|
|
(1,647 |
) |
|
|
400 |
|
|
|
(22,355 |
) |
|
|
Railcars held for sale
|
|
|
|
|
|
|
(14,523 |
) |
|
|
(4,127 |
) |
|
|
32,747 |
|
|
|
14,097 |
|
|
|
Other
|
|
|
(36,750 |
) |
|
|
692 |
|
|
|
11,593 |
|
|
|
27,405 |
|
|
|
2,940 |
|
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
3,814 |
|
|
|
18,461 |
|
|
|
8,699 |
|
|
|
(18 |
) |
|
|
30,956 |
|
|
|
Participation
|
|
|
|
|
|
|
(18,794 |
) |
|
|
|
|
|
|
|
|
|
|
(18,794 |
) |
|
|
Deferred revenue
|
|
|
|
|
|
|
(3,367 |
) |
|
|
(522 |
) |
|
|
(33,606 |
) |
|
|
(37,495 |
) |
|
Net cash provided by (used in) operating activities
|
|
|
(4,289 |
) |
|
|
(23,226 |
) |
|
|
10,903 |
|
|
|
637 |
|
|
|
(15,975 |
) |
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments received under direct finance leases
|
|
|
|
|
|
|
9,461 |
|
|
|
|
|
|
|
|
|
|
|
9,461 |
|
|
Proceeds from sales of equipment
|
|
|
|
|
|
|
16,217 |
|
|
|
|
|
|
|
|
|
|
|
16,217 |
|
|
Investment in and advances to unconsolidated subsidiaries
|
|
|
|
|
|
|
(2,240 |
) |
|
|
|
|
|
|
|
|
|
|
(2,240 |
) |
|
Decrease in restricted cash
|
|
|
|
|
|
|
1,233 |
|
|
|
3,524 |
|
|
|
|
|
|
|
4,757 |
|
|
Capital expenditures
|
|
|
|
|
|
|
(40,221 |
) |
|
|
(3,378 |
) |
|
|
640 |
|
|
|
(42,959 |
) |
|
|
Net cash (used in) provided by investing activities
|
|
|
|
|
|
|
(15,550 |
) |
|
|
146 |
|
|
|
640 |
|
|
|
(14,764 |
) |
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in revolving notes
|
|
|
|
|
|
|
|
|
|
|
(14,030 |
) |
|
|
|
|
|
|
(14,030 |
) |
|
Repayments of notes payable
|
|
|
(969 |
) |
|
|
(19,751 |
) |
|
|
(819 |
) |
|
|
|
|
|
|
(21,539 |
) |
|
Repayments of subordinated debt
|
|
|
|
|
|
|
(5,979 |
) |
|
|
|
|
|
|
|
|
|
|
(5,979 |
) |
|
Dividends
|
|
|
(889 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(889 |
) |
|
Proceeds from exercise of stock options
|
|
|
6,093 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,093 |
|
|
Purchase of subsidiarys shares subject to mandatory
redemption
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,277 |
) |
|
|
(1,277 |
) |
|
|
Net cash provided by (used in) financing activities
|
|
|
4,235 |
|
|
|
(25,730 |
) |
|
|
(14,849 |
) |
|
|
(1,277 |
) |
|
|
(37,621 |
) |
|
Effect of exchange rate changes
|
|
|
54 |
|
|
|
571 |
|
|
|
2,547 |
|
|
|
|
|
|
|
3,172 |
|
Decrease in cash and cash equivalents
|
|
|
|
|
|
|
(63,935 |
) |
|
|
(1,253 |
) |
|
|
|
|
|
|
(65,188 |
) |
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
|
|
|
|
74,389 |
|
|
|
2,909 |
|
|
|
|
|
|
|
77,298 |
|
|
End of period
|
|
$ |
|
|
|
$ |
10,454 |
|
|
$ |
1,656 |
|
|
$ |
|
|
|
$ |
12,110 |
|
|
The Greenbrier Companies 2006
Annual
Report 55
Note 28 - Subsequent
Event (Unaudited)
On September 11, 2006, the Company purchased substantially
all of the operating assets of Rail Car America (RCA), its
American Hydraulics division and the assets of its wholly owned
subsidiary, Brandon Corp. RCA is a leading provider of
intermodal and conventional railcar repair services in North
America, operating from four repair facilities throughout the
United States. RCA also reconditions and repairs
end-of-railcar
cushioning units through its American Hydraulics division and
operates a switching railroad in Nebraska through Brandon Corp.
The purchase price of the acquisition was approximately
$34.0 million in cash. RCA currently generates nearly
$40.0 million in annual revenue with a workforce
approaching 400 employees.
In October 2006, the Company formed a joint venture with Grupo
Industrial Monclova (GIMSA) to build new railroad freight
cars for the North American marketplace at GIMSAs existing
manufacturing facility, located in Monclova, Mexico. The initial
investment will be less than $10.0 million for one
production line and each party will maintain a 50% interest in
the joint venture. Production is expected to commence in the
second calendar quarter of 2007.
In October 2006, the Company entered into a definitive agreement
to acquire the stock of Meridian Rail Holdings, Corp. for
$227.5 million in cash, plus or minus working capital
adjustments. Meridian is a leading supplier of wheel maintenance
services to the North American freight car industry. Operating
out of six facilities, Meridian supplies replacement wheel sets
and axles to approximately 170 freight car maintenance
locations where worn or damaged wheels, axles, or bearings are
replaced. Meridian also operates a coupler reconditioning
facility and performs railcar repair at one of its wheel
services facilities. The acquisition is expected to close in
November 2006, subject to customary closing conditions.
Greenbrier has entered into a commitment to increase our
revolving line of credit in the U.S. and Canada to an aggregate
of $275.0 million. The amended five year facility will
replace our existing facility aggregating $150.0 million
and will be used to support the Meridian acquisition, provide
working capital and interim financing of equipment for United
States and Mexican operations. It is expected to close on or
before the closing of the Meridian acquisition.
56 The
Greenbrier Companies 2006 Annual Report
Quarterly Results of Operations
(Unaudited)
Operating results by quarter for 2006 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
|
Total | |
| |
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
164,596 |
|
|
$ |
208,922 |
|
|
$ |
236,052 |
|
|
$ |
241,719 |
|
|
$ |
851,289 |
|
|
Leasing & services
|
|
|
21,766 |
|
|
|
27,292 |
|
|
|
30,036 |
|
|
|
23,440 |
|
|
|
102,534 |
|
|
|
|
|
186,362 |
|
|
|
236,214 |
|
|
|
266,088 |
|
|
|
265,159 |
|
|
|
953,823 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
143,030 |
|
|
|
185,360 |
|
|
|
211,444 |
|
|
|
214,587 |
|
|
|
754,421 |
|
|
Leasing & services
|
|
|
10,439 |
|
|
|
10,671 |
|
|
|
10,172 |
|
|
|
10,741 |
|
|
|
42,023 |
|
|
|
|
|
153,469 |
|
|
|
196,031 |
|
|
|
221,616 |
|
|
|
225,328 |
|
|
|
796,444 |
|
Margin
|
|
|
32,893 |
|
|
|
40,183 |
|
|
|
44,472 |
|
|
|
39,831 |
|
|
|
157,379 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
15,541 |
|
|
|
17,092 |
|
|
|
17,896 |
|
|
|
20,389 |
|
|
|
70,918 |
|
|
Interest and foreign exchange
|
|
|
4,573 |
|
|
|
7,180 |
|
|
|
6,149 |
|
|
|
7,494 |
|
|
|
25,396 |
|
|
|
|
|
20,114 |
|
|
|
24,272 |
|
|
|
24,045 |
|
|
|
27,883 |
|
|
|
96,314 |
|
Earnings before income tax and equity in unconsolidated
subsidiaries
|
|
|
12,779 |
|
|
|
15,911 |
|
|
|
20,427 |
|
|
|
11,948 |
|
|
|
61,065 |
|
Income tax benefit (expense)
|
|
|
(4,934 |
) |
|
|
(7,466 |
) |
|
|
(9,866 |
) |
|
|
568 |
|
|
|
(21,698 |
) |
Equity in (loss) earnings of unconsolidated subsidiaries
|
|
|
172 |
|
|
|
118 |
|
|
|
119 |
|
|
|
(240 |
) |
|
|
169 |
|
|
|
Earnings from continuing operations
|
|
|
8,017 |
|
|
|
8,563 |
|
|
|
10,680 |
|
|
|
12,276 |
|
|
|
39,536 |
|
|
Earning from discontinuing operations (net of tax)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
62 |
|
|
Net earnings
|
|
$ |
8,017 |
|
|
$ |
8,563 |
|
|
$ |
10,680 |
|
|
$ |
12,338 |
|
|
$ |
39,598 |
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
.52 |
|
|
$ |
.55 |
|
|
$ |
.67 |
|
|
$ |
.77 |
|
|
$ |
2.51 |
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
.52 |
|
|
$ |
.55 |
|
|
$ |
.67 |
|
|
$ |
.77 |
|
|
$ |
2.51 |
|
|
Diluted earnings per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
.51 |
|
|
$ |
.54 |
|
|
$ |
.67 |
|
|
$ |
.76 |
|
|
$ |
2.48 |
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
.51 |
|
|
$ |
.54 |
|
|
$ |
.67 |
|
|
$ |
.76 |
|
|
$ |
2.48 |
|
|
The Greenbrier Companies 2006
Annual
Report 57
Quarterly Results of Operations
(Unaudited)
Operating results by quarter for 2005 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
|
Total | |
| |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
$ |
200,397 |
|
|
$ |
233,808 |
|
|
$ |
266,090 |
|
|
$ |
240,866 |
|
|
$ |
941,161 |
|
|
Leasing & services
|
|
|
17,651 |
|
|
|
21,105 |
|
|
|
19,944 |
|
|
|
24,361 |
|
|
|
83,061 |
|
|
|
|
|
218,048 |
|
|
|
254,913 |
|
|
|
286,034 |
|
|
|
265,227 |
|
|
|
1,024,222 |
|
Cost of revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
182,862 |
|
|
|
217,796 |
|
|
|
241,491 |
|
|
|
215,801 |
|
|
|
857,950 |
|
|
Leasing & services
|
|
|
10,380 |
|
|
|
10,570 |
|
|
|
9,561 |
|
|
|
10,588 |
|
|
|
41,099 |
|
|
|
|
|
193,242 |
|
|
|
228,366 |
|
|
|
251,052 |
|
|
|
226,389 |
|
|
|
899,049 |
|
Margin
|
|
|
24,806 |
|
|
|
26,547 |
|
|
|
34,982 |
|
|
|
38,838 |
|
|
|
125,173 |
|
Other costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and administrative expense
|
|
|
12,072 |
|
|
|
14,044 |
|
|
|
15,276 |
|
|
|
16,033 |
|
|
|
57,425 |
|
|
Interest and foreign exchange
|
|
|
3,059 |
|
|
|
4,295 |
|
|
|
2,285 |
|
|
|
5,196 |
|
|
|
14,835 |
|
|
Special charges
|
|
|
|
|
|
|
|
|
|
|
2,913 |
|
|
|
|
|
|
|
2,913 |
|
|
|
|
|
15,131 |
|
|
|
18,339 |
|
|
|
20,474 |
|
|
|
21,229 |
|
|
|
75,173 |
|
Earnings before income tax and equity in unconsolidated
subsidiaries
|
|
|
9,675 |
|
|
|
8,208 |
|
|
|
14,508 |
|
|
|
17,609 |
|
|
|
50,000 |
|
Income tax expense
|
|
|
(3,554 |
) |
|
|
(3,397 |
) |
|
|
(5,881 |
) |
|
|
(7,079 |
) |
|
|
(19,911 |
) |
Equity in (loss) earnings of unconsolidated subsidiaries
|
|
|
(731 |
) |
|
|
(9 |
) |
|
|
417 |
|
|
|
56 |
|
|
|
(267 |
) |
|
Net earnings
|
|
$ |
5,390 |
|
|
$ |
4,802 |
|
|
$ |
9,044 |
|
|
$ |
10,586 |
|
|
$ |
29,822 |
|
|
Basic earnings per common
share:
|
|
$ |
.36 |
|
|
$ |
.32 |
|
|
$ |
.60 |
|
|
$ |
.71 |
|
|
$ |
1.99 |
|
Diluted earnings per common
share:
|
|
$ |
.35 |
|
|
$ |
.31 |
|
|
$ |
.58 |
|
|
$ |
.68 |
|
|
$ |
1.92 |
|
58 The
Greenbrier Companies 2006 Annual Report
Report of Independent Registered
Public Accounting Firm
Board of Directors and Stockholders
The Greenbrier Companies, Inc.
We have audited the accompanying consolidated balance sheets of
The Greenbrier Companies, Inc. and subsidiaries (the
Company) as of August 31, 2006 and 2005, and
the related consolidated statements of operations,
stockholders equity and comprehensive income (loss), and
cash flows for each of the three years in the period ended
August 31, 2006. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of The
Greenbrier Companies, Inc. and subsidiaries as of
August 31, 2006 and 2005, and the results of their
operations and their cash flows for each of the three years in
the period ended August 31, 2006, in conformity with
accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of August 31, 2006, based on the
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
November 1, 2006, expressed an unqualified opinion on
managements assessment of the effectiveness of the
Companys internal control over financial reporting.
Deloitte & Touche LLP
Portland, Oregon
November 1, 2006
Item 9.
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
The Greenbrier Companies 2006
Annual
Report 59
Item 9a.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the
participation of our President and Chief Executive Officer and
Chief Financial Officer, the effectiveness of our disclosure
controls and procedures as of the end of the period covered by
this report pursuant to
Rule 13a-15(b)
under the Securities Exchange Act of 1934 (the Exchange Act).
Based on that evaluation, our President and Chief Executive
Officer and Chief Financial Officer have concluded that, as of
the end of the period covered by this report, our disclosure
controls and procedures were effective in ensuring that
information required to be disclosed in our Exchange Act reports
is (1) recorded, processed, summarized and reported in a
timely manner, and (2) accumulated and communicated to our
management, including our President and Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
Changes In Internal Controls
There has been no change in our internal control over financial
reporting that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
Managements Report on
Internal Control over Financial Reporting
Management of the Greenbrier Companies, Inc. together with its
consolidated subsidiaries (the Company), is responsible for
establishing and maintaining adequate internal control over
financial reporting. The Companys internal control over
financial reporting is a process designed under the supervision
of the Companys principal executive and principal
financial officers to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the
Companys financial statements for external reporting
purposes in accordance with accounting principles generally
accepted in the United States of America.
As of the end of the Companys 2006 fiscal year, management
conducted an assessment of the effectiveness of the
Companys internal control over financial reporting based
on the framework established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management has determined that the Companys
internal control over financial reporting as of August 31,
2006 is effective.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
August 31, 2006 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as
stated in their report appearing herein.
Inherent Limitations on Effectiveness of Controls
The Companys management, including the Chief Executive
Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures or our internal control over
financial reporting will prevent or detect all error and all
fraud. A control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that the control systems objectives will be met. The
design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be
considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that misstatements due
to error or fraud will not occur or that all control issues and
instances of fraud, if any, within the Company have been
detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns
can occur because of simple error or mistake. Controls can also
be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of
the controls. The design of any system of controls is based in
part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time,
controls may become inadequate because of changes in conditions
or deterioration in the degree of compliance with policies or
procedures.
60 The
Greenbrier Companies 2006 Annual Report
Report of Independent Registered
Public Accounting Firm
Board of Directors and Stockholders
The Greenbrier Companies, Inc.
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control
over Financial Reporting, that The Greenbrier Companies,
Inc. and subsidiaries (the Company) maintained
effective internal control over financial reporting as of
August 31, 2006, based on the criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions. A companys internal control over
financial reporting is a process designed by, or under the
supervision of, the companys principal executive and
principal financial officers, or persons performing similar
functions, and effected by the companys board of
directors, management, and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a
material effect on the financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of August 31, 2006, is fairly stated, in all material
respects, based on the criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Also in
our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of
August 31, 2006, based on the criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
August 31, 2006, of the Company and our report dated
November 1, 2006, expressed an unqualified opinion on those
financial statements.
Portland, Oregon
November 1, 2006
The Greenbrier Companies 2006
Annual
Report 61
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information under
the captions Election of Directors and
Section 16(a) Beneficial Ownership Reporting
Compliance and Executive Officers in the
Companys definitive Proxy Statement to be filed pursuant
to Regulation 14A, which Proxy Statement is anticipated to
be filed with the Securities and Exchange Commission within
120 days after the end of Registrants year ended
August 31, 2006.
ITEM 11.
EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under
the caption Executive Compensation in
Registrants definitive Proxy Statement to be filed
pursuant to Regulation 14A, which Proxy Statement is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of
Registrants year ended August 31, 2006.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
There is hereby incorporated by reference the information under
the captions Voting and Stockholdings of
Certain Beneficial Owners and Management in
Registrants definitive Proxy Statement to be filed
pursuant to Regulation 14A, which Proxy Statement is
anticipated to be filed with the Securities and Exchange
Commission within 120 days after the end of
Registrants year ended August 31, 2006.
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information under
the caption Certain Relationships and Related Party
Transactions in Registrants definitive Proxy
Statement to be filed pursuant to Regulation 14A, which
Proxy Statement is anticipated to be filed with the Securities
and Exchange Commission within 120 days after the end of
Registrants year ended August 31, 2006.
ITEM 14. PRINCIPAL
ACCOUNTANTS FEES AND SERVICES
There is hereby incorporated by reference the information under
the caption Ratification of the Appointment of
Auditors in Registrants definitive Proxy Statement
to be filed pursuant to Regulation 14A, which Proxy
Statement is anticipated to be filed with the Securities and
Exchange Commission within 120 days after the end of the
Registrants year ended August 31, 2006.
62 The
Greenbrier Companies 2006 Annual Report
PART IV
Item 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial
Statements
See
Consolidated Financial Statements in Item 8
(b) (2) Financial
Statements Schedule*
|
|
* |
All other schedules have been omitted because they are
inapplicable, not required or because the information is given
in the Consolidated Financial Statements or notes thereto. This
supplemental schedule should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in
this report. |
|
|
|
|
(a) (3) |
The following exhibits are filed herewith and this list is
intended to constitute the exhibit index: |
|
|
|
|
|
|
3 |
.1 |
|
Registrants Articles of Incorporation is incorporated
herein by reference to Exhibit 3.1 to the Registrants
Form 10-Q filed April 5, 2006. |
|
|
3 |
.2 |
|
Articles of Merger amending the Registrants Articles of
Incorporation, is incorporated herein by reference to
Exhibit 3.2 to the Registrants Form 10-Q filed
April 5, 2006. |
|
|
3 |
.3 |
|
Registrants Bylaws, as amended January 11, 2006, are
incorporated herein by reference to Exhibit 3.3 to the
Registrants Form 10-Q filed April 5, 2006. |
|
|
4 |
.1 |
|
Indenture between the Registrant, Autostack Corporation,
Greenbrier-Concarril, LLC, Greenbrier Leasing Corporation,
Greenbrier Leasing Limited Partner, LLC, Greenbrier Management
Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar,
Inc., Gunderson, Inc., Gunderson Marine, Inc., Gunderson Rail
Services, Inc., Gunderson Specialty Products, LLC and
U.S. Bank National Association as Trustee dated
May 11, 2005, is incorporated herein by reference to
Exhibit 4.1 to the Registrants Form 8-K filed
May 13, 2005. |
|
|
4 |
.2 |
|
Indenture between the Registrant, the Guarantors named therein
and U.S. Bank National Association as Trustee dated
May 22, 2006, is incorporated herein by reference to
Exhibit 4.1 to the Registrants Form 8-K filed
May 25, 2006. |
|
|
4 |
.3 |
|
Rights Agreement, dated as of July 13, 2004, between the
Registrant and EquiServe Trust Registrant, N.A., as Rights
Agent, is incorporated herein by reference to Exhibit 4.1
to the Registrants Registration Statement on Form 8-A
filed September 16, 2004. |
|
|
4 |
.4 |
|
Amendment No. 1 to the Rights Agreement, dated as of
July 13, 2004, is incorporated herein by reference to
Exhibit 4.2 to the Registrants Form 8-K filed
November 15, 2004. |
|
|
4 |
.5 |
|
Amendment No. 2 to the Rights Agreement, dated as of
July 13, 2004, incorporated herein by reference to
Exhibit 4.3 to the Registrants Form 8-K filed
February 9, 2005. |
|
|
10 |
.1 |
|
Registration Rights Agreement among the Registrant and Banc of
America Securities LLC and Bear, Stearns & Co. Inc.,
dated May 11, 2005, is incorporated herein by reference to
Exhibit 10.1 to the Registrants Form 8-K filed
May 13, 2005. |
|
|
10 |
.2 |
|
Termination Agreement entered into November 1, 2005 between
the Registrant and William A. Furman and each of George L.
Chelius and Eric Epperson as Executor of the Will and Estate of
Alan James and as Trustee, is incorporated herein by reference
to Exhibit 10.1 to the Registrants Form 8-K
filed November 10, 2005. |
|
|
10 |
.3 |
|
Purchase Agreement among the Registrant and Banc of America
Securities LLC and Bear, Stearns & Co. Inc., as initial
purchasers, dated November 16, 2005, is incorporated herein
by reference to Exhibit 10.1 to the Registrants
Form 8-K filed December 1, 2005. |
|
|
10 |
.4 |
|
Registration Rights Agreement among the Registrant and Banc of
America LLC and Bear, Stearns & Co. Inc., dated
November 21, 2005, is incorporated herein by reference to
Exhibit 10.2 to the Registrants Form 8-K filed
December 1, 2005. |
The Greenbrier Companies 2006
Annual
Report 63
EXHIBITS, FINANCIAL STATEMENT
SCHEDULES (continued)
|
|
|
|
|
|
|
10 |
.5* |
|
Employment Agreement dated April 7, 2006 between
Mr. Mark Rittenbaum and Registrant, is incorporated herein
by reference to Exhibit 10.1 to the Registrants Form
8 K filed April 13, 2006. |
|
|
10 |
.5* |
|
Employment Agreement between the Registrant and Mr. William
A. Furman dated April 20, 2005, is incorporated herein by
reference to Exhibit 10.1 to the Registrants
Form 8-K filed April 20, 2005. |
|
|
10 |
.6* |
|
Amendment to Employment Agreement between Mr. William A.
Furman and Registrant dated May 11, 2006, is incorporated
herein by reference to Exhibit 10.1 to the
Registrants Form 8-K filed May 12, 2006. |
|
|
10 |
.7* |
|
Employment Agreement dated May 11, 2006 between Robin
Bisson and Registrant, is incorporated herein by reference to
Exhibit 10.2 to the Registrants Form 8-K filed
May 12, 2006. |
|
|
10 |
.8 |
|
Purchase Agreement among the Registrant and Bear,
Stearns & Co. Inc. and Banc of America Securities LLC,
as initial purchasers, and the guaranteeing subsidiaries named
therein, dated May 17, 2006, is incorporated herein by
reference to Exhibit 10.1 to the Registrants
Form 8-K filed May 18, 2006. |
|
|
10 |
.9 |
|
Registration Rights Agreement among the Registrant, the
Guarantors named therein, Bear, Stearns & Co. Inc. and
Banc of America Securities LLC, dated May 22, 2006, is
incorporated herein by reference to Exhibit 10.1 to the
Registrants Form 8-K filed May 25, 2006. |
|
|
10 |
.10* |
|
Greenbrier Leasing Corporations Manager Owned Target
Benefit Plan dated as of January 1, 1996 is incorporated
herein by reference to Exhibit 10.35 to the
Registrants Quarterly Report on Form 10-Q for the
quarter ended May 31, 1997. |
|
|
10 |
.11* |
|
James-Furman Supplemental 1994 Stock Option Plan is incorporated
herein by reference to Exhibit 10.35 to the
Registrants Annual Report on Form 10-K for the year
ended August 31, 1994. |
|
|
10 |
.12** |
|
Form of Agreement concerning Indemnification and Related Matters
(Directors) between Registrant and its directors. |
|
|
10 |
.13 |
|
Railcar Management Agreement between Greenbrier Leasing
Corporation and James-Furman & Registrant, dated as of
December 31, 1989 is incorporated herein by reference to
Exhibit 10.9 to the Registrants Registration
Statement No. 33-78852, dated July 11, 1994. |
|
|
10 |
.14 |
|
Form of Amendment No. 1 to Railcar Management Agreement
between Greenbrier Leasing Corporation and
James-Furman & Registrant dated as of July 1, 1994
is incorporated herein by reference to Exhibit 10.11 to the
Registrants Registration Statement No. 33-78852,
dated July 11, 1994. |
|
|
10 |
.15 |
|
Railcar Maintenance Agreement between Greenbrier Leasing
Corporation and James-Furman & Registrant, dated as of
December 31, 1989 is incorporated herein by reference to
Exhibit 10.10 to the Registrants Registration
Statement No. 33-78852, dated July 11, 1994. |
|
|
10 |
.16 |
|
Form of Amendment No. 1 to Railcar Maintenance Agreement
between Greenbrier Leasing Corporation and
James-Furman & Registrant, dated as of July 1,
1994 is incorporated herein by reference to Exhibit 10.12
to the Registrants Registration Statement
No. 33-78852, dated July 11, 1994. |
|
|
10 |
.17 |
|
Lease of Land and Improvements dated as of July 23, 1992
between the Atchison, Topeka and Santa Fe Railway
Registrant and Gunderson Southwest, Inc. is incorporated herein
by reference to Exhibit 10.4 to the Registrants
Registration Statement No. 33-78852, dated July 11,
1994. |
|
|
10 |
.18 |
|
Re-marketing Agreement dated as of November 19, 1987 among
Southern Pacific Transportation Registrant, St. Louis
Southwestern Railway Registrant, Greenbrier Leasing Corporation
and Greenbrier Railcar, Inc. is incorporated herein by reference
to Exhibit 10.5 to the Registrants Registration
Statement No. 33-78852, dated July 11, 1994. |
64 The
Greenbrier Companies 2006 Annual Report
EXHIBITS, FINANCIAL STATEMENT
SCHEDULES (continued)
|
|
|
|
|
|
|
10 |
.19 |
|
Amendment to Re-marketing Agreement among Southern Pacific
Transportation Registrant, St. Louis Southwestern Railway
Registrant, Greenbrier Leasing Corporation and Greenbrier
Railcar, Inc. dated as of November 15, 1988 is incorporated
herein by reference to Exhibit 10.6 to the
Registrants Registration Statement No. 33-78852,
dated July 11, 1994. |
|
|
10 |
.20 |
|
Amendment No. 2 to Re-marketing Agreement among Southern
Pacific Transportation Registrant, St. Louis Southwestern
Railway Registrant, Greenbrier Leasing Corporation and
Greenbrier Railcar, Inc. dated as of November 15, 1988 is
incorporated herein by reference to Exhibit 10.7 to the
Registrants Registration Statement No. 33-78852,
dated July 11, 1994. |
|
|
10 |
.21 |
|
Amendment No. 3 to Re-marketing Agreement dated
November 19, 1987 among Southern Pacific Transportation
Registrant, St. Louis Southwestern Railway Registrant,
Greenbrier Leasing Corporation and Greenbrier Railcar, Inc.
dated as of March 5, 1991 is incorporated herein by
reference to Exhibit 10.8 to the Registrants
Registration Statement No. 33-78852, dated July 11,
1994. |
|
|
10 |
.22 |
|
First amendment dated September 26, 1994 to the Lease of
Land and Improvements dated as of July 23, 1992 between The
Atchison, Topeka and Santa Fe Railway Registrant and
Gunderson Southwest, Inc. is incorporated herein by reference to
Exhibit 10.24 to the Registrants Quarterly Report on
Form 10-Q for the quarter ended November 30, 1994. |
|
|
10 |
.23* |
|
Stock Incentive Plan2000, dated as of April 6, 1999
is incorporated herein by reference to Exhibit 10.23 to the
Registrants Annual Report on Form 10-K for the year
ended August 31, 1999. |
|
|
10 |
.24* |
|
Amendment No. 1 to the Stock Incentive Plan2000, is
incorporated herein by reference to Exhibit 10.1 to the
Registrants Form 10-Q for the quarter ended
February 28, 2001. |
|
|
10 |
.25* |
|
Amendment No. 2 to the Stock Incentive Plan2000, is
incorporated herein by reference to Exhibit 10.2 to the
Registrants Form 10-Q for the quarter ended
February 28, 2001. |
|
|
10 |
.26* |
|
Amendment No 3 to the Stock Incentive Plan2000, is
incorporated herein by reference to Exhibit 10.2 to the
Registrants Form 10-Q for the quarter ended
February 28, 2001. |
|
|
10 |
.27 |
|
The Greenbrier Companies Code of Business Conduct and Ethics is
incorporated herein by reference to Exhibit 10.26 to the
Registrants Annual Report on Form 10-K for the year
ended August 31, 2003. |
|
|
10 |
.28* |
|
Employment Agreement dated February 15, 2004 between James
T. Sharp and Registrant, is incorporated herein by reference to
Exhibit 10.27 to the Registrants Annual Report on
Form 10-K for the year ended August 31, 2004. |
|
|
10 |
.29* |
|
Form of Employee Restricted Share Agreement related to the 2005
Stock Incentive Plan, is incorporated herein by reference to
Exhibit 10.2 to the Registrants Form 8-K filed
August 5, 2005. |
|
|
10 |
.30* |
|
Form of Change of Control Agreement, is incorporated herein by
reference to Exhibit 10.3 to the Registrants
Form 8-K filed August 5, 2005. |
|
|
10 |
.31* |
|
2004 Employee Stock Purchase Plan is incorporated herein by
reference to Appendix B to the Registrants Proxy
Statement on Schedule 14A filed November 25, 2003. |
|
|
10 |
.32* |
|
2005 Stock Incentive Plan is incorporated herein by reference to
Appendix C to the Registrants Proxy Statement on
Schedule 14A filed November 24, 2004. |
|
|
10 |
.33* |
|
Amendment No. 1 to the 2005 Stock Incentive Plan dated
June 30, 2005 is incorporated herein by reference to
Exhibit 10.36 to the Registrants Annual Report on
Form 10-K for the year ended August 31, 2005. |
|
|
10 |
.34** |
|
Stock purchase agreement among Gunderson Rail Services LLC and
Meridian Rail Holdings Corp. dated October 15, 2006. |
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|
12 |
.1** |
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Calculation of ratio of earnings to fixed changes. |
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21 |
.1** |
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List of the subsidiaries of the Registrant. |
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23 |
.1** |
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Consent of Deloitte & Touche LLP, independent auditors. |
The Greenbrier Companies 2006
Annual
Report 65
EXHIBITS, FINANCIAL STATEMENT
SCHEDULES (continued)
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31 |
.1(a) |
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Certification pursuant to Rule 13(a)-14(a) |
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31 |
.2(b) |
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Certification pursuant to Rule 13(a)-14(a) |
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32 |
.1(c) |
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Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
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32 |
.2(d) |
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Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. |
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* |
Management contract or compensatory plan or arrangement. |
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** |
Previously filed with the Original Filing. |
CERTIFICATIONS
The Company filed the required 303A.12(a) New York Stock
Exchange Certification of its Chief Financial Officer with the
New York Stock Exchange with no qualifications following the
2005 Annual Meeting of Shareholders and the Company filed as an
exhibit to its Annual Report on
Form 10-K for the
year ended August 31, 2005, as filed with the Securities
and Exchange Commission, a Certification of the Chief Executive
Officer and a Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
66 The
Greenbrier Companies 2006 Annual Report
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GREENBRIER COMPANIES,
INC.
Dated: November 3, 2006
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By: |
/s/ William A. Furman |
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William A. Furman |
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President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
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Signature |
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Date |
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Benjamin
R. Whiteley, Chairman of the Board |
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/s/ William A. Furman
William
A. Furman, President and Chief Executive Officer, Director |
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November 3, 2006 |
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Victor
G. Atiyeh, Director |
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/s/ Duane McDougall
Duane
McDougall, Director |
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November 3, 2006 |
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/s/ A. Daniel ONeal
A.
Daniel ONeal, Director |
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November 3, 2006 |
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/s/ Charles J. Swindells
Charles
J. Swindells, Director |
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November 3, 2006 |
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/s/ C. Bruce Ward
C.
Bruce Ward, Director |
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November 3, 2006 |
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/s/ Donald A. Washburn
Donald
A. Washburn, Director |
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November 3, 2006 |
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/s/ Joseph K. Wilsted
Joseph
K. Wilsted, Sr. Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer) |
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November 3, 2006 |
The Greenbrier Companies 2006
Annual
Report 67
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREENBRIER-CONCARRIL, LLC
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Dated: November 3, 2006
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By:
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/s/ Joseph K. Wilsted |
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Joseph K. Wilsted
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Vice President |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, this report has been signed by the following persons in the capacities indicated on
November 3, 2006:
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Signature |
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Title |
/s/ William A. Furman
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Chairman of the Board of Directors |
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William A. Furman
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(Principal Executive Officer) |
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/s/ Joseph K. Wilsted
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Vice President |
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Joseph K. Wilsted
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(Principal Financial and Accounting Officer) |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREENBRIER LEASING LIMITED PARTNER, LLC
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Dated: November 3, 2006 |
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By: Greenbrier Leasing Company LLC |
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Sole Member and Manager |
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By:
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/s/ Joseph K. Wilsted |
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Joseph K. Wilsted
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Vice President |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, this report has been signed by the following persons in the capacities indicated on
November 3, 2006:
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Signature |
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Title |
/s/ William A. Furman
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Principal Executive Officer |
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William A. Furman |
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/s/ Joseph K. Wilsted
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Principal Financial and Accounting Officer |
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Joseph K. Wilsted |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREENBRIER LEASING COMPANY, LLC
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Dated: November 3, 2006
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By:
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/s/ Joseph K. Wilsted |
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Joseph K. Wilsted
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Vice President |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, November 3, 2006:
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Signature |
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Title |
/s/ William A. Furman
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Chief Executive Officer and Manager |
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William A. Furman
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(Principal Executive Officer) |
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/s/ Joseph K. Wilsted
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Vice President |
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Joseph K. Wilsted
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(Principal Financial and Accounting Officer) |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREENBRIER LEASING, L.P.
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Dated: November 3, 2006 |
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By: Greenbrier Management Services LLC |
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General Partner |
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By: Greenbrier Leasing Company LLC |
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Sole Member and Manager |
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By:
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/s/ Joseph K. Wilsted |
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Joseph K. Wilsted
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Vice President |
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|
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, this report has been signed by the following persons in the capacities indicated on
November 3, 2006:
|
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Signature |
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Title |
/s/ William A. Furman
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Principal Executive Officer |
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|
William A. Furman |
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|
|
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/s/ Joseph K. Wilsted
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Principal Financial and Accounting Officer |
|
|
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Joseph K. Wilsted |
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|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GREENBRIER MANAGEMENT SERVICES LLC
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Dated: November 3, 2006 |
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By: Greenbrier Leasing Company LLC |
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Sole Member and Manager |
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By:
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/s/ Joseph K. Wilsted |
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Joseph K. Wilsted
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Vice President |
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|
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, this report has been signed by the following persons in the capacities indicated on
November 3, 2006:
|
|
|
Signature |
|
Title |
/s/ William A. Furman
|
|
Principal Executive Officer |
|