-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BqPe7BIERjJBMvKi5I0tTbO4Mszkk1blS1jEsH+i2jPqC9NXRVg1KIUIMQHtUd3b GXjPYShTlwUq6/Z01GpFNA== /in/edgar/work/0000912057-00-051577/0000912057-00-051577.txt : 20001130 0000912057-00-051577.hdr.sgml : 20001130 ACCESSION NUMBER: 0000912057-00-051577 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREENBRIER COMPANIES INC CENTRAL INDEX KEY: 0000923120 STANDARD INDUSTRIAL CLASSIFICATION: [3743 ] IRS NUMBER: 930816972 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13146 FILM NUMBER: 779911 BUSINESS ADDRESS: STREET 1: ONE CENTERPOINTE DR STREET 2: STE 200 CITY: LAKE OSWEGO STATE: OR ZIP: 97035 BUSINESS PHONE: 5036847000 MAIL ADDRESS: STREET 1: ONE CENTERPOINTE DR STREET 2: STE 200 CITY: LAKE OSWEGO STATE: OR ZIP: 97035 10-K 1 a2031876z10-k.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 2000 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to ___________ Commission File No. 1-13146 --------------------------- THE GREENBRIER COMPANIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 93-0816972 (State of Incorporation) (IRS Employer Identification No.) ONE CENTERPOINTE DRIVE, SUITE 200 LAKE OSWEGO, OREGON 97035 (Address of principal executive offices) (503) 684-7000 (Registrant's telephone number, including area code) --------------------------- Securities registered pursuant to Section 12(b) of the Act: (Title of Each Class) (Name of Each Exchange COMMON STOCK, on Which Registered) PAR VALUE $0.001 PER SHARE NEW YORK STOCK EXCHANGE Securities registered pursuant to Section 12(g) of the Act: NONE 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 Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / Aggregate market value of the Registrant's Common Stock held by non-affiliates on October 31, 2000 (based on the closing price of such shares on such date) was approximately $47,000,000. The number of shares outstanding of the Registrant's Common Stock on October 31, 2000 was 14,152,132 shares of Common Stock, par value $0.001 per share. DOCUMENTS INCORPORATED BY REFERENCE Parts of Registrant's 2000 Annual Report to Stockholders and of Registrant's Proxy Statement dated November 29, 2000 prepared in connection with the Annual Meeting of Stockholders to be held on January 9, 2001 are incorporated by reference into Parts II and III of this Report. THE GREENBRIER COMPANIES, INC. FORM 10-K TABLE OF CONTENTS
PART I PAGE Item 1. BUSINESS 2 Item 2. PROPERTIES 8 Item 3. LEGAL PROCEEDINGS 9 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9 PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 10 Item 6. SELECTED FINANCIAL DATA 10 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 10 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 10 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 10 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT 11 Item 11. EXECUTIVE COMPENSATION 11 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 11 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 11 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K 12 SIGNATURES 18
(i) PART I. 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 the Company with the Securities and Exchange Commission. These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to: - financing sources for future expansion, other business development activities, capital spending and railcar syndication activities; - improved earnings in Europe; - improved European railcar market environment; - increased stockholder value; - increased competition; - market slowdown in North America; - share of new and existing markets; - increased production; - increased railcar services business; and - short- and long-term revenue and earnings effects of the above items. These forward-looking statements are subject to a number of uncertainties and other factors outside Greenbrier's control. The following are among the factors, particularly in North America and Europe, that could cause actual results or outcomes to differ materially from the forward-looking statements: - - a delay or failure of acquisitions, products or services to compete successfully; - - actual future costs and the availability of materials and a trained workforce; - - changes in product mix and the mix between manufacturing and leasing & services revenue; - - labor disputes or operating difficulties that might disrupt manufacturing operations or the flow of cargo; - - production difficulties and product delivery delays as a result of, among other matters, changing technologies or non-performance of sub-contractors; - - ability to obtain suitable contracts for the sale of leased equipment; - - lower-than-anticipated residual values for leased equipment; - - discovery of defects in railcars resulting in increased warranty cost or litigation; - - resolution or outcome of pending litigation; - - the ability to consummate expected sales; - - 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 the contracts as anticipated; - - financial condition of principal customers; - - market acceptance of products; - - competitive factors, including increased competition, introduction of competitive products and price pressures; - - industry overcapacity or other factors; - - shifts in market demand; - - domestic and global business conditions and growth or reduction in the surface transportation industry; - - domestic and global political, regulatory or economic conditions; - - changes in interest rates; - - changes in fuel prices; - - commodity price fluctuations; and - - economic impacts from currency fluctuations in the Company's worldwide operations. Any forward-looking statements should be considered in light of these factors. Greenbrier assumes no obligation to update or revise any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements or if Greenbrier later becomes aware that these assumptions are not likely to be achieved. 1 ITEM 1. BUSINESS INTRODUCTION Greenbrier is a leading supplier of transportation equipment and services to the railroad and related industries. With operations in North America and Europe, the manufacturing segment produces double-stack intermodal railcars, conventional railcars, marine vessels and industrial forgings, and performs repair and refurbishment activities for both intermodal and conventional railcars. In addition to manufacturing, Greenbrier is engaged in complementary leasing & services activities principally in North America. As of August 31, 2000, the fleet consists of approximately 37,000 owned or managed railcars. Greenbrier believes this fleet is among the larger non-railroad owned fleets in the United States. In January 2000, Greenbrier completed the purchase of the Freight Wagon Division of DaimlerChrysler Rail Systems located in Siegen, Germany. The acquired operation provides expertise in the fields of engineering, design, sales and marketing and project management. It also includes a comprehensive portfolio of railcar designs certified for the European marketplace. Accordingly, a significant portion of the assets acquired are intangibles. In September 1998, Greenbrier acquired a 60% interest in a railcar manufacturer located in Swidnica, Poland. Through a series of subsequent transactions, the Company has increased its ownership interest to 97.5%. This facility establishes a European manufacturing base and provides access to the European markets. Effective September 1, 1999, Greenbrier completed the acquisition of the remaining common equity of the minority investor's interest in the Canadian manufacturing subsidiary. Also in September 1998, Greenbrier entered into a 50% joint venture with Bombardier Transportation to build railroad freight cars at Bombardier's existing manufacturing facility in Sahagun, Mexico. The facility serves the North American marketplace and provides better access to the growing market in Mexico. Greenbrier is a Delaware corporation formed in 1981. The Company's principal executive offices are located at One Centerpointe Drive, Lake Oswego, Oregon 97035, and its telephone number is (503) 684-7000. PRODUCTS AND SERVICES Greenbrier operates in two primary business segments: the manufacture of railcars and marine vessels and the refurbishment and repair of railcars, and the leasing of railcars and related services. A summary of selected consolidated financial information for these two business segments as well as domestic and foreign operations is set forth in Note 18 of the Notes to Consolidated Financial Statements. The manufacturing segment operates from 12 separate facilities in North America, one in Europe and through a network of subcontractors in Europe. NORTH AMERICA RAILCAR PRODUCTS INTERMODAL RAILCARS Intermodal transportation is the movement of cargo in standardized containers or trailers. Intermodal containers and trailers are generally freely interchangeable among railcar, truck or ship, making it possible to move cargo in a single container or trailer from a point of origin to its final destination without the repeated loading and unloading of freight required by traditional shipping methods. A major innovation in intermodal transportation has been the articulated double-stack railcar, which transports stacked containers on a single platform. An articulated railcar is a unit comprised of up to five platforms, each of which is linked by a common set of wheels and axles. The double-stack railcar provides significant operating and capital savings over other types of intermodal railcars. These savings are the result of (i) increased train density (two containers are carried within the same longitudinal space conventionally used to carry one trailer or container); (ii) a railcar weight reduction per container of approximately 50%; (iii) easier terminal handling characteristics; (iv) reduced equipment costs of approximately 30% over the cost of providing the same carrying capacity with conventional equipment; (v) better ride quality leading to reduced damage claims; and (vi) increased fuel efficiency resulting from weight reduction and improved aerodynamics. Greenbrier is the leading manufacturer of double-stack railcars with an estimated cumulative North American market share of nearly 60%. 2 Greenbrier's comprehensive line of articulated and non-articulated double-stack railcars offers varying load capacities and configurations. Current double-stack products include: MAXI-STACK-Registered Trademark- The Maxi-Stack is a series of double-stack railcars that features the ride-quality and operating efficiency of articulated stack cars. The Maxi-Stack IV is a three-platform articulated railcar with 53-foot wells that can accommodate all current container sizes in all three wells. The Maxi-Stack III is a five-platform railcar that features the ability to carry containers up to 48 feet in length in all wells and up to 53 feet in length on the top level. The Maxi-Stack AP is a three-platform all-purpose railcar that is more versatile than other intermodal cars because it allows the loading of either trailers or double-stack containers on the same platform. HUSKY-STACK-Registered Trademark- The Husky-Stack is a non-articulated (stand-alone) or draw bar connected series of double-stack railcars with the capability of carrying containers up to 42% heavier than a single Maxi-Stack platform. The All-Purpose Husky-Stack is a non-articulated version of the Maxi-Stack AP. Husky-Stack 2+2 is a 56-foot railcar that allows the double-stack loading of up to four 28-foot containers. Husky-Stack also provides a means to extend double-stack economics to small load segments and terminals. CONVENTIONAL RAILCARS In 2000, the majority of Greenbrier's manufactured railcars were conventional railcars. A leading manufacturer of boxcars in North America, Greenbrier produces a wide variety of 100-ton capacity boxcars, which are primarily used in the forest products industry. Greenbrier also produces custom-built, high-capacity boxcars for special applications such as automotive parts or canstock movement. In addition to boxcars: bulkhead, automotive and other flat cars; center-partition cars; flat cars; gondolas and various other conventional railcar types are manufactured. Production of Auto-Max-Registered Trademark- , a fully integrated, two-unit railcar designed to transport a mix of full-size pickups, automobiles and sport utility vehicles in a tri-level configuration began in the fourth quarter of 1999. The adjustable decks in Auto-Max can also be moved to a bi-level configuration, assuring the ability to adjust to automobile industry model changes. EUROPEAN RAILCAR PRODUCTS TANK CARS Greenbrier manufactures a comprehensive line of pressurized tank cars for liquid petroleum gas ("LPG") and non-pressurized tank cars for light oil and other products. Recent production includes 120m(3) LPG tank cars for Germany and France and 79m(3) chemical tank cars for Western Europe. These are the first two tank car products manufactured by Greenbrier that have been approved for use in Western Europe. GENERAL PURPOSE FREIGHT CARS Greenbrier has the capability to manufacture a broad range of other types of freight cars, including flat cars, coil steel cars, intermodal cars, coal cars and sliding wall cars. RAIL SERVICES Greenbrier is actively engaged in the repair and refurbishment of railcars for third parties, as well as its own lease fleet. In certain situations, repair and refurbishment of the Company's lease fleet is performed in unaffiliated facilities. Refurbishment and repair facilities are located in Portland and Springfield, Oregon; Cleburne and San Antonio, Texas; Finley, Washington; Atchison, Kansas; Golden, Colorado; and Modesto, California. The Springfield facility has a long-term contract with a third-party primarily for the repair of railcars. Greenbrier believes it is one of only a few railcar lessors with its own refurbishing capabilities. In addition, Greenbrier operates wheel reconditioning shops in Portland, Oregon; Pine Bluff, Arkansas; Tacoma, Washington; and Sahagun, Mexico. 3 MARINE VESSEL FABRICATION The Portland, Oregon manufacturing facility is located on a deep water port on the Willamette River. Until 1984, the Company's predecessor designed and built ocean-going barges and other types of marine vessels for maritime shipping companies. In 1995, Greenbrier re-entered the marine vessel market and expanded and upgraded the marine facilities, which include the largest side-launch ways on the West Coast. The upgraded marine facilities also enhance steel plate burning and fabrication capacity providing flexibility for railcar production. Since 1995, vessels manufactured include conventional deck barges, railcar deck barges, barges for aggregates and other heavy industrial products and ocean-going dump barges. FORGING Greenbrier also produces steel forgings weighing up to 100 tons at its TrentonWorks industrial forge facility, one of the largest in North America. The forge produces custom parts for the oil and gas, hydroelectric and other heavy industries in all parts of the world. LEASING & SERVICES Greenbrier currently manages a fleet of approximately 37,000 railcars, primarily in North America, of which 45% are owned and the remainder are managed for institutional investors, railroads and other leasing companies. Management services include equipment marketing and re-marketing, maintenance management and administration. Greenbrier participates in both the finance and the operating lease segments of the market. The aggregate rental payments over the operating lease terms do not fully amortize the acquisition costs of the leased equipment. As a result, the Company is subject to the customary risk that it may not be able to sell or re-lease equipment after the operating lease term expires. However, the Company believes it can effectively manage the risks typically associated with operating leases due to its railcar expertise and its refurbishing and re-marketing capabilities. Most of the leases are "full service" leases, whereby Greenbrier is responsible for maintenance, taxes and administration. The fleet is maintained, in part, through Greenbrier's own facilities and engineering and technical staff. Assets from the owned lease fleet are periodically sold to take advantage of market conditions, manage risk and maintain liquidity. The following table summarizes the lease fleet:
FLEET PROFILE AS OF AUGUST 31, 2000(1) --------------------------------------------------------------------- Percent Average of Owned Age of Owned Managed Total Units on Owned Units Units Units Lease Units (Yrs.) -------- -------- -------- ---------- --------------- Railcars Available for Revenue Service 15,662 20,488 36,150 89% 22 Railcar Equipment Held for Sale(2) 1,073 - 1,073 --------- --------- ----------- 16,735 20,488 37,223 ========= ========= =========== Lessee Profile: Class I Railroads 11,597 13,935 25,532 Non-Class I Railroads 1,499 3,629 5,128 Shipping Companies 664 2,284 2,948 Leasing Companies 231 594 825 Off-Lease 1,671 46 1,717 --------- --------- ----------- Total Revenue Units 15,662 20,488 36,150 ========= ========= ===========
- -------------------------- (1) Each platform of an articulated car is treated as a separate car. (2) Railcar equipment held for sale consists mainly of railcars that will either be sold or refurbished and placed on lease. A substantial portion of the equipment in the lease fleet has been acquired through an agreement entered into in August 1990 with Southern Pacific Transportation Company, which has since merged with Union Pacific Railroad, to purchase, refurbish and re-market over 10,000 railcars. The railcars were refurbished to predetermined specifications by Greenbrier or unaffiliated contract shops after satisfactory re-marketing arrangements were in place. 4 RAW MATERIALS AND COMPONENTS Products manufactured at Greenbrier owned facilities require a supply of raw materials including steel and numerous specialty components such as brakes, wheels and axles. Approximately 50% of the cost of each freight car represents specialty components purchased from third-parties. 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. Inventory levels are continually monitored to ensure adequate support of production. Advance purchases are periodically made to avoid possible shortages of material due to capacity limitations of component suppliers and possible price increases. Binding long-term contracts with suppliers are not typically entered into as the Company relies on established relationships with major suppliers to ensure the availability of raw materials and specialty items. Fluctuations in the price of components and raw materials have not had a material effect on earnings and are not anticipated to have a material effect in the foreseeable future. In Europe, certain railcars are manufactured by sub-contractors. The Company believes that alternatives are available should the sub-contractors be unable to perform. In 2000, approximately 73% of domestic requirements for steel were purchased from Oregon Steel Mills, Inc., approximately 75% of the Company's Canadian requirements were purchased from Algoma Steel, Inc., and approximately 36% of the Company's European requirements were purchased from Rautaruukki Steel. The top ten suppliers for all inventory purchases accounted for approximately 41% of total purchases, of which no supplier accounted for more than 10%. The Company maintains good relationships with its suppliers and has not experienced any significant interruptions in recent years in the supply of raw materials or specialty components. A member of the Canadian subsidiary's board of directors serves as chairman of the board of directors of Algoma Steel, Inc. MARKETING AND PRODUCT DEVELOPMENT A fully-integrated marketing and sales effort is utilized whereby Greenbrier seeks to leverage relationships developed in each of its manufacturing and leasing & services operations to provide customers with a diverse range of equipment and financing alternatives designed to satisfy a customer's unique needs. These custom programs may involve a combination of railcar products and financing, leasing, refurbishing and re-marketing services, depending on whether the customer is buying new equipment, refurbishing existing equipment, or seeking to outsource the maintenance or management of equipment. Through 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 2000, 1999 and 1998 were $2,300,000, $1,107,000 and $1,470,000. CUSTOMERS AND BACKLOG The manufacturing customer base includes every transportation company that utilizes double-stack or conventional railcars as well as financial institutions that provide equipment to the transportation industry. A portion of the customer base includes TTX Company, Burlington Northern Sante Fe ("BNSF"), Union Pacific Railroad ("UP"), Canadian National Railway Company, Canadian Pacific Railway, Norfolk Southern Railway Company, Bombardier Rail Capital, DB Cargo AG and VTG Lehnkering AG. The following table lists the Company's backlog in units and dollars for new railcars at the dates shown:
August 31, ------------- ------------ ------------ 2000 1999 1998 ---- ---- ---- New railcar backlog(1) 7,800 4,000 6,200 Estimated value (in thousands) $440,000 $271,000 $375,000
- -------------------------- (1) Each platform of an articulated car is treated as a separate car. The backlog is based on customer purchase or lease orders that the Company believes are firm. Customer orders, however, are 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 sold. The backlog is not necessarily indicative of future results of operations. Payment for railcars manufactured is typically received when the cars are completed and accepted by a third-party customer. 5 Leasing & services customers include Class I Railroads, regional and short line railroads, other leasing companies, shippers and carriers such as UP, BNSF, Kansas City Southern Railroad, Florida East Coast Railroad and III Transportation. In 2000, sales to the two largest customers, TTX Company and BNSF, accounted for 30% and 9% of total revenues and 33% and 7% of manufacturing revenues. Revenues from UP and BNSF accounted for approximately 27% and 12% of leasing & services revenues. No other customers accounted for more than 10% of total, manufacturing or leasing & services revenues. COMPETITION Greenbrier is affected by a variety of competitors in each of its principal business activities. There are currently seven major railcar manufacturers competing in North America. Two of these producers build railcars principally for their own fleets and five producers - Trinity Industries, Inc., Thrall Car Manufacturing Co., Johnstown America Corp., National Steel Car, Ltd. and the Company - compete principally in the general railcar market. Some of these producers have substantially greater resources than the Company. Greenbrier competes on the basis of type of product, reputation for quality, price, reliability of delivery and customer service and support. Competition in Europe, with 20 to 30 railcar producers, is more fragmented than in North America. In railcar leasing, principal competitors in North America include Bombardier Rail Capital, The CIT Group, First Union Rail, GATX Corporation and General Electric Railcar Services. Greenbrier does not currently provide significant leasing services in Europe. PATENTS AND TRADEMARKS Greenbrier pursues a proactive program for protection of intellectual property resulting from its research and development efforts. Greenbrier has obtained patent and trademark protection for significant intellectual property as it relates to its manufacturing business. The Company holds several United States and foreign patents of varying duration and has several patent applications pending. ENVIRONMENTAL MATTERS The Company is 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. Greenbrier maintains an active program of environmental compliance and believes that its current operations are in material compliance with all applicable national, state, provincial and local environmental laws and regulations. Prior to acquiring manufacturing facilities, the Company conducts investigations to evaluate the environmental condition of subject properties and negotiates contractual terms for allocation of environmental exposure arising from prior uses. Upon commencing operations at acquired facilities, the Company endeavors to implement environmental practices, which are at least as stringent as those mandated by applicable laws and regulations. Environmental studies have been conducted of owned and leased properties, which indicate additional investigation and some remediation may be necessary. The Portland, Oregon manufacturing facility is located on the Willamette River. The United States Environmental Protection Agency is considering possible classification of portions of the river bed, including the portion fronting the facility, as a federal "superfund" site due to sediment contamination. There is no indication that the Company has contributed to contamination of the Willamette River bed, although uses by prior owners of the property may have contributed. Nevertheless, ultimate classification of the Willamette River may have an impact on the value of the Company's investment in the property and may require the Company to initially bear a portion of the cost of any mandated remediation. The Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its side-launch ways on the river, and classification as a superfund site could result in some limitations on future launch activity. Management believes that its operations adhere to sound environmental practices, applicable laws and regulations. 6 REGULATION The Federal Railroad Administration (the "FRA") 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 (the "AAR") also promulgates a wide variety of rules and regulations governing the safety and design of equipment, relationships among railroads 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. The effect of these regulations is that the Company must maintain its certifications with the AAR as a railcar builder and component manufacturer, and products sold and leased by the Company in North America must meet AAR, Transport Canada and FRA standards. In Europe, many countries have deregulated their railroads, and the privatization process is underway. However, each country currently has its own market with different certification requirements. To address cross-border issues, the European Union has proposed international rail routes that would run on a common standard with few customs restrictions. However, there can be no assurance that such standards will be adopted. EXECUTIVE OFFICERS OF THE COMPANY The following are the executive officers of the Company. ALAN JAMES, 70, is Chairman of the Board of Directors of Greenbrier, a position he has held since 1994. Mr. James was President of Greenbrier, or its predecessor company, from 1974 to 1994. WILLIAM A. FURMAN, 56, is President, Chief Executive Officer and a director of Greenbrier, positions he has held since 1994. Mr. Furman is also Managing Director of TrentonWorks Limited and Chairman of the Board of Directors of WagonySwidnica, S.A. Mr. Furman was Chief Executive Officer of Gunderson from 1989 to 2000 and was Vice President of Greenbrier, or its predecessor company, from 1974 to 1994. Mr. Furman serves as a director of Schnitzer Steel Industries, Inc., a steel recycling and manufacturing company. ROBIN D. BISSON, 46, has been Senior Vice President Marketing and Sales since 1996 and President of Greenbrier Railcar, Inc., a subsidiary that engages in railcar leasing, since 1991. Mr. Bisson was Vice President of Greenbrier Railcar, Inc. from 1987 to 1991 and has been Vice President of Greenbrier Leasing Corporation, a subsidiary that engages in railcar leasing, since 1987. LARRY G. BRADY, 61, is Senior Vice President and Chief Financial Officer of the Company. Prior to becoming Senior Vice President in 1998, he was Vice President and Chief Financial Officer since 1994. Mr. Brady has been Senior Vice President of Greenbrier Leasing Corporation since he joined the Company in 1991. From 1974 to 1990, he was a partner with Touche Ross & Co. (which subsequently became Deloitte & Touche LLP). A. DANIEL O'NEAL, JR., 64, has been a director of Gunderson, Inc. since 1985 and serves as a director of the Company. From 1973 until 1980, Mr. O'Neal served as a commissioner of the Interstate Commerce Commission, and from 1977 until 1980 served as its Chairman. He is currently Chairman of Powertech Toolworks, Inc., a computer services company. Mr. O'Neal has been Chairman of Washington State's Freight Mobility Board since being appointed by the Governor in 1998. MARK J. RITTENBAUM, 43, is Vice President and Treasurer of the Company, a position he has held since 1994. Mr. Rittenbaum is also Vice President of Greenbrier Leasing Corporation and Greenbrier Railcar, Inc., positions he has held since 1993 and 1994. TIMOTHY A. STUCKEY, 50, has been President of Gunderson Rail Services since May 1999 and President of Autostack Corporation since 1992, prior to which he served as Executive Vice President of Autostack since 1990, and Assistant Vice President of Greenbrier Leasing Corporation since 1987. NORRISS M. WEBB, 60, is Executive Vice President and General Counsel of the Company, a position he has held since 1994. He is also Vice President, Secretary and a director of Gunderson, Inc. Mr. Webb was Vice President of the Company from 1981 to 1994. L. CLARK WOOD, 58, has been President of Manufacturing Operations since April 1998, Chief Executive Officer and a director of Gunderson, Inc. since 2000 and Chief Executive Officer of TrentonWorks Limited since June 1995. Mr. Wood was President of Gunderson from 1990 to 1999 and was Vice President and Director of Railcar Sales at Trinity Industries, Inc., a railroad freight car manufacturer, from 1985 to 1990. 7 Executive officers are elected by the Board of Directors. There are no family relationships among any of the executive officers of the Company. Mr. James, Chairman of the Board of Directors, and Mr. Furman have entered into a Stockholders' Agreement pursuant to which they have agreed, among other things, to vote as directors to elect Mr. Furman as President and Chief Executive Officer of the Company, Mr. James as Chairman, and certain persons as executive officers and each to vote for the other and for the remaining existing directors in electing directors of the Company. EMPLOYEES As of August 31, 2000, Greenbrier had 3,835 full-time employees, consisting of 3,712 employees engaged in railcar and marine manufacturing, and railcar services, and 123 employees engaged in leasing & services activities. A total of 823 employees at the manufacturing facility in Trenton, Nova Scotia, Canada are covered by collective bargaining agreements, which are currently under negotiations. In addition, 359 employees at the manufacturing facility in Swidnica, Poland are also covered by collective bargaining agreements that can be terminated by either party with three months notice. A stock incentive plan and a stock purchase plan are available for all North American employees. A discretionary bonus program is maintained for salaried and most hourly employees not covered by collective bargaining agreements. Greenbrier believes that its relations with its employees are generally good. ITEM 2. PROPERTIES The Company operates at the following facilities in North America and Europe as of August 31, 2000:
- ------------------------------- ----------------------------------- ------------------------- ---------------------------- DESCRIPTION SIZE LOCATION STATUS - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar and marine 75 acres including 774,000 sq. Portland, Oregon Owned manufacturing facility ft. of manufacturing space and a 750-foot side-launch ways for launching ocean-going vessels - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar manufacturing and 100 acres with 800,000 sq. ft. of Trenton, Nova Scotia Owned forge facility manufacturing space as well as a forge shop - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar manufacturing facility 88 acres with 676,000 sq. ft. of Swidnica, Poland Owned manufacturing space - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar manufacturing and 461,991 sq. ft. of manufacturing Sahagun, Mexico Leased through 2003(1) wheel reconditioning shop space, which includes a 152,245 sq. ft. wheel reconditioning shop - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar repair facility 70 acres Cleburne, Texas Leased through 2002 with an option to purchase - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar repair facility 40 acres Finley, Washington Leased through 2015 with an option to purchase - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar repair facility 18 acres Atchison, Kansas Owned - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar repair facility 5.4 acres Springfield, Oregon Leased through 2004 - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Wheel reconditioning shop 4.6 acres Tacoma, Washington Leased through 2003 with extensions through 2071 - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Wheel reconditioning shop 20,000 sq. ft. Pine Bluff, Arkansas Month-to-month - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Railcar repair facility 145,800 sq. ft. Golden, Colorado Leased through 2006 - ------------------------------- ----------------------------------- ------------------------- ---------------------------- Executive offices, railcar 37,000 sq. ft. Lake Oswego, Oregon Leased through 2009 marketing and leasing activities - ------------------------------- ----------------------------------- ------------------------- ----------------------------
(1) The property in Sahagun, Mexico, is leased from Bombardier Transportation, Greenbrier's joint venture partner. Marketing, administrative offices and other facilities are also leased in various locations throughout North America and Europe. Greenbrier believes that its facilities are in good condition and that the facilities, together with anticipated capital improvements and additions, are adequate to meet its operating needs for the foreseeable future. The need for expansion and upgrading of the railcar manufacturing and refurbishment facilities is continually evaluated in order to take advantage of increased market opportunities for new railcar designs and repair and refurbishment services. 8 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. In addition, litigation has been initiated by former shareholders of Interamerican Logistics, Inc. ("Interamerican"), which was acquired in the fall of 1996. The plaintiffs allege that Greenbrier violated the agreements pursuant to which it acquired ownership of Interamerican and seek damages aggregating $4.5 million Canadian. Management believes the claim is without merit and intends to vigorously defend its position. Accordingly, management believes that any ultimate liability resulting from litigation will not materially affect the financial position, results of operations or cash flows of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Reference is made to the information set forth in the section entitled "Common Stock" on page 44 of the 2000 Annual Report to Stockholders, which section is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Reference is made to the information set forth in the section entitled "Selected Financial Information" on page 22 of the Company's 2000 Annual Report to Stockholders, which section is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Reference is made to the information set forth in the section entitled "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 23 to 27 of the 2000 Annual Report to Stockholders, which section is incorporated herein by reference. ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Greenbrier has assessed its exposure to market risk for its variable rate debt and foreign currency exposures and believes that exposures to such risks are not material. Foreign operations give rise to market risks from changes in foreign currency exchange rates. Greenbrier utilizes foreign currency forward exchange contracts with established financial institutions to hedge a portion of that risk. Even though forward exchange contracts are entered into to mitigate the impact of currency fluctuations, certain exposure remains which may affect operating results. No provision has been made for credit loss due to counterparty non-performance. At the August 31, 2000 exchange rates, forward exchange contracts for the purchase of Canadian dollars aggregated $47.8 million, contracts for the purchase of Polish zloties aggregated $15.8 million and contracts for the purchase of United States dollars aggregated $2.0 million. These contracts mature at various dates through June 2001. At August 31, 2000, gains and losses of approximately $0.8 million and $0.4 million on such contracts have been deferred and will be recognized in earnings concurrent with the hedged transaction. 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 on the agreements are accrued and recognized as an adjustment to interest expense. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. At August 31, 2000, such agreements had a notional amount of $30.0 million and mature between July 2008 and March 2011. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements and report of independent auditors set forth in the 2000 Annual Report to Stockholders are incorporated herein by reference: Consolidated Balance Sheets as of August 31, 2000 and 1999, and the Consolidated Statements of Operations, Consolidated Statements of Stockholders' Equity and Comprehensive Income and Consolidated Statements of Cash Flows for each of the years ended August 31, 2000, 1999 and 1998, on pages 29 to 32 the Notes to Consolidated Financial Statements on pages 33 to 41, the report of independent auditors thereon on page 28 and the section entitled Quarterly Results of Operations on page 42. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 10 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT There is hereby incorporated by reference the information under the captions "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant's year ended August 31, 2000, and the information under the caption "Executive Officers of the Company" in Part I, Item 1, "Business," of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION There is hereby incorporated by reference the information under the caption "Executive Compensation" in Registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant's year ended August 31, 2000. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is hereby incorporated by reference the information under the captions "Voting" and "Stockholdings of Certain Beneficial Owners and Management" in Registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant's year ended August 31, 2000. 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 Registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant's year ended August 31, 2000. 11 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The Consolidated Financial Statements, together with the report thereon of Deloitte & Touche LLP, dated October 24, 2000, appearing on pages 28 to 41 of the 2000 Annual Report to Stockholders are incorporated by reference into this Annual Report on Form 10-K. With the exception of the aforementioned information and that which is specifically incorporated in Parts I and II, the 2000 Annual Report to Stockholders is not to be deemed filed as part of this Annual Report on Form 10-K.
Annual Report Page No. ----------- (a) (1) Financial Statements of the Company - Index 21 Independent Auditors' Report 28 Consolidated Balance Sheets as of August 31, 2000 and 1999 29 Consolidated Statements of Operations for each of the years ended August 31, 2000, 1999 and 1998 30 Consolidated Statements of Stockholders' Equity and Comprehensive Income for each of the years ended August 31, 2000, 1999 and 1998 31 Consolidated Statements of Cash Flows for each of the years ended August 31, 2000, 1999 and 1998 32 Notes to Consolidated Financial Statements 33-41 This Filing Page No. ----------- (2) The following financial statement schedule should be read in conjunction with the Consolidated Financial Statements in the 2000 Annual Report to Stockholders. All other schedules have been omitted because they are inapplicable, not required or because the information is given in the Consolidated Financial Statements or related Notes to Consolidated Financial Statements. Independent Auditors' Report 15 Schedule I - Condensed Financial Information of Registrant 16-17
(3) List of Exhibits 3.1. Registrant's Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 to the Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 3.2. Registrant's Amended and Restated By-laws, as amended on November 9, 1994 is incorporated herein by reference to Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the year ended August 31, 1994. 9.1. Form of Stockholders' Agreement dated July 1, 1994, between Alan James and William A. Furman is incorporated herein by reference to Exhibit 9.1 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 9.2. Amendment No. 1 dated as of December 23, 1994 to Stockholders' Agreement dated July 1, 1994 between Alan James and William A. Furman is incorporated herein by reference to Exhibit 9.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended February 28, 1995. 10.1.* Employment Agreement dated as of July 1, 1994, between Alan James and Registrant is incorporated herein by reference to Exhibit 10.2 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31, 1994. 12 10.2.* Employment Agreement dated as of July 1, 1994, between William A. Furman and Registrant is incorporated herein by reference to Exhibit 10.3 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31, 1994. 10.3.* Employment Agreement dated October 1, 1998 between Greenbrier Leasing Corporation and A. Daniel O'Neal Jr. 10.4.* Amendment No. 1 dated August 1, 2000 to Employment Agreement dated October 1, 1998 between Greenbrier Leasing Corporation and A. Daniel O'Neal Jr. 10.5.* Form of Registrant's Split-Dollar Agreement is incorporated herein by reference to Exhibit 10.32 to Registrant's Annual Report on Form 10-K for the year ended August 31, 1995. 10.6.* Greenbrier Leasing Corporations Manager Owned Target Benefit Plan dated as of January 1, 1996 is incorporated herein by reference to Exhibit 10.35 to Registrant's Quarterly Report on Form 10-Q for the quarter ended May 31, 1997. 10.7.* James-Furman Supplemental 1994 Stock Option Plan is incorporated herein by reference to Exhibit 10.23 to the Registrant's Annual Report on Form 10-K for the year ended August 31, 1994. 10.8. Form of Registrant's 1994 Stock Incentive Plan, dated July 1, 1994 is incorporated herein by reference to Exhibit 10.1 to the Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.9. Amendment No. 1 to the 1994 Stock Incentive Plan, dated July 14, 1998, incorporated herein by reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K for the year ended August 31, 1998. 10.10. Amendment No. 2 to the 1994 Stock Incentive Plan, incorporated herein by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K for the year ended August 31, 1999. 10.11. Amendment No. 3 to the 1994 Stock Incentive Plan incorporated herein by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K for the year ended August 31, 1999. 10.12. Form of Agreement concerning Indemnification and Related Matters (Directors) between Registrant and its directors is incorporated herein by reference to Exhibit 10.18 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.13. Form of Option with Right of First Refusal and Agreement of Purchase and Sale among William A. Furman, Alan James and Registrant is incorporated herein by reference to Exhibit 10.13 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.14. Railcar Management Agreement between Greenbrier Leasing Corporation and James-Furman & Company, dated as of December 31, 1989 is incorporated herein by reference to Exhibit 10.9 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.15. Form of Amendment No. 1 to Railcar Management Agreement between Greenbrier Leasing Corporation and James-Furman & Company dated as of July 1, 1994 is incorporated herein by reference to Exhibit 10.11 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.16. Railcar Maintenance Agreement between Greenbrier Leasing Corporation and James-Furman & Company, dated as of December 31, 1989 is incorporated herein by reference to Exhibit 10.10 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 13 10.17. Form of Amendment No. 1 to Railcar Maintenance Agreement between Greenbrier Leasing Corporation and James-Furman & Company dated as of July 1, 1994 is incorporated herein by reference to Exhibit 10.12 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.18. Lease of Land and Improvements dated as of July 23, 1992 between the Atchison, Topeka and Santa Fe Railway Company and Gunderson Southwest, Inc. is incorporated herein by reference to Exhibit 10.4 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.19. 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 Company and Gunderson Southwest, Inc. is incorporated herein by reference to Exhibit 10.24 to Registrant's Quarterly Report on form 10-Q for the quarter ended November 30, 1994. 10.20. Re-marketing Agreement dated as of November 19, 1987 among Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. is incorporated herein by reference to Exhibit 10.5 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.21. Amendment to Re-marketing Agreement among Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated as of November 15, 1988 is incorporated herein by reference to Exhibit 10.6 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.22. Amendment No. 2 to Re-marketing Agreement among Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. is incorporated herein by reference to Exhibit 10.7 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.23. Amendment No. 3 to Re-marketing Agreement dated November 19, 1987 among Southern Pacific Transportation Company, St. Louis Southwestern Railway Company, Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated as of March 5, 1991 is incorporated herein by reference to Exhibit 10.8 to Registrant's Registration Statement No. 33-78852, dated July 11, 1994. 10.24. Stock Incentive Plan - 2000, dated as of April 6, 1999 is incorporated herein by reference to Exhibit 10.23 to Registrant's Annual Report on form 10-K for the year ended August 31, 1999. 13. Portions of the 2000 Annual Report to Stockholders incorporated by reference herein. 21.1. List of the subsidiaries of the Registrant 23. Consent of Deloitte & Touche LLP, independent auditors 27. Financial Data Schedule - ----------------- * Management contract or compensatory plan or arrangement (b) Reports on Form 8-K None 14 INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders The Greenbrier Companies, Inc. We have audited the consolidated financial statements of The Greenbrier Companies, Inc. and Subsidiaries as of August 31, 2000 and 1999, and for each of the three years in the period ended August 31, 2000, and have issued our report thereon dated October 24, 2000; such consolidated financial statements and report are included in your 2000 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of The Greenbrier Companies, Inc. and Subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Deloitte & Touche LLP Portland, Oregon October 24, 2000 15 SCHEDULE I THE GREENBRIER COMPANIES, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (In thousands)
BALANCE SHEETS August 31, ------------------------------- 2000 1999 ------------- -------------- ASSETS Cash and cash equivalents $ 31 $ 31 Accounts receivable 152 229 Due from affiliates 10,824 9,898 Investment in subsidiaries 185,210 162,305 Deferred income taxes - 650 Prepaid expenses and other 2,402 2,282 ------------- -------------- $ 198,619 $ 175,395 ============= ============== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $ 3,512 $ 7,002 Due to affiliates 40,364 34,230 Deferred income taxes 1,128 - Notes payable 12,000 - Stockholders' equity 141,615 134,163 ------------- -------------- $ 198,619 $ 175,395 ============= ==============
STATEMENTS OF OPERATIONS Year ended August 31, ------------------------------------------------- 2000 1999 1998 -------------- ------------- -------------- Interest and other income $ 1,783 $ 1,528 $ 612 Expenses Selling and administrative 8,682 10,474 8,859 Interest 3,339 1,325 326 -------------- ------------- -------------- 12,021 11,799 9,185 -------------- ------------- -------------- Loss before income tax benefit and equity in earnings of subsidiaries (10,238) (10,271) (8,573) Income tax benefit 4,687 4,268 3,601 -------------- ------------- -------------- Loss before equity in earnings of subsidiaries (5,551) (6,003) (4,972) Equity in earnings of subsidiaries 19,905 25,484 25,304 -------------- ------------- -------------- Net earnings $ 14,354 $ 19,481 $ 20,332 ============== ============= ==============
16 SCHEDULE I (CONTINUED) THE GREENBRIER COMPANIES, INC. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (IN THOUSANDS)
STATEMENTS OF CASH FLOWS Year ended August 31, ------------------------------------------------- 2000 1999 1998 -------------- ------------- -------------- Cash flows from operating activities: Net earnings $ 14,354 $ 19,481 $ 20,332 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Deferred income taxes 1,778 (2,338) 996 Equity in earnings of subsidiaries (19,905) (25,484) (25,304) Other (1,524) 1,037 685 Decrease (increase) in assets: Accounts and notes receivable 77 2,394 (2,575) Due from affiliates (926) 4,074 (2,140) Prepaid expenses and other (120) 482 (1,182) Increase (decrease) in liabilities: Accounts payable and accrued liabilities (3,490) 3,743 2,144 Due to affiliates 6,134 21,773 9,380 -------------- ------------- -------------- Net cash (used in) provided by operating activities (3,622) 25,162 2,336 Cash flows from investing activities: Investment in subsidiary (3,000) (19,770) - --------------- ---------------- -------------- Net cash used in investing activities (3,000) (19,770) - Cash flows for financing activities: Proceeds from borrowings 12,000 - - Purchase of treasury stock (246) - - Dividends (5,132) (5,559) (3,409) Proceeds from stock options - 29 1,221 -------------- ------------- -------------- Net cash provided by (used in) financing activities 6,622 (5,530) (2,188) Increase (decrease) in cash - (138) 148 Cash and cash equivalents: Beginning of year 31 169 21 -------------- ------------- -------------- End of year $ 31 $ 31 $ 169 ============== ============= ============== Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 2,992 $ 1,413 $ 326
17 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 29, 2000 By: /s/ William A. Furman ---------------------------------- William A. Furman President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Date - --------- ---- /s/ Alan James November 29, 2000 - ------------------------------- Alan James, Chairman of the Board /s/ William A. Furman November 29, 2000 - ------------------------------- William A. Furman, President and Chief Executive Officer, Director /s/ Victor G. Atiyeh November 29, 2000 - ------------------------------- Victor G. Atiyeh, Director /s/ Peter K. Nevitt November 29, 2000 - ------------------------------- Peter K. Nevitt, Director /s/ A. Daniel O'Neal November 29, 2000 - ------------------------------- A. Daniel O'Neal, Director /s/ C. Bruce Ward November 29, 2000 - ------------------------------- C. Bruce Ward, Director /s/ Benjamin R. Whiteley November 29, 2000 - ------------------------------- Benjamin R. Whiteley, Director /s/ Larry G. Brady November 29, 2000 - ------------------------------- Larry G. Brady, Sr. Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 18 EX-10.3 2 a2031876zex-10_3.txt EXHIBIT 10.3 EXHIBIT 10.3 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement"), dated for reference purposes the 1st day of October, 1998, is by and between GREENBRIER LEASING CORPORATION, a Delaware corporation ("Company"), and A. DANIEL O'NEAL, JR. ("Executive") (collectively, "the Parties"). RECITALS A. By agreement dated June 1, 1996, Executive was employed by an affiliate of Company, Greenbrier Logistics, Inc. ("Logistics"). B. Logistics was engaged in the business of commercial transportation scheduling and logistics. C. During 1997, the Company discontinued its operations in the commercial transportation and logistics business and it became necessary to restructure the relationship between Executive and the Company. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises, agreements and conditions set forth below, it is agreed as follows: 1. EMPLOYMENT. Company agrees to employ Executive and Executive agrees to accept employment by Company upon the terms and conditions hereinafter set forth. This Agreement supersedes any prior agreement of the parties concerning the subject matter hereof and specifically terminates the Employment Agreement between the Executive and Greenbrier Logistics, Inc. dated June 1, 1996. 2. TERM. Subject to the provisions for termination in Section 9, the term of this Agreement shall be for three (3) years beginning on October 1, 1998. 3. DUTIES. Executive will perform duties as may be assigned to him from time to time by or at the direction of the Chief Executive Officer of the Company. 4. EXTENT OF SERVICES; RESTRICTIONS. Executive shall devote one-half of his working time to the performance of his duties hereunder; he may, during the term of this Agreement, be engaged in other business activities, whether or not any such business activity is pursued for gain, profit or other pecuniary advantage. Executive shall at all times faithfully and to the best of his ability perform all of the duties that may be required of him pursuant to this Agreement. The duties shall be rendered at such places and times as the needs of the Company shall require, subject to reasonable travel burdens on Executive, consistent with past service to the Greenbrier Companies. Executive may be engaged by other persons, firms, agencies or committees during the term of this Agreement, including transportation companies, PROVIDED that such engagements shall not be on behalf of persons or entities who directly compete 2 - EMPLOYMENT AGREEMENT in any area of business in which the Company or any of its affiliates conduct business. 5. COMPENSATION AND BENEFITS. a. BASE COMPENSATION. Executive shall receive base compensation of $100,000 per year, payable in accordance with Company's standard payroll procedures for its non-union employees. b. EXECUTIVE BENEFITS. Executive shall be entitled to such other fringe benefits as are normally accorded full-time employees of Company under its personnel policies adopted from time to time. In addition, Company shall provide Executive with a $500,000 life insurance policy. c. STOCK OPTIONS. The Greenbrier Companies, Inc. granted a stock option to Executive on November 30, 1996 to purchase 50,000 shares of The Greenbrier Companies, Inc. common stock under the terms of The Greenbrier Companies' 1994 Stock Option program. Such options will continue to vest pursuant to the terms of the stock option agreement of July 18, 1996 designated as Grant No. ISO-1858. d. EXPENSES. Executive shall be entitled to reimbursement from Company for reasonable expenses, including club and trade association dues, necessarily incurred by Executive in the performance of Executive's duties under this Agreement, upon presentation of vouchers indicating in detail the amount and business purpose of each such expense and upon compliance with Company's reimbursement policies established from time to time. 3 - EMPLOYMENT AGREEMENT e. CAR ALLOWANCE. The Company shall provide a car for Executive, for use in performing his duties hereunder, that is in keeping with his position and responsibilities, and the Company shall pay for full maintenance and operating costs for such car. 6. OFFICE EXPENSES. Executive will maintain an office on behalf of the Company in the Seattle area. Company shall pay one-half of the expenses of such office, which expenses shall include a single assistant. 7. EMPLOYMENT AGREEMENT OF JUNE 1, 1996. The Employment Agreement between Executive and Greenbrier Logistics, Inc., an affiliate of Company is hereby terminated and, except for provisions specifically continued in this Agreement, shall be of no further force and effect. In consideration of Executive's consent to such termination, Greenbrier shall pay Executive a one-time fee of $100,000 upon the execution of this Agreement. 8. CONFIDENTIALITY; NON-COMPETITION. a. CONFIDENTIALITY. Executive acknowledges that during the course of his employment by Company, he has been and will be exposed to, have disclosed to him and may develop information that is proprietary to Company and its affiliates ("Confidential Information"). Confidential Information includes, but is not limited to, financial data, trade secrets, information concerning the operation, design and marketing of products, repairs and processes, business plans and procedures, customer lists, files and profiles needs analyses, calculations, data, manuals, specifications, performance standards, instructions and 4 - EMPLOYMENT AGREEMENT any other material or information related to Company, its business or operations, the business or operations of any of its affiliates and the ideas and information relating thereto. Confidential Information does not include any information which is available to the public, in the public domain, or readily ascertainable or available from another legitimate source. Executive will at no time use or permit any other person or entity to examine, use or derive benefit from Confidential Information except in the course of performing his duties under this Agreement. Executive shall maintain all Confidential Information in the strictest confidence, and shall take all reasonable precautions to preserve its confidentiality during the term of this Agreement and thereafter. All documents and materials evidencing Confidential Information, and copies thereof, shall at all times remain the property of Company or its affiliates. Upon demand, Executive will deliver to Company all documents and other materials which contain or pertain to Confidential Information. b. NON-COMPETITION. Provided that Company is not in breach of this Agreement, Executive agrees that during the term of this Agreement and for a period of two years following termination of his employment for any reason, Executive will not, without the consent of the Company, within the geographic area of North America: (1) Directly or indirectly own (as a proprietor, general or limited partner, shareholder, trust beneficiary or otherwise), manage, operate, participate in (as an employee, 5 - EMPLOYMENT AGREEMENT agent, manager, director, officer, consultant or otherwise), perform services or consult for or otherwise carry on in any capacity whatsoever for, a business engaged in providing services which directly compete with the Company's business or products or those of any of its affiliates; (2) Directly or indirectly induce or attempt to persuade any current or future employee, agent, manager, consultant, director of, or other participant in the business of the Company or any of its affiliates to terminate such employment or other relationship; or (3) Directly or indirectly contact or solicit any customers of Company or any of its affiliates for the purpose of selling to the customers any products or services which are the same as or substantially similar to, or competitive with the products or services sold by Company or any of its affiliates during Executive's employment with Company; or (4) Directly or indirectly use Confidential Information in connection with any activity prohibited above. (5) Notwithstanding anything herein to the contrary, Executive may own an interest not in excess of 5% of a corporation whose shares are listed on a recognized stock exchange or traded in the over-the-counter market in any country in North America, which carries on a business which directly competes with the services or products provided by Company. c. BREACH. Upon a breach by Executive of any of the terms or conditions of the confidentiality or non-competition covenants, Company shall have the right to: 6 - EMPLOYMENT AGREEMENT (1) Recover from Executive its actual damages incurred by reason of such breach, including its attorney fees and costs of suit, if Company prevails, or provided that such is awarded to Company by way of an actual judgment; (2) Obtain injunctive relief to prevent the breach or continued breach of the covenants without proof of actual damages; and (3) Pursue any other remedy available at law or in equity. The provisions of this Section 8 shall remain in full force and effect following termination of this Agreement for any reason. 9. TERMINATION. a. FOR CAUSE. Company may terminate Executive's employment at any time for cause with immediate effect upon delivering written notice thereof to Executive. For purposes of this Agreement, "for cause" shall mean: (i) gross negligence or willful misconduct in the performance of Executive's duties; (ii) embezzlement, theft, larceny, material fraud or other acts of dishonesty; (iii) failure to cure any violation of any of the provisions of this Agreement within thirty (30) days of written notice from the Company; (iv) conviction of or entrance of a plea of guilty or NOLO CONTENDERE to a felony or other crime which has or may have a material adverse effect on Executive's ability to carry out his duties under this Agreement or upon the reputation of Company; (v) conduct involving moral turpitude; or (vi) refusal or repeated failure after warning by the Company to 7 - EMPLOYMENT AGREEMENT carry out the reasonable directives of the Chief Executive Officer, PROVIDED THAT such directives are consistent with Executive's duties herein. Upon termination for cause, Company's sole and exclusive obligation will be to pay Executive his base compensation earned through the date of termination, and any accrued but unused vacation during the year of termination and outstanding reimbursements, and Executive shall not be entitled to any compensation after the date of such termination. b. WITHOUT CAUSE. Company may terminate Executive's employment at any time without cause upon written notice. Upon termination without cause, Company's sole and exclusive obligation will be to pay to Executive his base compensation for the lesser of one year from the date of termination or the remaining term of this Agreement, and Executive shall not be entitled to any other compensation after the date of such termination, except any accrued, but unused or unpaid, vacation in the year of termination or compensation, and any unreimbursed expenses incurred in conformance with this Agreement prior to termination. Company's obligation under this paragraph shall be reduced by any compensation Executive earns subsequent to his termination and during the period that Company is required to pay Executive his base compensation. c. UPON DEATH. In the event of Executive's death during the term of this Agreement, Company's sole and exclusive obligation will be to pay to Executive's widow, if living, or to his estate, if his widow is not then living, Executive's base compensation through the last day of the month in which his death 8 - EMPLOYMENT AGREEMENT occurs and any accrued, but unused, vacation in the year of Executive's death. d. UPON DISABILITY. This Agreement shall terminate, at Company's option, upon Executive's total disability. Executive's total disability means his inability to perform his duties under this Agreement by reason of illness, mental or physical disability or accident for a period of six consecutive months or for a period of twelve months (whether or not consecutive in any consecutive 24-month period). Upon termination by reason of Executive's disability, Company's sole and exclusive obligation will be to pay Executive his base compensation through the date of termination and any accrued, but unused or unpaid, vacation or compensation. If Executive claims disability, Company shall have the authority to consult with Executive's attending physicians. Any and all information obtained through such consultation shall be treated as confidential. e. Executive may terminate his employment under this Agreement upon written notice to Company. Upon such termination, Executive shall be entitled to all base compensation and unused vacation in the year of termination, accrued to the date of termination, and to reimbursement of any reasonable business expenses incurred on behalf of the company prior to termination. 10. NOTICES. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing and personally delivered or sent by registered or certified mail addressed as follows: 9 - EMPLOYMENT AGREEMENT If to Company: William A. Furman, President and CEO Greenbrier Leasing Corp. Suite 200 One Centerpointe Drive Lake Oswego, OR 97035 Telephone: (503) 684-7000 Facsimile: (503) 624-1488 With a copy to: Norriss M. Webb Executive Vice President and General Counsel The Greenbrier Companies, Inc. Suite 200 One Centerpointe Drive Lake Oswego, OR 97035 Telephone: (503) 684-7000 Facsimile: (503) 684-7553 And a copy to: Larry G. Brady Vice President and Chief Financial Officer The Greenbrier Companies, Inc. Suite 200 One Centerpointe Drive Lake Oswego, OR 97035 Telephone: (503) 684-7000 Facsimile: (503) 684-7553 If to Executive: A. Daniel O'Neal, Jr. Suite 109 555 Andover Park West Tukwila, WA 98188 Telephone: (206) 575-0675 Facsimile: (206) 575-8448 Inadvertent failure to provide a courtesy copy shall not be deemed a breach of this Agreement. Either party may, by notice in writing to the other party, change the address to which notices to that party are to be given. 11. WAIVER. The waiver by either party of the breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. 10 - EMPLOYMENT AGREEMENT 12. MODIFICATION. No amendment, modification or discharge of this Agreement shall be valid unless it is in writing and duly executed by the party to be charged therewith. 13. CONSTRUCTION, ATTORNEY FEES. This Agreement shall be construed in accordance with and governed by the laws of the state of Oregon. If any action is instituted by any party to this Agreement to interpret or enforce this Agreement, the prevailing party shall be entitled to recover as part of the award its reasonable attorney fees and costs incurred in any such action including at arbitration, trial, bankruptcy proceeding, and appeal. 14. SEVERABILITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. 15. BENEFIT. This Agreement shall inure to and be binding upon the Parties, their heirs, personal representatives, successors and assigns, provided Executive may not assign this Agreement. 16. ENTIRE AGREEMENT. The entire agreement between the Parties relating to employment of the Executive is contained herein. But for the payment of the Deferred Price under Section 1.02(b) of the Stock Purchase Agreement of June 28, 1996 between Greenbrier Logistics, Inc. and A. Daniel O'Neal (which shall be handled separately pursuant to that agreement), this Agreement supersedes any and all prior agreements and understandings between the Parties. There are no promises or 11 - EMPLOYMENT AGREEMENT representations made on behalf of Company to induce Executive to enter into this Agreement which are not set forth herein. 17. ARBITRATION. Except for any dispute arising under Section 8 above, any and all disputes arising from or pertaining to this Agreement, or the interpretation or enforcement thereof, shall be resolved by binding arbitration. The arbitration shall be conducted by an independent and neutral arbiter mutually agreed upon by the Parties. 18. CAPTIONS. The paragraph captions are for convenience of the Parties and shall not affect the meaning or interpretation of this Agreement. 19. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which counterparts shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first written above. GREENBRIER LEASING CORPORATION By /s/ William A. Furman --------------------------- /s/ A. Daniel O'Neal, Jr. Its President - ------------------------------------------------------------------------------- A. DANIEL O'NEAL, JR. 12 - EMPLOYMENT AGREEMENT EX-10.4 3 a2031876zex-10_4.txt EXHIBIT 10.4 EXHIBIT 10.4 AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT This Amendment is entered into effective August 1, 2000, and amends the Employment Agreement dated October 1, 1998 between Greenbrier Leasing Corporation ("Company") and A. Daniel O'Neal, Jr. ("Executive"). WHEREAS, Company and Executive entered into the Employment Agreement with the expectation that Executive, through his contacts and by virtue of maintaining an office on behalf of Company, would significantly enhance Company's business opportunities: and WHEREAS, for commercial reasons Company must reduce its costs, and Executive recognizes the importance of reducing Company's costs; NOW THEREFORE, in consideration of the foregoing circumstances, and for other good and valuable consideration, Company and executive hereby agree to modify the Employment Agreement as follows: 1. Effective August 1, 2000, Executive's base compensation shall be reduced to $75,000 per year. 2. Effective August 1, 2000, Executive will cease to maintain an office on behalf of the Company, and Company shall have no further obligation to pay expenses associated with such office or Executive's assistant. Except as specifically provided above, the terms and conditions of the Employment Agreement shall remain in full force and effect for the duration of the contract term. GREENBRIER LEASING CORPORATION By: /s/ Larry G. Brady ---------------------------- Date: July 14, 2000 ---------------------------- By: /s/ A. Daniel O'Neal, Jr. ---------------------------- Date: July 19, 2000 ---------------------------- EX-13 4 a2031876zex-13.txt EXHIBIT 13 EXHIBIT 13 FINANCIAL SECTION TABLE OF CONTENTS 22 Selected Financial Information 23 Management's Discussion and Analysis of Results of Operations and Financial Condition 28 Reports of Management and Independent Auditors 29 Consolidated Balance Sheets 30 Consolidated Statements of Operations 31 Consolidated Statements of Stockholders' Equity and Comprehensive Income 32 Consolidated Statements of Cash Flows 33 Notes to Consolidated Financial Statements 42 Quarterly Results of Operations 43 Directors & Officers 44 Investor Information 45 Locations 21 SELECTED FINANCIAL INFORMATION YEARS ENDED AUGUST 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999 1998 1997 1996 - -------------------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS DATA Revenue: Manufacturing $ 528,240 $ 520,311 $ 451,706 $ 325,501 $ 421,456 Leasing & services 91,189 98,225 88,655 105,419 98,484 - -------------------------------------------------------------------------------------------------------------- $ 619,429 $ 618,536 $ 540,361 $ 430,920 $ 519,940 ============================================================================================================== Earnings from continuing operations $ 14,354 $ 20,419(1) $ 20,332(2) $ 6,021(3) $ 18,613 Discontinued operations:(4) Loss on operations -- -- -- (2,512) (338) Estimated loss on disposal -- -- -- (7,680) -- Extraordinary charge related to debt -- (938) -- -- -- - -------------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 14,354 $ 19,481 $ 20,332 $ (4,171) $ 18,275 ============================================================================================================== Basic earnings per common share: Continuing operations $ 1.01 $ 1.44 $ 1.43 $ .43 $ 1.31 Net earnings (loss) $ 1.01 $ 1.37 $ 1.43 $ (.29) $ 1.29 Diluted earnings per common share: Continuing operations $ 1.01 $ 1.43 $ 1.42 $ .43 $ 1.31 Net earnings (loss) $ 1.01 $ 1.36 $ 1.42 $ (.29) $ 1.29 Weighted average common shares outstanding: Basic 14,227 14,254 14,203 14,160 14,160 Diluted 14,241 14,294 14,346 14,160 14,170 Cash dividends paid per common share $ .36 $ .39(5) $ .24 $ .24 $ .24 BALANCE SHEET DATA Assets: Cash $ 12,908 $ 77,796 $ 57,909 $ 21,744 $ 12,483 Inventories 127,484 92,495 79,849 151,591 90,448 Leased equipment 246,854 236,410 256,509 284,541 364,701 All other 196,863 144,015 111,222 122,642 147,856 - -------------------------------------------------------------------------------------------------------------- $ 584,109 $ 550,716 $ 505,489 $ 580,518 $ 615,488 ============================================================================================================== DEBT: Revolving $ 13,019 $ 3,783 $ -- $ 57,709 $ 27,814 Term 159,363 161,401 147,876 201,786 216,278 - -------------------------------------------------------------------------------------------------------------- $ 172,382 $ 165,184 $ 147,876 $ 259,495 $ 244,092 ============================================================================================================== CAPITAL BASE: Subordinated debt $ 37,748 $ 37,788 $ 37,932 $ 38,089 $ 44,554 Minority interest 5,068 14,034 9,783 18,183 38,154 Stockholders' equity 141,615 134,163 121,370 103,969 111,567 - -------------------------------------------------------------------------------------------------------------- $ 184,431 $ 185,985 $ 169,085 $ 160,241 $ 194,275 ==============================================================================================================
(1) Includes earnings of $1.1 million resulting from the resolution of certain matters on a leasing contract that began in 1990. (2) Includes a gain of $1.3 million resulting from exiting the trailer and container leasing operation more favorably than anticipated. (3) Includes $4.8 million of special charges related to an adjustment to the carrying value of vehicle transportation equipment and the divestiture of the trailer and container lease fleet. (4) Includes the divestiture of the transportation logistics segment. (5) Includes regular dividend of $0.27 per common share and special dividend of $0.12 per common share. 22 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Greenbrier currently operates in two primary business segments: manufacturing and leasing & services. The two business segments are operationally integrated. With operations in North America and Europe, the manufacturing segment produces double-stack intermodal railcars, conventional railcars, marine vessels and forged steel products and performs railcar refurbishment and maintenance activities. In Europe, the Company also manufactures new freight cars through the use of unaffiliated subcontractors. Such activities are included in the manufacturing segment. The leasing & services segment owns or manages approximately 37,000 railcars for railroads, institutional investors and other leasing companies. Railcars are generally manufactured under firm orders from third parties, and revenue is recognized when the cars are completed and accepted by the customer. From time to time, Greenbrier commits to manufacture railcars prior to receipt of firm orders to maintain continuity of manufacturing operations and may also build railcars for its own lease fleet. Railcars produced in a given period may be delivered in subsequent periods, delaying revenue recognition. Revenue does not include sales of new railcars to, or refurbishment services performed for, the leasing & services segment since intercompany transactions are eliminated in preparing the consolidated financial statements. The margin generated from such sales or refurbishment activity is realized by the leasing & services segment over the related life of the asset or upon sale of the equipment. OVERVIEW Total revenues for 2000 were $619.4 million, an increase of $0.9 million from 1999 revenues of $618.5 million. The increase was due to increased revenues from European manufacturing operations as a result of an acquisition completed in January 2000, offset by lower leasing & services revenue. Total revenues for 1999 were $618.5 million, an increase of 14.5% from 1998 revenues of $540.4 million. The increase was due primarily to a manufacturing product mix with a higher unit sales value, the resolution of certain matters on a leasing contract that began in 1990 and an acquisition completed in early 1999. Net earnings for 2000 were $14.4 million, or $1.01 per diluted common share, compared to net earnings for 1999 of $19.5 million, or $1.36 per diluted common share, and to 1998 net earnings of $20.3 million, or $1.42 per diluted share. Earnings for 1999 include earnings of $1.1 million from the resolution of certain matters on a leasing contract that began in 1990 and an after-tax extraordinary charge of $0.9 million, or $0.07 per diluted common share, resulting from refinancing of $22.0 million of notes payable. Earnings for 1998 include a gain of $1.3 million resulting from exiting the trailer and container leasing operation more favorably than anticipated. EXPANSION AND ACQUISITIONS In January 2000, Greenbrier completed the purchase of the Freight Wagon Division of DaimlerChrysler Rail Systems located in Siegen, Germany. The acquired operation provides expertise in the fields of engineering, design, sales and marketing and project management. It also includes a comprehensive portfolio of railcar designs certified for the European marketplace, which enhanced production at Greenbrier's Polish manufacturing facility. Accordingly, a significant portion of the assets acquired are intangibles. The purchase was initially funded with a cash payment of $4.3 million and the assumption of net liabilities of $29.2 million. Results of the acquired operation, which include the sale of freight cars manufactured by unaffiliated subcontractors, have been included in the accompanying financial statements from the date of acquisition. In September 1998, Greenbrier acquired a 60.0% interest in a railcar manufacturer located in Swidnica, Poland. Through a series of subsequent transactions, the Company has increased its ownership interest to 97.5%. The acquisition was accounted for by the purchase method, and operating results are included in the consolidated financial statements. Effective September 1, 1999, Greenbrier acquired the common equity of the minority investor's interest in the Canadian manufacturing subsidiary. 23 Also in September 1998, Greenbrier entered into a joint venture with Bombardier Transportation to build railroad freight cars at Bombardier's existing manufacturing facility in Mexico. Each party holds a 50.0% non-controlling interest in the joint venture, and therefore Greenbrier's investment is being accounted for using the equity method. Greenbrier's share of operating results is included in operating results as equity in earnings of unconsolidated subsidiary. In February 1998, the unaffiliated investors' minority interest in the automobile transportation business was acquired for $7.8 million through the use of restricted cash. DIVESTITURES A portion of the trailer and container fleet was sold in 1997, with the remainder sold in 1998. Trailer and container leasing operations were included in leasing & services continuing operations until disposition. RESULTS OF OPERATIONS MANUFACTURING SEGMENT Manufacturing revenues include results from new railcar, marine, forge, refurbishment and maintenance activities. New railcar delivery and backlog information disclosed herein includes all facilities, including the joint venture in Mexico that is accounted for by the equity method. Manufacturing revenues were $528.2 million, $520.3 million and $451.7 million for the years ended 2000, 1999 and 1998. Manufacturing revenues increased $7.9 million, or 1.5%, in 2000 from 1999 due to an increase in European revenues resulting from the newly acquired operation and a shift in product mix to units with a relatively higher sales value, partially offset by a softer North American market. Manufacturing revenues increased $68.6 million, or 15.2%, in 1999 from 1998 as market demand for freight cars remained strong, and the product mix shifted to units with a higher sales value. The Polish manufacturing operation, acquired in 1999, also contributed to this increase. Deliveries of new railcars, which are the primary source of revenue, were approximately 8,100 in 2000, 8,900 in 1999 and 7,800 in 1998. As of August 31, 2000, the backlog of new railcars to be manufactured for sale and lease at all facilities was approximately 7,800 railcars with an estimated value of $440.0 million compared to 5,900 railcars valued at $340.0 million as of May 31, 2000. Manufacturing gross margin decreased to 11.7% in 2000 from 12.3% in 1999 due to lower selling prices resulting from increased competition. Manufacturing gross margin in 1999 increased from 8.9% in 1998, reflecting overall improved operational efficiencies, a temporary reduction in certain material costs for the North American operations and the benefit of stronger market demand for railcars. The factors influencing cost of revenue and gross margin in a given period include order size (which affects economies of plant utilization), product mix, changes in manufacturing costs, product pricing and currency exchange rates. LEASING & SERVICES SEGMENT Leasing & services revenues were $91.2 million, $98.2 million and $88.7 million for the years ended 2000, 1999 and 1998. Revenues decreased $7.0 million, or 7.1%, in 2000 from 1999 due primarily to the completion of maintenance obligations in 1999 on a contract that began in 1990, partially offset by increases in 2000 due to the multi-year maintenance agreement that began in December 1998. The $9.5 million, or 10.7% increase in revenues in 1999 as compared to 1998 is primarily due to the resolution of certain matters on a leasing contract that began in 1990. A multi-year maintenance agreement that began in December 1998 also contributed to the increase in revenues. These increases were somewhat offset by lower gains on sales as compared to 1998. Pre-tax earnings realized on the disposition of leased equipment amounted to $4.4 million during 2000 compared to $5.7 million in 1999 and $9.0 million in 1998. Assets from Greenbrier's 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 operating margin as a percentage of revenue was 48.8% in 2000 compared to 50.4% in 1999 and 60.1% in 1998. The lower margin in 2000 is primarily due to lower utilization of the owned lease fleet, which averaged 90.4% and 97.0% for the years ended August 31, 2000 and 1999. The lower margin in 1999 compared to 1998 was primarily due to a sharing arrangement related to the resolution of matters associated with the leasing contract discussed above. Lower gains on sales of leased equipment and the lower margin maintenance agreement that began in December 1998 also impacted the 2000 and 1999 operating margin. 24 OTHER COSTS Selling and administrative expense was $54.2 million, $51.1 million and $37.3 million in 2000, 1999 and 1998. As a percentage of revenue, selling and administrative expense was 8.8%, 8.3% and 6.9% in 2000, 1999 and 1998. The increase in 2000 compared to 1999 is due primarily to the addition of the European operations and increased research and development costs, partially offset by cost reduction measures. The increase in 1999 compared to 1998 is primarily due to increased international activity. Interest expense increased $2.2 million, or 11.6%, to $21.2 million for 2000 as compared to $19.0 million in 1999 as a result of both increased borrowings and cost of borrowings. Interest expense declined $1.9 million in 1999 as compared to $20.9 million in 1998 due to more favorable interest rates on refinanced leasing & services term debt and greater liquidity. The divestiture of the trailer and container leasing operations was completed in 1998. The results associated with the sale of the operations were more favorable than originally anticipated, resulting in a $2.3 million benefit in 1998. Income tax expense for all periods presented represents an effective tax rate of 42.0% on United States operations and varying effective tax rates on foreign operations. The consolidated effective tax rate of 51.8% in the current period is a result of European operating losses for which no tax benefi t has been recognized. The consolidated effective tax rate for 1999 and 1998 was 48.1% and 41.8%. Minority interest decreased $1.3 million, or 43.3%, to $1.7 million for 2000 as compared to $3.0 million for 1999 primarily as a result of acquiring minority interests in Poland and Canada. The increase in minority interest in 1999 from 1998, reflects the improved contribution from the Canadian operation offset by the effects of European operating losses in 1999. Equity in earnings of an unconsolidated subsidiary increased $0.2 million, or 28.5%, for 2000 as compared to 1999 as a result of improved manufacturing efficiencies at the Mexican operation. LIQUIDITY AND CAPITAL RESOURCES Greenbrier's growth has been financed through cash generated from operations, borrowings from banks and other financial institutions, issuance of subordinated debt and capital from minority investors. Cash utilization in the current year is primarily due to timing of railcar syndication activities and additions to the lease fleet. The Company's balance sheet and liquidity continue to be strong. Credit facilities aggregated $129.3 million as of August 31, 2000. A $60.0 million revolving line of credit is available through May 2001 to provide working capital and interim financing of equipment for the leasing & services operations. A $40.0 million line of credit to be used for working capital is available through February 2002 for United States manufacturing operations. A $20.4 million (at the August 31, 2000 exchange rate) line of credit is available through March 2001 for working capital for Canadian manufacturing operations. Lines of credit totaling $6.4 million (at the August 31, 2000 exchange rate) are available principally through December 2000 for working capital for Polish manufacturing operations. A line of credit totaling $2.5 million (at the August 31, 2000 exchange rate) is available to support European operations. Advances under the lines of credit bear interest at rates that vary depending on the type of borrowing and certain defined ratios. At August 31, 2000, there were no borrowings outstanding under the United States manufacturing and European lines. At August 31, 2000, $4.0 million and $4.9 million were outstanding under the Canadian and Polish manufacturing lines and $4.1 million was outstanding under the leasing & services line. Available borrowings under these lines are principally based upon defined levels of receivables, inventory and leased equipment. In addition, bank guarantees totaling $29.2 million (at the August 31, 2000 exchange rate) are available to support European operations, of which $19.3 million were issued at August 31, 2000. Subsequent to August 31, 2000, the Company entered into additional revolving loan and bank guarantees totaling $3.4 million and $11.4 million (at the August 31, 2000 exchange rate) to support European operations. 25 Capital expenditures totaled $94.0 million, $71.0 million and $51.2 million in 2000, 1999, and 1998. Of these capital expenditures, approximately $74.5 million, $47.7 million and $39.3 million, in 2000, 1999, and 1998 were attributable to leasing & services operations. Leasing & services capital expenditures for 2001 are expected to be approximately $45.0 million. Greenbrier regularly sells assets from its lease fleet, some of which may have been purchased within the current year and included in capital expenditures. Approximately $19.5 million, $23.3 million, and $11.9 million of the total capital expenditures for 2000, 1999 and 1998 were attributable to manufacturing operations. Capital expenditures for manufacturing additions are expected to be approximately $20.0 million in 2001 and will include plant improvements and equipment acquisitions to further increase capacity, enhance efficiencies and allow for the production of new railcars. Inventories increased $35.0 million primarily as a result of the acquisition in Europe and the purchase of new railcar production, which is expected to be sold in the normal course of business over the next year. Foreign operations give rise to risks from changes in foreign currency exchange rates. Greenbrier utilizes foreign currency forward exchange contracts with established financial institutions to hedge a portion of that risk. No provision has been made for credit loss due to counterparty non-performance. At the August 31, 2000 exchange rates, forward exchange contracts for the purchase of Canadian dollars aggregated $47.8 million, contracts for the purchase of Polish zloties aggregated $15.8 million and contracts for the purchase of United States dollars aggregated $2.0 million. These contracts mature at various dates through June 2001. At August 31, 2000, gains and losses of approximately $0.8 million and $0.4 million on such contracts have been deferred and will be recognized in earnings concurrent with the hedged transaction. A quarterly dividend of $0.09 per common share was declared in November 2000, to be paid in December. In July 1999, the dividend rate was increased to $0.09 from the $0.06 per common share that had been paid quarterly since 1995. In addition, a special one-time dividend of $0.12 per common share was paid in August 1999. Future dividends are dependent upon earnings, capital requirements and financial condition. Certain loan covenants restrict the transfer of funds from subsidiaries to the parent company in the form of cash dividends, loans, or advances. The restricted net assets of subsidiaries amounted to $79.8 million as of August 31, 2000. Consolidated retained earnings of $14.7 million at August 31, 2000 were restricted as to the payment of dividends. Management expects existing funds and cash generated from operations, together with borrowings under existing credit facilities and long term financing, to be sufficient to fund dividends, stock repurchases, working capital needs, planned capital expenditures, acquisitions and expected debt repayments. In July 2000, Greenbrier's Board of Directors authorized a stock repurchase program under which the company intends to repurchase up to $5.0 million in shares of its outstanding common stock program in open-market transactions, from time to time. As of August 31, 2000, the Company had repurchased approximately 28,000 shares at a purchase price totaling $0.2 million. PROSPECTIVE ACCOUNTING CHANGES Statement of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, requires that all derivatives be recognized as either assets or liabilities measured at fair value. Adoption of SFAS No. 133 is effective for the Company's fiscal year beginning September 1, 2000 and is not expected to have a material adverse effect on the consolidated financial position, results of operations, or liquidity of the Company. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS, which, as amended, the Company is required to implement beginning June 1, 2001. Management is currently evaluating the effects of SAB No. 101. 26 FORWARD-LOOKING INFORMATION 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 the Company with the Securities and Exchange Commission. These forward-looking statements rely on a number of assumptions concerning future events and include statements relating to: - - financing sources for future expansion, other business development activities, capital spending and railcar syndication activities; - - improved earnings in Europe; - - improved European railcar market environment; - - increased stockholder value; - - increased competition; - - market slowdown in North America; - - share of new and existing markets; - - increased production; - - increased railcar services business; and - - short- and long-term revenue and earnings effects of the above items. These forward-looking statements are subject to a number of uncertainties and other factors outside Greenbrier's control. The following are among the factors, particularly in North America and Europe, that could cause actual results or outcomes to differ materially from the forward-looking statements: - - a delay or failure of acquisitions, products or services to compete successfully; - - actual future costs and the availability of materials and a trained workforce; - - changes in product mix and the mix between manufacturing and leasing & services revenue; - - labor disputes or operating difficulties that might disrupt manufacturing operations or the flow of cargo; - - production difficulties and product delivery delays as a result of, among other matters, changing technologies or non-performance of sub-contractors; - - ability to obtain suitable contracts for the sale of leased equipment; - - lower-than-anticipated residual values for leased equipment; - - discovery of defects in railcars resulting in increased warranty cost or litigation; - - resolution or outcome of pending litigation; - - the ability to consummate expected sales; - - 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 the contracts as anticipated; - - financial condition of principal customers; - - market acceptance of products; - - competitive factors, including increased competition, introduction of competitive products and price pressures; - - industry overcapacity or other factors; - - shifts in market demand; - - domestic and global business conditions and growth or reduction in the surface transportation industry; - - domestic and global political, regulatory or economic conditions; - - changes in interest rates; - - changes in fuel prices; - - commodity price fluctuations; and - - economic impacts from currency fluctuations in the Company's worldwide operations. Any forward-looking statements should be considered in light of these factors. Greenbrier assumes no obligation to update or revise any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements or if Greenbrier later becomes aware that these assumptions are not likely to be achieved. 27 REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS REPORT OF MANAGEMENT Board of Directors and Stockholders The Greenbrier Companies, Inc. The consolidated financial statements and other financial information of The Greenbrier Companies, Inc. and Subsidiaries in this report were prepared by management, which is responsible for their content. They reflect amounts based upon management's best estimates and informed judgments. In management's opinion, the financial statements present fairly the financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America. The Company maintains a system of internal control which is designed, consistent with reasonable cost, to provide reasonable assurance that transactions are executed as authorized, that they are properly recorded to produce reliable financial records, and that accountability for assets is maintained. The accounting controls and procedures are supported by careful selection and training of personnel and a continuing management commitment to the integrity of the system. The financial statements have been audited, to the extent required by auditing standards generally accepted in the United States of America, by Deloitte & Touche LLP, independent auditors. In connection therewith, management has considered the recommendations made by the independent auditors in connection with their audit and has responded in an appropriate, cost-effective manner. The Board of Directors has appointed an Audit Committee composed entirely of directors who are not employees of the Company. The Audit Committee meets with representatives of management and the independent auditors, both separately and jointly. The Committee reports to the Board on its activities and findings. /s/ William A. Furman /s/ Larry G. Brady - --------------------- ------------------ William A. Furman, Larry G. Brady, President, Chief Senior Vice President, Executive Officer Chief Financial Officer INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders The Greenbrier Companies, Inc. We have audited the accompanying consolidated balance sheets of The Greenbrier Companies, Inc. and Subsidiaries as of August 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended August 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended August 31, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP Portland, Oregon October 24, 2000 28 CONSOLIDATED BALANCE SHEETS AUGUST 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 - -------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 12,819 $ 77,161 Restricted cash and investments 89 635 Accounts and notes receivable 66,150 47,514 Inventories 127,484 92,495 Investment in direct finance leases 124,780 143,185 Equipment on operating leases 122,074 93,225 Property, plant and equipment 77,628 69,316 Intangible assets 23,001 4,000 Other 30,084 23,185 - -------------------------------------------------------------------------------- $ 584,109 $ 550,716 ================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Revolving notes $ 13,019 $ 3,783 Accounts payable and accrued liabilities 147,792 131,474 Deferred participation 54,266 50,439 Deferred income taxes 25,238 17,634 Notes payable 159,363 161,401 Subordinated debt 37,748 37,788 Minority interest 5,068 14,034 Commitments and contingencies (Notes 20 & 21) Stockholders' equity: Preferred stock -- $0.001 par value; 25,000 shares authorized; none outstanding -- -- Common stock -- $0.001 par value; 50,000 shares authorized; 14,227 and 14,255 outstanding at August 31, 2000 and 1999 14 14 Additional paid-in capital 50,249 50,495 Retained earnings 94,756 85,534 Accumulated other comprehensive loss (3,404) (1,880) - -------------------------------------------------------------------------------- 141,615 134,163 - -------------------------------------------------------------------------------- $ 584,109 $ 550,716 ================================================================================
The accompanying notes are an integral part of these financial statements. 29 CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED AUGUST 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 1998 - --------------------------------------------------------------------------------------------- REVENUE Manufacturing $ 528,240 $ 520,311 $ 451,706 Leasing & services 91,189 98,225 88,655 - --------------------------------------------------------------------------------------------- 619,429 618,536 540,361 COST OF REVENUE Manufacturing 466,348 456,122 411,655 Leasing & services 46,711 48,682 35,349 - --------------------------------------------------------------------------------------------- 513,059 504,804 447,004 MARGIN 106,370 113,732 93,357 OTHER COSTS Selling and administrative expense 54,202 51,061 37,270 Interest expense 21,165 19,048 20,933 Special charges -- leasing & services -- -- (2,250) - --------------------------------------------------------------------------------------------- 75,367 70,109 55,953 Earnings before income tax expense, minority interest and equity in earnings of unconsolidated subsidiary 31,003 43,623 37,404 Income tax expense (16,053) (20,979) (15,643) - --------------------------------------------------------------------------------------------- Earnings before minority interest and equity in earnings of unconsolidated subsidiary 14,950 22,644 21,761 Minority interest (1,650) (3,045) (1,429) Equity in earnings of unconsolidated subsidiary 1,054 820 -- - --------------------------------------------------------------------------------------------- Earnings from continuing operations 14,354 20,419 20,332 Extraordinary charge (net of $680 tax benefit) -- (938) -- - --------------------------------------------------------------------------------------------- NET EARNINGS $ 14,354 $ 19,481 $ 20,332 ============================================================================================= BASIC EARNINGS PER COMMON SHARE: Continuing operations $ 1.01 $ 1.44 $ 1.43 Extraordinary charge -- (.07) -- - --------------------------------------------------------------------------------------------- Net earnings $ 1.01 $ 1.37 $ 1.43 ============================================================================================= DILUTED EARNINGS PER COMMON SHARE: Continuing operations $ 1.01 $ 1.43 $ 1.42 Extraordinary charge -- (.07) -- - --------------------------------------------------------------------------------------------- Net earnings $ 1.01 $ 1.36 $ 1.42 ============================================================================================= WEIGHTED AVERAGE COMMON SHARES: Basic 14,227 14,254 14,203 Diluted 14,241 14,294 14,346
The accompanying notes are an integral part of these financial statements. 30 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
ACCUMULATED ADDITIONAL OTHER TOTAL (IN THOUSANDS, EXCEPT COMMON STOCK PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS' PER SHARE AMOUNTS) SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY - ---------------------------------------------------------------------------------------------------------------- BALANCE AUGUST 31, 1997 14,160 $ 14 $ 49,135 $ 54,689 $ 131 $ 103,969 Net earnings -- -- -- 20,332 -- 20,332 Translation adjustment (net of $631 tax benefit) -- -- -- -- (803) (803) --------- Comprehensive income 19,529 Stock options exercised 93 -- 1,221 -- -- 1,221 Compensation relating to non-qualified stock option plan -- -- 60 -- -- 60 Cash dividends ($0.24 per share) -- -- -- (3,409) -- (3,409) - ---------------------------------------------------------------------------------------------------------------- BALANCE AUGUST 31, 1998 14,253 14 50,416 71,612 (672) 121,370 Net earnings -- -- -- 19,481 -- 19,481 Translation adjustment (net of $214 tax benefit) -- -- -- -- (1,208) (1,208) --------- Comprehensive income 18,273 Stock options exercised 2 -- 29 -- -- 29 Compensation relating to non-qualified stock option plan -- -- 50 -- -- 50 Cash dividends ($0.39 per share) -- -- -- (5,559) -- (5,559) - ------------------------------------------------------------------------------------------------------------ BALANCE AUGUST 31, 1999 14,255 14 50,495 85,534 (1,880) 134,163 Net earnings -- -- -- 14,354 -- 14,354 Translation adjustment (net of $188 tax benefit) -- -- -- -- (1,524) (1,524) --------- Comprehensive income 12,830 Purchase of treasury stock (28) -- (246) -- -- (246) Cash dividends ($0.36 per share) -- -- -- (5,132) -- (5,132) - ------------------------------------------------------------------------------------------------------------ BALANCE AUGUST 31, 2000 14,227 $ 14 $ 50,249 $ 94,756 $ (3,404) $ 141,615 ============================================================================================================
The accompanying notes are an integral part of these financial statements. 31 CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED AUGUST 31,
(IN THOUSANDS) 2000 1999 1998 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 14,354 $ 19,481 $ 20,332 Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: Extraordinary charge -- 938 -- Deferred income taxes 7,604 6,470 (2,217) Deferred participation 3,827 5,196 6,211 Depreciation and amortization 20,356 16,477 14,527 Special charges -- -- (2,250) Gain on sales of equipment (4,527) (5,887) (9,994) Other 2,627 5,879 1,537 Decrease (increase) in assets: Accounts and notes receivable (18,610) (2,713) 13,197 Inventories (39,249) (3,608) 10,110 Prepaid expenses and other (1,376) (879) 1,910 Increase (decrease) in liabilities: Accounts payable and accrued liabilities (13,295) (2,961) 22,509 - --------------------------------------------------------------------------------------------------- Net cash (used in) provided by operating activities (28,289) 38,393 75,872 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired (4,787) (11,702) -- Principal payments received under direct finance leases 18,313 16,729 15,102 Investment in direct finance leases (170) (446) (856) Proceeds from sales of equipment 49,789 39,903 117,945 Purchase of property and equipment (93,821) (70,531) (50,345) Use of (investment in) restricted cash and investments 546 15,362 (8,637) - --------------------------------------------------------------------------------------------------- Net cash (used in) provided by investing activities (30,130) (10,685) 73,209 - --------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 34,052 60,029 13,157 Repayments of borrowings (26,987) (46,958) (124,750) Dividends (5,132) (5,559) (3,409) Purchase of minority interest (7,610) -- (7,772) Purchase of treasury stock (246) -- -- Proceeds from exercise of stock options -- 29 1,221 - --------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities (5,923) 7,541 (121,553) - --------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (64,342) 35,249 27,528 CASH AND CASH EQUIVALENTS: Beginning of period 77,161 41,912 14,384 - --------------------------------------------------------------------------------------------------- End of period $ 12,819 $ 77,161 $ 41,912 - --------------------------------------------------------------------------------------------------- CASH PAID DURING THE PERIOD FOR: Interest $ 18,430 $ 16,637 $ 20,526 Income taxes 6,291 9,150 13,626 NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of minority interest $ -- $ -- $ 1,580
The accompanying notes are an integral part of these financial statements. 32 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 North America and Europe, the manufacturing segment produces double-stack intermodal railcars, conventional railcars, marine vessels and forged steel products and performs railcar refurbishment and maintenance activities. In Europe, the Company also manufactures freight cars through the use of unaffiliated subcontractors. Such activities are included in the manufacturing segment. The leasing & services segment owns or manages approximately 37,000 railcars for railroads, institutional investors and other leasing 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 advances to a joint venture in which the Company has a 50% ownership interest are accounted for by the equity method and included in other assets. FOREIGN CURRENCY TRANSLATION -- Operations outside the United States prepare financial statements in currencies other than the United States dollar, the income statement amounts are translated at average exchange rates for the year, while the assets and liabilities are translated at year-end exchange rates. Translation adjustments are accumulated as a separate component of stockholders' equity and comprehensive income. CASH AND INVESTMENTS -- Cash is temporarily invested primarily in bankers' acceptances, United States Treasury bills, commercial paper and money market funds. Restricted cash and investments may only be used for equipment acquisitions in accordance with loan agreements. All highly-liquid investments with a maturity of three months or less are considered cash equivalents. INVENTORIES -- Inventories are valued at the lower of cost (first-in, first-out) or market. Work-in-process includes material, labor and overhead. Assets held for sale or refurbishment consist of railcars, carried at cost, that will either be sold or refurbished and placed on lease. 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 twenty-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 of three to twenty years. INTANGIBLE ASSETS -- Loan fees are capitalized and amortized as interest expense over the life of the related borrowings. Goodwill is generally amortized over twelve years using the straight-line method. MAINTENANCE AND WARRANTY RESERVES -- Maintenance reserves are estimated and provided for over the term of maintenance obligations specified in the underlying lease agreements. Warranty reserves are estimated and charged to operations. INCOME TAXES -- The liability method is used to account for income taxes. Deferred income taxes are provided for the temporary effects of differences in the recognition of revenues and expenses 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. MINORITY INTEREST -- Minority interest represents unaffiliated investors' capital investment and interest in the undistributed earnings and losses of consolidated entities. COMPREHENSIVE INCOME -- Statement of Financial Accounting Standards ("SFAS") No. 130, REPORTING COMPREHENSIVE INCOME, requires presentation of comprehensive income (net income plus all other changes in net assets from non-owner sources) and its components in the financial statements. REVENUE RECOGNITION -- Revenue from manufacturing operations is recognized at the time products are completed and accepted by unaffiliated customers. 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. Certain interim rentals are based on estimated costs. Operating lease revenue is recognized as earned under the lease terms. Payments received in advance are deferred until earned. 33 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 and recognized in earnings concurrent with the hedged transaction. 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 on the agreements are accrued and recognized as an adjustment to interest expense. NET EARNINGS PER COMMON 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. STOCK-BASED COMPENSATION -- Compensation expense for stock-based employee compensation continues to be measured using the method prescribed by Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. If material, pro forma disclosures of net earnings and earnings per common share will be made as if the method prescribed by SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, had been applied in measuring compensation expense. MANAGEMENT ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. This includes, among other things, evaluation of the remaining life and recoverability of long-lived assets. Actual results could differ from those estimates. RECLASSIFICATIONS -- Certain reclassifications have been made to prior years' consolidated financial statements to conform with the 2000 presentation. PROSPECTIVE ACCOUNTING CHANGES -- SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, requires that all derivatives be recognized as either assets or liabilities measured at fair value. Adoption of SFAS No. 133 is effective for the Company's fiscal year beginning September 1, 2000 and is not expected to have a material adverse effect on the consolidated financial position, results of operations, or liquidity of the Company. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS, which, as amended, the Company is required to implement beginning June 1, 2001. Management is currently evaluating the effects of SAB No. 101. NOTE 3 -- ACQUISITIONS In January 2000, Greenbrier completed the purchase of the Freight Wagon Division of DaimlerChrysler Rail Systems located in Siegen, Germany. The acquired operation provides expertise in the fields of engineering, design, sales and marketing and project management. It also includes a comprehensive portfolio of railcar designs certified for the European marketplace. Accordingly, a significant portion of the assets acquired are intangibles. The purchase was initially funded with a cash payment of $4.3 million and the assumption of net liabilities of $29.2 million. Results of the acquired operation, which include the sale of freight cars manufactured by unaffiliated subcontractors, have been included in the accompanying financial statements from the date of acquisition. Disclosure of the acquisition on a proforma basis, as if it had taken place on September 1, 1999, has not been provided, as it is not material to the Company's financial position or results of operations. On September 30, 1998, Greenbrier acquired a 60.0% interest in a railcar manufacturer located in Swidnica, Poland. Through a series of subsequent transactions, the Company has increased its ownership interest to 97.5%. This acquisition was accounted for by the purchase method, and operating results are included in the consolidated financial statements since the date of acquisition. Effective September 1, 1999, Greenbrier completed the acquisition of the remaining common equity of the minority investor's interest in the Canadian manufacturing subsidiary. On September 1, 1998, Greenbrier entered into a joint venture agreement with Bombardier Transportation ("Bombardier") to build railroad freight cars at Bombardier's existing manufacturing facility in Sahagun, Mexico. Each party holds a 50.0% non-controlling interest in the joint venture, and therefore Greenbrier's investment is being accounted for using the equity method. Greenbrier's share of the operating results is included as equity in earnings of unconsolidated subsidiary in the Consolidated Statements of Operations. The excess purchase price over the fair value of net assets acquired in these transactions has been included in intangible assets in the Consolidated Balance Sheets and is being amortized on a straight-line basis over 12 years. The above acquisitions were completed utilizing operating cash flows and available lines of credit. 34 NOTE 4 -- DIVESTITURES In 1997, a plan was adopted to sell the trailer and container leasing operation, in order to focus on core railcar operations. A portion of the trailer and container lease fleet was sold in 1997. In 1998, the sale of the remaining trailer and container fleet was completed. In 1997, an estimated pre-tax loss of approximately $1.6 million was included in the Consolidated Statements of Operations in special charges -- leasing & services for anticipated results of selling the operation. The results associated with the sale were more favorable than originally anticipated, resulting in a $2.3 million benefit in 1998. NOTE 5 -- INVENTORIES
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Manufacturing supplies and raw materials $ 23,071 $ 10,953 Work-in-process 55,227 66,255 Assets held for sale or refurbishment 49,186 15,287 - ------------------------------------------------------ $127,484 $ 92,495 ======================================================
NOTE 6 -- INVESTMENT IN DIRECT FINANCE LEASES
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Future minimum receipts on lease contracts $151,879 $ 196,883 Maintenance, insurance and taxes (35,671) (43,940) - ------------------------------------------------------ Net minimum lease receipts 116,208 152,943 Estimated residual values 51,848 51,901 Unearned finance charges (43,276) (61,659) - ------------------------------------------------------ $124,780 $ 143,185 ======================================================
Minimum future receipts on the direct finance lease contracts are as follows:
(IN THOUSANDS) - ------------------------------------------------------ YEAR ENDING AUGUST 31, 2001 $ 48,750 2002 40,215 2003 29,098 2004 18,339 2005 10,430 Thereafter 5,047 - ------------------------------------------------------ $ 151,879 ======================================================
NOTE 7 -- EQUIPMENT ON OPERATING LEASES Equipment on operating leases is reported net of accumulated depreciation of $53.2 million and $49.5 million as of August 31, 2000 and 1999. In addition, certain railcar equipment is leased by the Company and subleased to customers under non-cancelable operating leases. Aggregate minimum future amounts receivable under all non-cancelable operating leases and subleases are as follows:
(IN THOUSANDS) - ------------------------------------------------------ YEAR ENDING AUGUST 31, 2001 $ 16,585 2002 12,923 2003 11,346 2004 8,872 2005 6,819 Thereafter 3,548 - ------------------------------------------------------ $ 60,093 ======================================================
Certain equipment is also operated under daily, monthly or mileage arrangements. Associated revenues amounted to $25.8 million, $23.0 million and $24.5 million for the years ended August 31, 2000, 1999 and 1998. NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Land and improvements $ 9,326 $ 9,037 Machinery and equipment 63,772 51,384 Buildings and improvements 31,062 22,715 Other 20,227 21,788 - ------------------------------------------------------ 124,387 104,924 Accumulated depreciation (46,759) (35,608) - ------------------------------------------------------ $ 77,628 $ 69,316 ======================================================
35 NOTE 9 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY Summarized financial data for the Company's manufacturing joint venture for the year ended August 31, 2000 and 1999 is as follows:
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Current assets $ 25,623 $ 29,717 Total assets 44,407 40,156 Current liabilities 17,183 18,822 Equity 27,224 21,334 Revenues $ 100,313 $ 56,524 Net earnings $ 5,730 $ 1,334
NOTE 10 -- REVOLVING NOTES Credit facilities aggregated $129.3 million as of August 31, 2000. A $60.0 million revolving line of credit is available through May 2001 to provide working capital and interim financing of equipment for the leasing & services operations. A $40.0 million line of credit to be used for working capital is available through February 2002 for United States manufacturing operations. A $20.4 million (at the August 31, 2000 exchange rate) line of credit is available through March 2001 for working capital for Canadian manufacturing operations. Lines of credit totaling $6.4 million (at the August 31, 2000 exchange rate) are available principally through December 2000 for working capital for Polish manufacturing operations. A line of credit totaling $2.5 million (at the August 31, 2000 exchange rate) is available to support European operations. Advances under the lines of credit bear interest at rates, which vary depending on the type of borrowing and certain defined ratios. At August 31, 2000, there were no borrowings outstanding under the United States manufacturing and European lines. At August 31, 2000, $4.0 million and $4.9 million were outstanding under the Canadian and Polish manufacturing lines and $4.1 million was outstanding under the leasing & services line. Available borrowings under these lines are principally based upon defined levels of receivables, inventory and leased equipment. In addition, bank guarantees totaling $29.2 million (at the August 31, 2000 exchange rate), are available to support European operations, of which $19.3 million were issued at August 31, 2000. Subsequent to August 31, 2000, the Company entered into additional revolving loan and bank guarantees totaling $3.4 million and $11.4 million (at the August 31, 2000 exchange rate) to support European operations. NOTE 11 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Accounts payable and accrued liabilities $ 90,807 $ 69,578 Accrued payroll and related liabilities 18,215 19,518 Maintenance reserves 10,338 14,835 Participation 2,943 8,366 Other 25,489 19,177 - ------------------------------------------------------ $147,792 $131,474 ======================================================
NOTE 12 -- NOTES PAYABLE
(IN THOUSANDS) 2000 1999 - ------------------------------------------------------ Equipment notes payable $ 98,663 $ 121,816 Term loans 59,337 37,616 Other notes payable 1,363 1,969 - ------------------------------------------------------ $159,363 $ 161,401 ======================================================
Equipment notes payable, related to the lease fleet, bear interest at fixed rates of 6.5% to 10.8% and are due in varying installments through June 2006. The weighted average remaining contractual life and weighted average interest rate of the notes as of August 31, 2000 and 1999 were approximately 27 and 37 months and 7.3% and 7.7% for 2000 and 1999. The notes are collateralized by certain lease fleet railcars. Term loans for manufacturing operations and acquisitions are due in varying installments through March 2011 and are collateralized by certain property, plant and equipment. As of August 31, 2000, the effective interest rates on the term loans ranged from 6.6% to 8.5%, except for Eastern Europe where borrowings of $1.5 million bear interest at 19.1%. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. At August 31, 2000, such agreements had a notional amount of $30.0 million and mature between July 2008 and March 2011. 36 In February 1999, Greenbrier issued $30.0 million of senior term notes due 2006 (the "Notes"). In conjunction with the issuance of the Notes, $22.0 million of leasing equipment notes payable were repaid. The early retirement of this debt resulted in a $0.9 million extraordinary charge (net of income taxes of $0.7 million) in 1999 for prepayment penalties and the write-off of deferred loan costs. Principal payments on the notes payable are as follows:
(IN THOUSANDS) - ------------------------------------------------------ YEAR ENDING AUGUST 31, 2001 $ 31,734 2002 34,721 2003 24,420 2004 20,649 2005 11,758 Thereafter 36,081 - ------------------------------------------------------ $159,363 ======================================================
The revolving and operating lines of credit, along with certain equipment notes payable, contain covenants with respect to various subsidiaries, the most restrictive of which limit the payment of dividends or advances by subsidiaries and require certain levels of tangible net worth, ratio of debt to equity and debt service coverage. At August 31, 2000, the Company was in compliance with these covenants. NOTE 13 -- SUBORDINATED DEBT Subordinated notes, amounting to $37.7 million and $37.8 million at August 31, 2000 and 1999, were issued for railcars purchased as part of an agreement described in Note 21. The notes bear interest at 11.0% and 9.0%, with substantially all of the principal due ten years from the date of the notes, and are subordinated to all other liabilities of a subsidiary. Approximately $0.3 million becomes due in 2001, $10.3 million in 2002, $6.0 million in 2003, $5.9 million in 2004 and $6.4 million in 2005 with the remaining balance due after 2005. 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. Should such option be exercised, amounts due under the subordinated notes would be retired from the repurchase proceeds. NOTE 14 -- STOCKHOLDERS' EQUITY The Chairman and the Chief Executive Officer, who are the founding and majority stockholders, have entered into an agreement whereby they have agreed to vote their shares together to elect each other as directors of the Company and with respect to all other matters put to a vote of the stockholders. Certain loan covenants restrict the transfer of funds from the subsidiaries to the parent company in the form of cash dividends, loans, or advances. Restricted net assets of subsidiaries amounted to $79.8 million as of August 31, 2000. Consolidated retained earnings of $14.7 million at August 31, 2000 were restricted as to the payment of dividends. 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. Outstanding options generally vest at 50.0% two years from grant with the balance five years from grant. 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 are available for issuance with respect to options granted to employees, non-employee directors and consultants of the Company. The 2000 Plan authorizes 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 may not be less than the market value of the Company's common stock at the time the option is granted. Options are exercisable not less than six months or more than 10 years after the date the option is granted. General awards under the 2000 Plan vest at 50.0% two years from the grant date, with the balance vesting five years from grant. 37 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 August 31, 1997 761,373 $ 13.62 Granted 3,000 17.34 Exercised (92,772) 13.17 Canceled (24,742) 13.94 - --------------------------------------------------------- Balance at August 31, 1998 646,859 13.62 Granted 642,500 11.37 Exercised (1,860) 13.14 Canceled (16,534) 14.00 - --------------------------------------------------------- Balance at August 31, 1999 1,270,965 12.73 Granted 262,500 8.69 Expired (3,000) 16.75 Canceled (27,491) 12.59 - --------------------------------------------------------- Balance at August 31, 2000 1,502,974 11.75 =========================================================
Options outstanding at August 31, 2000 have exercise prices ranging from $8.56 to $17.34 per share and have a remaining contractual life of 4.74 years. As of August 31, 2000, options to purchase 556,324 shares were exercisable and 737,500 shares were available for grant. Options to purchase 1,000,000 and 640,000 shares were available for grant at August 31, 1999 and 1998. As discussed in Note 2, the disclosure-only provisions of SFAS No. 123 have been adopted. Accordingly, no compensation cost has been recognized for stock options granted with an exercise price equal to the fair value of the underlying stock on the date of grant. Had compensation costs been determined based on the estimated fair value of the options at the date of grant, the net earnings and net earnings per common share for the years ended August 31, 2000, 1999 and 1998 would not have differed materially from the amounts reported. NOTE 15 -- RELATED PARTY TRANSACTIONS The Company purchased railcars totaling $48.3 million and $54.2 million for the years ended August 31, 2000 and 1999 from a 50.0%-owned joint venture for subsequent sale or for its own lease fleet. Maintenance, management and other fees received from a related entity under an agreement were $0.5 million, $0.9 million and $0.9 million for the years ended August 31, 2000, 1999 and 1998. A member of the board of directors of a Canadian subsidiary also serves as a director of a company from which the majority of the Canadian subsidiary's steel requirements are acquired. NOTE 16 -- 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 $1.1 million, $0.8 million and $0.6 million for the years ended August 31, 2000, 1999 and 1998. Defined benefit pension plans are provided for Canadian and German 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. The plans' assets, obligations and pension cost are not material to the consolidated financial statements. Nonqualified deferred benefit plans exist for certain employees. Expenses resulting from contributions to the plans, which are based on earnings, were $1.5 million, $0.9 million and $2.4 million for the years ended August 31, 2000, 1999 and 1998. NOTE 17 -- INCOME TAXES Components of income tax expense are as follows:
(IN THOUSANDS) 2000 1999 1998 - ---------------------------------------------------------------- Current: Federal $ 2,466 $ 5,174 $ 13,139 State 1,506 1,092 2,581 Foreign 4,477 8,243 2,140 - ---------------------------------------------------------------- 8,449 14,509 17,860 Deferred: Federal 5,787 6,317 181 State 598 1,617 (2,062) Foreign 1,219 (1,464) (336) - ---------------------------------------------------------------- 7,604 6,470 (2,217) - ---------------------------------------------------------------- $16,053 $ 20,979 $ 15,643 ================================================================
38 Income tax expense is computed at rates different than statutory rates. The reconciliation between effective and statutory tax rates on continuing operations is as follows:
2000 1999 1998 - ------------------------------------------------------------------ Statutory rates 35.0% 35.0% 35.0% State income taxes, net of federal benefit 4.3 4.0 4.5 Impact of foreign taxes 11.9 7.4 0.6 Other 0.6 1.7 1.7 - ------------------------------------------------------------------ 51.8% 48.1% 41.8% ==================================================================
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) 2000 1999 - --------------------------------------------------------------- Deferred tax assets: Alternative minimum tax credit carryforward $ (4,417) $ (6,783) Deferred participation (21,775) (20,434) Maintenance and warranty reserves (5,553) (7,454) Accrued payroll and related liabilities (3,245) (7,420) Deferred revenue (872) (275) Inventories and other (4,094) (4,005) - ------------------------------------------------------------ (39,956) (46,371) Deferred tax liabilities: Accelerated depreciation 64,925 64,610 Other 2,671 2,269 - ------------------------------------------------------------ Net deferred tax liability attributable to continuing operations 27,640 20,508 Net deferred tax liability attributable to discontinued operations (2,402) (2,874) - ------------------------------------------------------------ Net deferred tax liability $ 25,238 $ 17,634 ============================================================
NOTE 18 - SEGMENT INFORMATION Greenbrier has 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, which is presented in the Consolidated Statements of Operations. 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, short-term investments and capitalized loan costs.
(IN THOUSANDS) 2000 1999 1998 - -------------------------------------------------------------------- Revenue: Manufacturing $582,543 $548,038 $ 470,025 Leasing & services 116,994 127,630 107,147 Intersegment eliminations (80,108) (57,132) (36,811) - -------------------------------------------------------------------- $619,429 $618,536 $ 540,361 ==================================================================== Assets: Manufacturing $232,265 $188,147 $ 162,907 Leasing & services 338,908 284,401 298,811 Unallocated 12,936 78,168 43,771 - -------------------------------------------------------------------- $584,109 $550,716 $ 505,489 ==================================================================== Depreciation and amortization: Manufacturing $ 9,847 $ 7,794 $ 4,774 Leasing & services 10,509 8,683 9,753 - -------------------------------------------------------------------- $ 20,356 $ 16,477 $ 14,527 ==================================================================== Capital expenditures: Manufacturing $ 19,476 $ 23,260 $ 11,887 Leasing & services 74,515 47,717 39,314 - -------------------------------------------------------------------- $ 93,991 $ 70,977 $ 51,201 ====================================================================
39 The Company has operations in the United States, Canada and Europe. The following table summarizes selected geographic information. Eliminations are sales between geographic areas.
(IN THOUSANDS) 2000 1999 1998 - -------------------------------------------------------------------- Revenue: United States $393,213 $387,735 $ 386,064 Canada 239,658 231,767 169,335 Europe 53,230 20,183 -- Eliminations (66,672) (21,149) (15,038) - -------------------------------------------------------------------- $619,429 $618,536 $ 540,361 ==================================================================== Earnings(1): United States $ 25,156 $ 33,413 $ 33,162 Canada 15,350 16,280 4,345 Europe (5,299) (6,120) -- Eliminations (4,204) 50 (103) - -------------------------------------------------------------------- $ 31,003 $ 43,623 $ 37,404 ==================================================================== Identifiable assets: United States $464,276 $469,133 $ 452,323 Canada 57,899 64,162 53,166 Europe 61,934 17,421 -- - -------------------------------------------------------------------- $584,109 $550,716 $ 505,489 ====================================================================
(1) From continuing operations before income tax expense, minority interest and equity in earnings of unconsolidated subsidiary. NOTE 19 -- CUSTOMER CONCENTRATION In 2000, revenue from the two largest customers was 30.1% and 8.9% of total revenues. Revenue from the two largest customers was 28.3% and 16.7% of total revenues for the year ended August 31, 1999 and 25.0% and 16.0% of total revenues for the year ended August 31, 1998. No other customers accounted for more than 10.0% of total revenues in 2000, 1999, or 1998. Two customers had balances that individually exceeded 10.0% of accounts receivable and in total represented 40.4% of the consolidated balance at August 31, 2000. Three customers had balances that individually exceeded 10.0% of accounts receivable and in total represented 64.0% of the consolidated balance at August 31, 1999. Note 20 -- Lease Commitments Lease expense for railcar equipment leased under non-cancelable leases was $7.4 million, $7.3 million and $5.0 million, for the years ended August 31, 2000, 1999 and 1998. Aggregate minimum future amounts payable under non-cancelable railcar equipment leases are as follows:
(IN THOUSANDS) - ------------------------------------------------ YEAR ENDING AUGUST 31, 2001 $ 4,154 2002 3,283 2003 2,668 2004 1,226 2005 125 Thereafter -- - ------------------------------------------------ $ 11,456 ================================================
Operating leases for domestic refurbishment facilities, office space and certain manufacturing and office equipment expire at various dates through September 2014. Rental expense for facilities, office space and equipment was $2.9 million, $2.5 million and $1.9 million for the years ended August 31, 2000, 1999 and 1998. Aggregate minimum future amounts payable under non-cancelable operating leases are as follows:
(IN THOUSANDS) - ------------------------------------------------ YEAR ENDING AUGUST 31, 2001 $ 2,748 2002 2,643 2003 2,168 2004 1,627 2005 1,258 Thereafter 5,189 - ------------------------------------------------ $ 15,633 ================================================
NOTE 21 -- COMMITMENTS AND CONTINGENCIES In 1990, an agreement was entered into for the purchase and refurbishment of over 10,000 used railcars. The agreement provides that, under certain conditions, the seller will receive a percentage of operating earnings of a subsidiary, as defined. Amounts accrued are referred to as participation and are included in accrued liabilities and deferred participation in the Consolidated Balance Sheets. Participation expense related to this and a similar, but smaller agreement was $9.7 million, $14.0 million and $7.2 million for the years ended August 31, 2000, 1999 and 1998. Payment of deferred participation is estimated to be $3.0 million in 2001, $4.5 million in 2002, $10.8 million in 2003, $21.7 million in 2004 and $17.7 million in 2005 with the remaining balance due after 2005. 40 At the August 31, 2000 exchange rates, forward exchange contracts for the purchase of Canadian dollars aggregated $47.8 million, contracts for the purchase of Polish zloties aggregated $15.8 million and contracts for the purchase of United States dollars aggregated $2.0 million. These contracts mature at various dates through June 2001. At August 31, 2000, gains and losses of approximately $0.8 million and $0.4 million on such contracts have been deferred and will be recognized in earnings concurrent with the hedged transaction. Environmental studies have been conducted of owned and leased properties that indicate additional investigation and some remediation may be necessary. The Portland, Oregon manufacturing facility is located on the Willamette River. The United States Environmental Protection Agency is considering possible classification of portions of the river bed, including the portion fronting the facility, as a federal "superfund" site due to sediment contamination. There is no indication that the Company has contributed to contamination of the Willamette River bed, although uses by prior owners of the property may have contributed. Nevertheless, ultimate classification of the Willamette River may have an impact on the value of the Company's investment in the property and may require the Company to initially bear a portion of the cost of any mandated remediation. The Company may be required to perform periodic maintenance dredging in order to continue to launch vessels from its launch ways on the river, and classification as a superfund site could result in some limitations on future launch activity. The outcome of such actions cannot be estimated; however, management believes that any ultimate liability resulting from environmental issues will not materially affect the financial position, results of operations, or cash flows of the Company. Management believes that its operations adhere to sound environmental practices, applicable laws and regulations. From time to time, the Company is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted with certainty. Litigation has been initiated by former shareholders of Interamerican Logistics, Inc. ("Interamerican"), which was acquired in the fall of 1996. The plaintiffs allege that the Company violated the agreements pursuant to which it acquired ownership of Interamerican and seek damages aggregating $4.5 million Canadian. Management contends the claim to be without merit and intends to vigorously defend its position. Management believes that any ultimate liability resulting from litigation will not materially affect the financial position, results of operations, or cash flows of the Company. Employment agreements, which expire August 31, 2004, with the Chairman and the Chief Executive Officer, provide each with a minimum annual salary and a bonus calculated based on operating results, as defined. The minimum annual aggregate defined payment under the agreements is $0.7 million and the maximum is $2.1 million. NOTE 22 - 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:
2000 ------------------------------ CARRYING ESTIMATED (IN THOUSANDS) AMOUNT FAIR VALUE - ------------------------------------------------------------------------------- Notes payable and subordinated debt $197,111 $ 174,575 Deferred participation 54,266 42,278 1999 ------------------------------ CARRYING ESTIMATED (IN THOUSANDS) AMOUNT FAIR VALUE - ------------------------------------------------------------------------------- Notes payable and subordinated debt $199,189 $ 179,456 Deferred participation 50,439 33,681
The carrying amount of cash and cash equivalents, restricted cash and investments, accounts and notes receivable, revolving notes and accounts payable and accrued liabilities 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 Company's estimated incremental borrowing rate. The carrying value and fair value of foreign currency forward contracts and interest rate swaps are not material. 41 QUARTERLY RESULTS OF OPERATIONS Unaudited operating results by quarter for 2000 and 1999 are as follows:
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH TOTAL - ---------------------------------------------------------------------------------------------------- 2000 Revenue Manufacturing $ 91,749 $ 149,387 $ 147,054 $ 140,050 $ 528,240 Leasing & services 21,253 23,436 24,861 21,639 91,189 - ----------------------------------------------------------------------------------------------------- 113,002 172,823 171,915 161,689 619,429 Cost of revenue Manufacturing 80,013 132,070 131,041 123,224 466,348 Leasing & services 12,214 12,332 11,817 10,348 46,711 - ----------------------------------------------------------------------------------------------------- 92,227 144,402 142,858 133,572 513,059 Margin $ 20,775 $ 28,421 $ 29,057 $ 28,117 $ 106,370 ===================================================================================================== Net earnings $ 424 $ 4,303 $ 4,241 $ 5,386 $ 14,354 ===================================================================================================== Net earnings per common share: Basic $ .03 $ .30 $ .30 $ .38 $ 1.01 ===================================================================================================== Diluted $ .03 $ .30 $ .30 $ .38 $ 1.01 ===================================================================================================== 1999 Revenue Manufacturing $100,074 $145,048 $ 152,360 $ 122,829 $ 520,311 Leasing & services 20,012 21,892 21,712 34,609 98,225 - ----------------------------------------------------------------------------------------------------- 120,086 166,940 174,072 157,438 618,536 Cost of revenue Manufacturing 90,393 127,128 133,695 104,906 456,122 Leasing & services 8,198 10,339 10,300 19,845 48,682 - ----------------------------------------------------------------------------------------------------- 98,591 137,467 143,995 124,751 504,804 Margin $ 21,495 $ 29,473 $ 30,077 $ 32,687 $113,732 ===================================================================================================== Net earnings $ 2,866 $ 5,151(1) $ 6,179 $ 5,285(2) $ 19,481 ===================================================================================================== Net earnings per common share: Basic(3) $ .20 $ .36(1) $ .43 $ .37 $ 1.37 ===================================================================================================== Diluted $ .20 $ .36(1) $ .43 $ .37 $ 1.36 =====================================================================================================
(1) Includes an extraordinary charge of $0.9 million, or $0.07 per share, representing prepayment penalties and the write-off of deferred loan costs. (2) Includes earnings of $1.1 million resulting from the resolution of certain matters on a leasing contract that began in 1990. (3) The sum of quarterly earnings per common share may not equal annual earnings per common share as a result of the computation of quarterly versus annual weighted average common shares outstanding. 42 EX-21.1 5 a2031876zex-21_1.txt EXHIBIT 21.1 Exhibit 21.1 THE GREENBRIER COMPANIES, INC. LIST OF SUBSIDIARIES
Names Under State of Which Does Name Incorporation Business ---- ------------- -------- 3048389 Nova Scotia Limited Nova Scotia, N/A Canada Autostack Corporation OR N/A Greenbrier Capital Corporation CA N/A Greenbrier-Concarril, LLC DE N/A Greenbrier de Mexico, S.R.L. de C.V. Mexico N/A Greenbrier Europe B.V. Netherlands N/A Greenbrier Germany GmbH Germany N/A Greenbrier Greenbrier Leasing Corporation DE Intermodal Greenbrier Leasing Limited Nova Scotia, N/A Canada Greenbrier Leasing Limited Partner, LLC DE N/A Greenbrier Leasing, LLC DE N/A Greenbrier Leasing, L.P. DE N/A Greenbrier Logistics, Inc. OR N/A Greenbrier Partners, Inc. CA N/A Greenbrier Poland Sp z.o.o. Poland N/A Greenbrier Railcar, Inc. DE N/A Greenbrier Rental Services, Inc. CA N/A Greenbrier U.K. Limited United Kingdom N/A Gunderson-Concarril, S.A. de C.V. Mexico N/A Gunderson, Inc. OR N/A Gunderson Leasing, Inc. OR N/A Gunderson Marine, Inc. OR N/A Gunderson Rail Services, Inc. (formerly known as Gunderson Northwest, Inc.) OR N/A InterAmerican Logistics Inc. Ontario, N/A Canada Superior Transportation Systems, Inc. OR N/A Tolan O'Neal Transportation & Logistics, Inc. WA N/A TrentonWorks Limited Nova Scotia, N/A Canada WagonySwidnica S.A. Poland N/A
EX-23 6 a2031876zex-23.txt EXHIBIT 23 EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-08035, 33-3392, and 33-80869 of The Greenbrier Companies, Inc. on Forms S-8 of our reports dated October 24, 2000, appearing in and incorporated by reference in this Annual Report on Form 10-K of The Greenbrier Companies, Inc. for the year ended August 31, 2000. DELOITTE & TOUCHE LLP Portland, Oregon November 29, 2000 EX-27.1 7 a2031876zex-27_1.txt EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED AUGUST 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR AUG-31-2000 SEP-01-1999 AUG-31-2000 12,908 0 66,150 0 127,484 0 77,628 0 584,109 0 0 0 0 14 141,601 584,109 0 619,429 513,059 567,261 0 0 21,165 31,003 16,053 14,354 0 0 0 14,354 1.01 1.01
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