SEC Form 10-Q filed by Greenbrier Companies Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

 

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the quarterly period ended May 31, 2024

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the transition period from ______ to ______

 

Commission File No. 1-13146

 

THE GREENBRIER COMPANIES, INC.

(Exact name of registrant as specified in its charter)

 

 

Oregon	93-0816972
(State of Incorporation)	(I.R.S. Employer Identification No.)
One Centerpointe Drive, Suite 200, Lake Oswego, OR	97035
(Address of principal executive offices)	(Zip Code)

 

(503) 684-7000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock without par value		GBX		New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐		Smaller reporting company		☐
				Emerging growth company		☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐ No ☒

 

The number of shares of the registrant’s common stock, without par value, outstanding on July 1, 2024 was 31,130,943 shares.

 

 

 

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FORM 10-Q

 

Table of Contents

 

		Page
	Forward-Looking Statements	3
PART I.	FINANCIAL INFORMATION	5
Item 1.	Condensed Consolidated Financial Statements	5
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Income	6
	Condensed Consolidated Statements of Comprehensive Income	7
	Condensed Consolidated Statements of Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION	47
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47
Item 5.	Other Information	47
Item 6.	Exhibits	48
	Signatures	49

 

 

 

 

 

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Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements, other than statements of historical fact included in this report, concerning our plans, objectives, goals, strategies, future events, future performance, financing needs, plans or intentions relating to business trends and other information referred to under "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. We use words such “affect,” “anticipate,” “assume,” “backlog,” “be,” “believe,” “can,” “contingent,” “conclude,” “continue,” “could,” “due to,” “estimate,” “expect,” “future,” “intend,” “likely,” “may,” “ongoing,” “opinion,” “optimize,” “plan,” “potential,” “schedule,” “trend,” “realize,” “result,” “seek,” “should,” “strategy,” “will,” “would,” and similar expressions to identify forward-looking statements. Forward-looking statements are not guarantees of future performance.

 

Forward-looking statements are based on our current expectations and beliefs and on currently available operating, financial and market information and are subject to various risks and uncertainties, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations and beliefs are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that our expectations or beliefs will result or be achieved and actual future results and trends may differ materially from what is expressed in or indicated by the forward-looking statements.

 

There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report. Such risks, uncertainties and important factors include but are not limited to the following:

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There may be other factors that may cause our actual results to differ materially from the forward-looking statements, including the risks, uncertainties and factors described in more detail in Part I Item 1A “Risk Factors” in our most recent Annual Report on Form 10-K which are incorporated herein by reference. You should evaluate all forward-looking statements made in this report in the context of these risks, uncertainties and factors. You are cautioned not to place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the date hereof. Except as otherwise required by law, we do not assume any obligation to update any forward-looking statements.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets

(In millions, except number of shares which are reflected in thousands, unaudited)

 

		May 31, 2024				August 31, 2023
Assets
Cash and cash equivalents		$	271.6			$	281.7
Restricted cash			20.2				21.0
Accounts receivable, net			488.5				529.9
Income tax receivable			20.0				42.2
Inventories			812.4				823.6
Leased railcars for syndication			155.3				187.4
Equipment on operating leases, net			1,226.9				1,000.0
Property, plant and equipment, net			648.3				619.2
Investment in unconsolidated affiliates			90.3				88.7
Intangibles and other assets, net			254.3				255.8
Goodwill			128.0				128.9
		$	4,115.8			$	3,978.4
Liabilities and Equity
Revolving notes		$	348.4			$	297.1
Accounts payable and accrued liabilities			652.9				743.5
Deferred income taxes			82.9				114.1
Deferred revenue			74.0				46.2
Notes payable, net			1,413.9				1,311.7
Commitments and contingencies (Note 15)
Contingently redeemable noncontrolling interest			56.3				55.6
Equity:
Greenbrier
Preferred stock - without par value; 25,000 shares authorized; none outstanding			—				—
Common stock - without par value; 50,000 shares authorized; 31,131 and 30,880 shares outstanding at May 31, 2024 and August 31, 2023			—				—
Additional paid-in capital			370.2				364.4
Retained earnings			966.9				897.5
Accumulated other comprehensive loss			(8.0	)			(7.3	)
Total equity – Greenbrier			1,329.1				1,254.6
Noncontrolling interest			158.3				155.6
Total equity			1,487.4				1,410.2
		$	4,115.8			$	3,978.4

 

The accompanying notes are an integral part of these financial statements

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Condensed Consolidated Statements of Income

(In millions, except number of shares which are reflected in thousands and per share amounts, unaudited)

 

		Three months ended May 31,								Nine months ended May 31,
		2024				2023				2024				2023
Revenue
Manufacturing		$	685.1			$	870.2			$	2,096.8			$	2,485.3
Maintenance Services			69.9				122.9				228.9				306.4
Leasing & Management Services			65.2				45.0				166.0				134.9
			820.2				1,038.1				2,491.7				2,926.6
Cost of revenue
Manufacturing			610.5				786.5				1,867.6				2,292.2
Maintenance Services			61.7				109.8				202.5				279.0
Leasing & Management Services			24.2				13.7				54.3				41.0
			696.4				910.0				2,124.4				2,612.2
Margin			123.8				128.1				367.3				314.4
Selling and administrative expense			59.3				63.3				179.2				175.7
Net gain on disposition of equipment			(7.8	)			(2.3	)			(12.6	)			(15.2	)
Asset impairment, disposal, and exit costs			—				16.4				—				40.6
Earnings from operations			72.3				50.7				200.7				113.3
Other costs
Interest and foreign exchange			24.7				22.8				72.5				64.0
Earnings before income tax and earnings from unconsolidated affiliates			47.6				27.9				128.2				49.3
Income tax expense			(10.7	)			(3.6	)			(30.0	)			(11.7	)
Earnings before earnings from unconsolidated affiliates			36.9				24.3				98.2				37.6
Earnings from unconsolidated affiliates			3.7				2.4				9.2				8.6
Net earnings			40.6				26.7				107.4				46.2
Net earnings attributable to noncontrolling interest			(6.7	)			(5.4	)			(8.9	)			(8.5	)
Net earnings attributable to Greenbrier		$	33.9			$	21.3			$	98.5			$	37.7
Basic earnings per common share		$	1.09			$	0.67			$	3.17			$	1.17
Diluted earnings per common share		$	1.06			$	0.64			$	3.05			$	1.13
Weighted average common shares:
Basic			31,131				31,757				31,091				32,346
Diluted			32,021				33,571				32,456				33,344

 

The accompanying notes are an integral part of these financial statements

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Condensed Consolidated Statements of Comprehensive Income

(In millions, unaudited)

 

		Three months ended May 31,								Nine months ended May 31,
		2024				2023				2024				2023
Net earnings		$	40.6			$	26.7			$	107.4			$	46.2
Other comprehensive income (loss)
Translation adjustment			(1.3	)			6.0				(3.1	)			16.9
Reclassification of derivative financial instruments recognized in net earnings1			(4.2	)			(2.7	)			(11.7	)			(4.8	)
Unrealized gain (loss) on derivative financial instruments2			6.4				(5.2	)			13.5				9.8
Other (net of tax effect)			—				—				0.6				0.1
			0.9				(1.9	)			(0.7	)			22.0
Comprehensive income			41.5				24.8				106.7				68.2
Comprehensive income attributable to noncontrolling interest			(6.7	)			(5.4	)			(8.9	)			(8.5	)
Comprehensive income attributable to Greenbrier		$	34.8			$	19.4			$	97.8			$	59.7

 

1 Net of tax effect of $1.2 million and $1.2 million for the three months ended May 31, 2024 and May 31, 2023, respectively, and $3.1 million and $2.2 million for the nine months ended May 31, 2024 and May 31, 2023, respectively.

 

2 Net of tax effect of $(1.7 million) and $(1.2 million) for the three months ended May 31, 2024 and May 31, 2023, respectively, and $(3.5 million) and $(8.0 million) for the nine months ended May 31, 2024 and May 31, 2023, respectively.

The accompanying notes are an integral part of these financial statements

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Condensed Consolidated Statements of Equity

(In millions, except per share amounts, unaudited)

 

	Attributable to Greenbrier
	Common Stock Shares			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity - Greenbrier			Noncontrolling Interest			Total Equity			Contingently Redeemable Noncontrolling Interest
Balance August 31, 2023		30.9		$	364.4		$	897.5		$	(7.3	)	$	1,254.6		$	155.6		$	1,410.2		$	55.6
Net earnings		—			—			98.5			—			98.5			8.2			106.7			0.7
Other comprehensive loss, net		—			—			—			(0.7	)		(0.7	)		—			(0.7	)		—
Noncontrolling interest adjustments		—			—			—			—			—			1.7			1.7			—
Joint venture partner distribution declared		—			—			—			—			—			(7.2	)		(7.2	)		—
Restricted stock awards (net of cancellations)		0.2			14.5			—			—			14.5			—			14.5			—
Unamortized restricted stock		—			(19.6	)		—			—			(19.6	)		—			(19.6	)		—
Stock based compensation expense		—			12.2			—			—			12.2			—			12.2			—
Repurchase of stock		—			(1.3	)		—			—			(1.3	)		—			(1.3	)		—
Cash dividends ($0.90 per share)		—			—			(29.1	)		—			(29.1	)		—			(29.1	)		—
Balance May 31, 2024		31.1		$	370.2		$	966.9		$	(8.0	)	$	1,329.1		$	158.3		$	1,487.4		$	56.3

 

	Attributable to Greenbrier
	Common Stock Shares			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity - Greenbrier			Noncontrolling Interest			Total Equity			Contingently Redeemable Noncontrolling Interest
Balance February 29, 2024		31.1		$	366.1		$	942.7		$	(8.9	)	$	1,299.9		$	154.6		$	1,454.5		$	56.0
Net earnings		—			—			33.9			—			33.9			6.4			40.3			0.3
Other comprehensive income, net		—			—			—			0.9			0.9			—			0.9			—
Noncontrolling interest adjustments		—			—			—			—			—			0.1			0.1			—
Joint venture partner distribution declared		—			—			—			—			—			(2.8	)		(2.8	)		—
Restricted stock awards (net of cancellations)		—			0.4			—			—			0.4			—			0.4			—
Unamortized restricted stock		—			(0.4	)		—			—			(0.4	)		—			(0.4	)		—
Stock based compensation expense		—			4.1			—			—			4.1			—			4.1			—
Cash dividends ($0.30 per share)		—			—			(9.7	)		—			(9.7	)		—			(9.7	)		—
Balance May 31, 2024		31.1		$	370.2		$	966.9		$	(8.0	)	$	1,329.1		$	158.3		$	1,487.4		$	56.3

 

	Attributable to Greenbrier
	Common Stock Shares			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity - Greenbrier			Noncontrolling Interest			Total Equity			Contingently Redeemable Noncontrolling Interest
Balance August 31, 2022		32.6		$	424.8		$	897.7		$	(45.6	)	$	1,276.9		$	152.2		$	1,429.1		$	27.7
Net earnings		—			—			37.7			—			37.7			8.4			46.1			0.1
Other comprehensive income, net		—			—			—			22.0			22.0			—			22.0			—
Noncontrolling interest adjustments		—			(7.9	)		(26.3	)		—			(34.2	)		(1.6	)		(35.8	)		26.3
Joint venture partner distribution declared		—			—			—			—			—			(10.9	)		(10.9	)		—
Restricted stock awards (net of cancellations)		0.2			8.9			—			—			8.9			—			8.9			—
Unamortized restricted stock		—			(11.1	)		—			—			(11.1	)		—			(11.1	)		—
Stock based compensation expense		—			8.8			—			—			8.8			—			8.8			—
Repurchase of stock		(1.7	)		(49.4	)		—			—			(49.4	)		—			(49.4	)		—
Cash dividends ($0.81 per share)		—			—			(26.9	)		—			(26.9	)		—			(26.9	)		—
Balance May 31, 2023		31.1		$	374.1		$	882.2		$	(23.6	)	$	1,232.7		$	148.1		$	1,380.8		$	54.1

 

	Attributable to Greenbrier
	Common Stock Shares			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Equity - Greenbrier			Noncontrolling Interest			Total Equity			Contingently Redeemable Noncontrolling Interest
Balance February 28, 2023		32.3		$	403.0		$	896.0		$	(21.7	)	$	1,277.3		$	144.6		$	1,421.9		$	27.5
Net earnings		—			—			21.3			—			21.3			5.1			26.4			0.3
Other comprehensive loss, net		—			—			—			(1.9	)		(1.9	)		—			(1.9	)		—
Noncontrolling interest adjustments		—			—			(26.3	)		—			(26.3	)		0.4			(25.9	)		26.3
Joint venture partner distribution declared		—			—			—			—			—			(2.0	)		(2.0	)		—
Restricted stock awards (net of cancellations)		—			(0.1	)		—			—			(0.1	)		—			(0.1	)		—
Unamortized restricted stock		—			0.3			—			—			0.3			—			0.3			—
Stock based compensation expense		—			2.9			—			—			2.9			—			2.9			—
Repurchase of stock		(1.2	)		(32.0	)		—			—			(32.0	)		—			(32.0	)		—
Cash dividends ($0.27 per share)		—			—			(8.8	)		—			(8.8	)		—			(8.8	)		—
Balance May 31, 2023		31.1		$	374.1		$	882.2		$	(23.6	)	$	1,232.7		$	148.1		$	1,380.8		$	54.1

The accompanying notes are an integral part of these financial statements

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Condensed Consolidated Statements of Cash Flows

(In millions, unaudited)

		Nine months ended May 31,
		2024				2023
Cash flows from operating activities
Net earnings		$	107.4			$	46.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Deferred income taxes			(33.1	)			(18.4	)
Depreciation and amortization			82.3				79.8
Net gain on disposition of equipment			(12.6	)			(15.2	)
Stock based compensation expense			12.2				8.8
Asset impairment, disposal, and exit costs			—				40.6
Noncontrolling interest adjustments			1.7				2.8
Other			3.1				2.8
Decrease (increase) in assets:
Accounts receivable, net			43.3				(16.1	)
Income tax receivable			22.2				10.0
Inventories			6.4				(80.7	)
Leased railcars for syndication			(29.8	)			(57.3	)
Other assets			2.4				(42.9	)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities			(94.2	)			8.3
Deferred revenue			27.1				32.5
Net cash provided by operating activities			138.4				1.2
Cash flows from investing activities
Proceeds from sales of assets			67.9				76.3
Capital expenditures			(324.7	)			(253.9	)
Investments in and advances to / repayments from unconsolidated affiliates			—				(3.5	)
Cash distribution from unconsolidated affiliates and other			2.5				6.3
Net cash used in investing activities			(254.3	)			(174.8	)
Cash flows from financing activities
Net change in revolving notes with maturities of 90 days or less			19.0				(11.5	)
Proceeds from revolving notes with maturities longer than 90 days			176.9				220.0
Repayments of revolving notes with maturities longer than 90 days			(145.8	)			(230.0	)
Proceeds from issuance of notes payable			180.5				75.0
Repayments of notes payable			(78.9	)			(27.1	)
Debt issuance costs			(2.8	)			(0.2	)
Repurchase of stock			(1.3	)			(48.0	)
Dividends			(29.1	)			(26.7	)
Cash distribution to joint venture partner			(7.2	)			(8.4	)
Tax payments for net share settlement of restricted stock			(5.2	)			(2.3	)
Net cash provided by (used in) financing activities			106.1				(59.2	)
Effect of exchange rate changes			(1.1	)			15.2
Decrease in Cash and cash equivalents and Restricted cash			(10.9	)			(217.6	)
Cash and cash equivalents and restricted cash
Beginning of period			302.7				559.1
End of period		$	291.8			$	341.5
Balance sheet reconciliation
Cash and cash equivalents		$	271.6			$	321.4
Restricted cash			20.2				20.1
Total cash and cash equivalents and restricted cash as presented above		$	291.8			$	341.5
Cash paid during the period for
Interest		$	65.9			$	57.1
Income taxes paid, net		$	40.3			$	13.7
Non-cash activity
Transfers between Leased railcars for syndication and Inventories and Equipment on operating leases, net		$	66.8			$	40.0
Capital expenditures accrued in Accounts payable and accrued liabilities		$	15.7			$	3.2
Change in Accounts payable and accrued liabilities associated with dividends declared		$	—			$	0.2
Change in Accounts payable and accrued liabilities associated with cash distributions to joint venture partner		$	—			$	2.5
Repurchase of stock accrued in Accounts payable and accrued liabilities		$	—			$	1.4

 

The accompanying notes are an integral part of these financial statements

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

We operate in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management Services. Our segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland, and Romania, produces freight railcars, tank cars, intermodal railcars and automotive railcar products. The Maintenance Services segment performs wheel and axle servicing, railcar maintenance and produces a variety of parts for the rail industry in North America. The Leasing & Management Services segment owns approximately 15,200 railcars as of May 31, 2024. We also provide management services for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America.

 

Management identifies the following trends which continue to impact our business and our results for the nine months ended May 31, 2024. Overall, demand in the marketplace is steady for our products and services. Supply chain challenges, rail service congestion, inflation, high interest rates, and labor shortages continue to impact our business. Despite this operating environment, we accomplished the following during the nine months ended May 31, 2024:

 

We believe our results highlight our continued focus on our strategic plan and we remain focused on increasing recurring revenue, expanding our aggregate gross margin, and raising our return on invested capital. Recurring revenue is defined as Leasing & Management Services revenue excluding the impact of syndication transactions.

Our backlog remains strong with railcar deliveries into 2027. Our railcar backlog was 29,400 units with an estimated value of $3.7 billion as of May 31, 2024. Our backlog includes nearly $740 million of railcars intended for syndication which are supported by lease agreements with external customers and may be syndicated to third parties or held in our lease fleet depending on a variety of factors. Approximately 2% of backlog units and estimated backlog value as of May 31, 2024 was associated with our Brazilian manufacturing operations which is accounted for under the equity method.

 

Our backlog of railcar units is not necessarily indicative of future results of operations. Certain orders in backlog are subject to customary documentation and completion of terms. Customers may attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time to time.

 

As described in Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2023 the items described above may have a material negative impact on our business, liquidity, results of operations and stock price. Beyond these general observations, we are unable to predict when, how, or with what magnitude these items will impact our business.

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Three Months Ended May 31, 2024 Compared to the Three Months Ended May 31, 2023

Overview

Revenue, Cost of revenue, Margin and Earnings from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.

 

		Three months ended May 31,
(in millions, except per share amounts)		2024				2023
Revenue:
Manufacturing		$	685.1			$	870.2
Maintenance Services			69.9				122.9
Leasing & Management Services			65.2				45.0
			820.2				1,038.1
Cost of revenue:
Manufacturing			610.5				786.5
Maintenance Services			61.7				109.8
Leasing & Management Services			24.2				13.7
			696.4				910.0
Margin:
Manufacturing			74.6				83.7
Maintenance Services			8.2				13.1
Leasing & Management Services			41.0				31.3
			123.8				128.1
Selling and administrative			59.3				63.3
Net gain on disposition of equipment			(7.8	)			(2.3	)
Asset impairment, disposal, and exit costs			—				16.4
Earnings from operations			72.3				50.7
Interest and foreign exchange			24.7				22.8
Earnings before income tax and earnings from unconsolidated affiliates			47.6				27.9
Income tax expense			(10.7	)			(3.6	)
Earnings before earnings from unconsolidated affiliates			36.9				24.3
Earnings from unconsolidated affiliates			3.7				2.4
Net earnings			40.6				26.7
Net earnings attributable to noncontrolling interest			(6.7	)			(5.4	)
Net earnings attributable to Greenbrier		$	33.9			$	21.3
Diluted earnings per common share		$	1.06			$	0.64

 

Performance for our segments is evaluated based on operating profit or loss. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.

 

		Three months ended May 31,
(in millions)		2024				2023
Operating profit (loss):
Manufacturing		$	54.2			$	44.1
Maintenance Services			5.9				11.0
Leasing & Management Services			40.5				25.9
Corporate			(28.3	)			(30.3	)
		$	72.3			$	50.7

 

 

---

Consolidated Results

 

		Three months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	820.2			$	1,038.1			$	(217.9	)			(21.0	%)
Cost of revenue		$	696.4			$	910.0			$	(213.6	)			(23.5	%)
Margin (%)			15.1	%			12.3	%			2.8	%		*
Net earnings attributable to Greenbrier		$	33.9			$	21.3			$	12.6				59.2	%

 

* Not meaningful

 

Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.

The 21.0% decrease in Revenue for the three months ended May 31, 2024 as compared to the three months ended May 31, 2023 was primarily due to a 21.3% decrease in Manufacturing revenue and 43.1% decrease in Maintenance Services revenue. The decrease in Manufacturing revenue was primarily attributed to a 21.9% decrease in railcar deliveries during the three months ended May 31, 2024. The decrease in Maintenance Services revenue was primarily due to 27.6% lower volumes in our wheels business and a change in product mix during the three months ended May 31, 2024.

The 23.5% decrease in Cost of revenue for the three months ended May 31, 2024 as compared to the three months ended May 31, 2023 was primarily due to a 22.4% decrease in Manufacturing cost of revenue and a 43.8% decrease in Maintenance Services cost of revenue. The decrease in Manufacturing cost of revenue was primarily attributed to a 21.9% decrease in railcar deliveries during the three months ended May 31, 2024. The decrease in Maintenance Services cost of revenue was primarily due to operating at lower volumes and a change in product mix during the three months ended May 31, 2024.

Margin as a percentage of revenue was 15.1% and 12.3% for the three months ended May 31, 2024 and May 31, 2023, respectively. Margin as a percentage of revenue was positively impacted by favorable product mix within our Manufacturing segment during the three months ended May 31, 2024. This was partially offset by a 6.7% decrease in Leasing & Management Services margin as a percentage of revenue for the three months ended May 31, 2024 from higher sales of railcars that we purchased from third parties which have lower margin percentages.

The $12.6 million increase in Net earnings attributable to Greenbrier for the three months ended May 31, 2024 as compared to the three months ended May 31, 2023 was primarily due to:

 

These were partially offset by the following:

 

 

 

 

---

Manufacturing Segment

 

		Three months ended May 31,
(In millions, except railcar deliveries)		2024				2023				Increase (Decrease)				% Change
Revenue		$	685.1			$	870.2			$	(185.1	)			(21.3	%)
Cost of revenue		$	610.5			$	786.5			$	(176.0	)			(22.4	%)
Margin (%)			10.9	%			9.6	%			1.3	%		*
Operating profit ($)		$	54.2			$	44.1			$	10.1				22.9	%
Operating profit (%)			7.9	%			5.1	%			2.8	%		*
Deliveries			5,000				6,400				(1,400	)			(21.9	%)

 

* Not meaningful

Our Manufacturing segment primarily generates revenue from manufacturing a wide range of freight railcars and from the conversion of existing railcars through our facilities in North America and Europe.

Manufacturing Revenue decreased $185.1 million or 21.3% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The decrease in Revenue was primarily attributed to a 21.9% decrease in railcar deliveries during the three months ended May 31, 2024.

Manufacturing Cost of revenue decreased $176.0 million or 22.4% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The decrease in Cost of revenue was primarily attributed to a 21.9% decrease in railcar deliveries during the three months ended May 31, 2024.

Manufacturing Margin as a percentage of revenue increased 1.3% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase in margin percentage for the three months ended May 31, 2024 was primarily attributed to favorable product mix during the three months ended May 31, 2024.

Manufacturing Operating profit increased $10.1 million for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase in operating profit was primarily attributed to the prior year including a $14.3 million loss on the sale of Gunderson Marine during the three months ended May 31, 2023. This was partially offset by $9.1 million decrease in Margin attributed to a 21.9% decrease in railcar deliveries during the three months ended May 31, 2024.

 

 

---

Maintenance Services Segment

 

		Three months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	69.9			$	122.9			$	(53.0	)			(43.1	%)
Cost of revenue		$	61.7			$	109.8			$	(48.1	)			(43.8	%)
Margin (%)			11.7	%			10.7	%			1.1	%		*
Operating profit ($)		$	5.9			$	11.0			$	(5.1	)			(46.4	%)
Operating profit (%)			8.4	%			9.0	%			(0.5	%)		*

 

* Not meaningful

Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.

Maintenance Services Revenue decreased $53.0 million or 43.1% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The decrease was primarily attributed to 27.6% lower volumes in our wheels business and a change in product mix during the three months ended May 31, 2024.

Maintenance Services Cost of revenue decreased $48.1 million or 43.8% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The decrease was primarily due to operating at lower volumes and a change in product mix during the three months ended May 31, 2024.

Maintenance Services Margin as a percentage of revenue increased 1.1% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase in margin percentage was primarily attributed to the a change in product mix during the three months ended May 31, 2024.

Maintenance Services Operating profit decreased $5.1 million for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The decrease in Operating profit was primarily attributed to operating at lower volumes during the three months ended May 31, 2024.

 

 

---

Leasing & Management Services Segment

 

		Three months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	65.2			$	45.0			$	20.2				44.9	%
Cost of revenue		$	24.2			$	13.7			$	10.5				76.6	%
Margin (%)			62.9	%			69.6	%			(6.7	%)		*
Operating profit ($)		$	40.5			$	25.9			$	14.6				56.4	%
Operating profit (%)			62.1	%			57.6	%			4.5	%		*

 

* Not meaningful

 

Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet, providing various management services, syndication revenue associated with leases attached to new railcar sales, interim rent on leased railcars for syndication and the sale of railcars purchased from third parties with the intent to resell.

Leasing & Management Services Revenue increased $20.2 million or 44.9% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase was primarily attributed to a $8.9 million increase in the sale of railcars which we had purchased from third parties with the intent to resell and an increase of $5.3 million in rents associated with a larger fleet and improved lease rates during the three months ended May 31, 2024.

Leasing & Management Services Cost of revenue increased $10.5 million or 76.6% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase was primarily due to higher costs from an increase in the volume of railcars sold that we purchased from third parties and a larger fleet during the three months ended May 31, 2024.

Leasing & Management Services Margin as a percentage of revenue decreased 6.7% for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. Margin as a percentage of revenue for the three months ended May 31, 2024 was negatively impacted by higher sales of railcars that we purchased from third parties which have lower margin percentages.

Leasing & Management Services Operating profit increased $14.6 million for the three months ended May 31, 2024 compared to the three months ended May 31, 2023. The increase was primarily attributed to higher rents associated with a larger fleet and improved lease rates and $5.0 million higher Net gain on disposition of equipment during the three months ended May 31, 2024.

 

 

---

Selling and Administrative Expense

 

		Three months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Selling and administrative expense		$	59.3			$	63.3			$	(4.0	)			(6.3	%)

 

Selling and administrative expense was $59.3 million or 7.2% of Revenue for the three months ended May 31, 2024 compared to $63.3 million or 6.1% of Revenue for the prior comparable period. The $4.0 million decrease was primarily attributed to lower short-term incentive compensation for the three months ended May 31, 2024 as a result of timing of financial performance when compared to the prior year.

Net Gain on Disposition of Equipment

 

Net gain on disposition of equipment typically includes the sale of assets from our lease fleet (Equipment on operating leases, net) and disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to optimize our fleet and to manage risk and liquidity.

Net gain on disposition of equipment was $7.8 million for the three months ended May 31, 2024 compared to $2.3 million for the prior comparable period. The increase in Net gain on disposition of equipment was primarily attributed to higher sales of assets from our lease fleet during the three months ended May 31, 2024.

Asset Impairment, Disposal and Exit Costs

 

The three months ended May 31, 2023 included a loss on the sale of Gunderson Marine of $14.3 million and $2.1 million of severance costs related to ceasing rail production at the Gunderson Facility.

Interest and Foreign Exchange

Interest and foreign exchange expense was composed of the following:

		Three months ended May 31,
(in millions)		2024				2023				Increase (Decrease)
Interest and foreign exchange:
Interest and other expense		$	23.4			$	20.0			$	3.4
Foreign exchange loss			1.3				2.8				(1.5	)
		$	24.7			$	22.8			$	1.9

 

The $1.9 million increase in Interest and foreign exchange expense for the three months ended May 31, 2024 compared to the three months ended May 31, 2023 was primarily attributed to an increase in interest expense from higher borrowings.

 

 

---

Income Tax

 

For the three months ended May 31, 2024, we had Income tax expense of $10.7 million on pre-tax income of $47.6 million for an effective tax rate of 22.5%. The effective tax rate primarily benefited from net favorable adjustments related to our foreign subsidiaries and U.S. tax credits.

 

For the three months ended May 31, 2023, we had Income tax expense of $3.6 million on a pre-tax income of $27.9 million for an effective tax rate of 12.9%. Tax expense included net favorable discrete items primarily related to changes in foreign currency exchange rates for our U.S. Dollar denominated foreign operations.

 

The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year and may be positively or negatively impacted by adjustments that are required to be reported in the quarter. The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.

Earnings From Unconsolidated Affiliates

 

Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from these unconsolidated affiliates on an after-tax basis.

 

Earnings from unconsolidated affiliates were $3.7 million and $2.4 million for the three months ended May 31, 2024 and May 31, 2023, respectively. The increase was primarily related to $2.4 million in higher earnings at our Brazil operations for the three months ended May 31, 2024.

 

Noncontrolling Interest

 

Net earnings attributable to noncontrolling interest was $6.7 million for the three months ended May 31, 2024 compared to $5.4 million for the three months ended May 31, 2023. Net earnings attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations.

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Nine Months Ended May 31, 2024 Compared to the Nine Months Ended May 31, 2023

Overview

Revenue, Cost of revenue, Margin and Earnings from operations (operating profit or loss) presented below, include amounts from external parties and exclude intersegment activity that is eliminated in consolidation.

 

		Nine months ended May 31,
(in millions, except per share amounts)		2024				2023
Revenue:
Manufacturing		$	2,096.8			$	2,485.3
Maintenance Services			228.9				306.4
Leasing & Management Services			166.0				134.9
			2,491.7				2,926.6
Cost of revenue:
Manufacturing			1,867.6				2,292.2
Maintenance Services			202.5				279.0
Leasing & Management Services			54.3				41.0
			2,124.4				2,612.2
Margin:
Manufacturing			229.2				193.1
Maintenance Services			26.4				27.4
Leasing & Management Services			111.7				93.9
			367.3				314.4
Selling and administrative			179.2				175.7
Net gain on disposition of equipment			(12.6	)			(15.2	)
Asset impairment, disposal, and exit costs			—				40.6
Earnings from operations			200.7				113.3
Interest and foreign exchange			72.5				64.0
Earnings before income taxes and earnings from unconsolidated affiliates			128.2				49.3
Income tax expense			(30.0	)			(11.7	)
Earnings before earnings from unconsolidated affiliates			98.2				37.6
Earnings from unconsolidated affiliates			9.2				8.6
Net earnings			107.4				46.2
Net earnings attributable to noncontrolling interest			(8.9	)			(8.5	)
Net earnings attributable to Greenbrier		$	98.5			$	37.7
Diluted earnings per common share		$	3.05			$	1.13

 

Performance for our segments is evaluated based on operating profit or loss. Corporate includes selling and administrative costs not directly related to goods and services and certain costs that are intertwined among segments due to our integrated business model. Management does not allocate Interest and foreign exchange or Income tax expense for either external or internal reporting purposes.

 

		Nine months ended May 31,
(in millions)		2024				2023
Operating profit (loss):
Manufacturing		$	167.3			$	87.3
Maintenance Services			21.1				23.3
Leasing & Management Services			100.0				82.2
Corporate			(87.7	)			(79.5	)
		$	200.7			$	113.3

 

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Consolidated Results

 

		Nine months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	2,491.7			$	2,926.6			$	(434.9	)			(14.9	%)
Cost of revenue		$	2,124.4			$	2,612.2			$	(487.8	)			(18.7	%)
Margin (%)			14.7	%			10.7	%			4.0	%		*
Net earnings attributable to Greenbrier		$	98.5			$	37.7			$	60.8				161.3	%

 

* Not meaningful

 

Through our integrated business model, we provide a broad range of custom products and services in each of our segments, which have various selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our results of operations.

The 14.9% decrease in Revenue for the nine months ended May 31, 2024 as compared to the nine months ended May 31, 2023 was primarily due to a 15.6% decrease in Manufacturing revenue. The decrease in Manufacturing revenue was primarily attributed to a 14.4% decrease in railcar deliveries during the nine months ended May 31, 2024.

The 18.7% decrease in Cost of revenue for the nine months ended May 31, 2024 as compared to the nine months ended May 31, 2023 was primarily due to a 18.5% decrease in Manufacturing cost of revenue. The decrease in Manufacturing cost of revenue was primarily attributed to a 14.4% decrease in railcar deliveries during the nine months ended May 31, 2024.

Margin as a percentage of revenue was 14.7% and 10.7% for the nine months ended May 31, 2024 and May 31, 2023, respectively. Margin as a percentage of revenue was positively impacted by an increase in Manufacturing margin from 7.8% to 10.9% primarily attributed to operating efficiencies and favorable product mix during the nine months ended May 31, 2024.

 

The $60.8 million increase in Net earnings attributable to Greenbrier for the nine months ended May 31, 2024 as compared to the nine months ended May 31, 2023 was primarily due to the following:

 

These were partially offset by the following:

 

 

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Manufacturing Segment

		Nine months ended May 31,
(In millions, except railcar deliveries)		2024				2023				Increase (Decrease)				% Change
Revenue		$	2,096.8			$	2,485.3			$	(388.5	)			(15.6	%)
Cost of revenue		$	1,867.6			$	2,292.2			$	(424.6	)			(18.5	%)
Margin (%)			10.9	%			7.8	%			3.1	%		*
Operating profit ($)		$	167.3			$	87.3			$	80.0				91.6	%
Operating profit (%)			8.0	%			3.5	%			4.5	%		*
Deliveries			15,500				18,100				(2,600	)			(14.4	%)

 

* Not meaningful

Our Manufacturing segment primarily generates revenue from manufacturing a wide range of freight railcars and from the conversion of existing or in-service railcars through our facilities in North America and Europe.

Manufacturing Revenue decreased $388.5 million or 15.6% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The decrease in Revenue was primarily attributed to a 14.4% decrease in railcar deliveries during the nine months ended May 31, 2024.

Manufacturing Cost of revenue decreased $424.6 million or 18.5% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The decrease in Cost of revenue was primarily attributed to a 14.4% decrease in the volume of railcar deliveries and favorable product mix during the nine months ended May 31, 2024.

Manufacturing Margin as a percentage of revenue increased 3.1% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase in margin percentage for the nine months ended May 31, 2024 was primarily attributed to operating efficiencies and favorable product mix during the nine months ended May 31, 2024.

Manufacturing Operating profit increased $80.0 million for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase in Operating profit was attributed to an increase in Margin during the nine months ended May 31, 2024 as well as the prior year including $40.6 million of charges related to the sale and closure of our Gunderson Facility during the nine months ended May 31, 2023.

 

 

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Maintenance Services Segment

 

		Nine months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	228.9			$	306.4			$	(77.5	)			(25.3	%)
Cost of revenue		$	202.5			$	279.0			$	(76.5	)			(27.4	%)
Margin (%)			11.5	%			8.9	%			2.6	%		*
Operating profit ($)		$	21.1			$	23.3			$	(2.2	)			(9.4	%)
Operating profit (%)			9.2	%			7.6	%			1.6	%		*

 

* Not meaningful

Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing and from providing railcar maintenance services.

Maintenance Services Revenue decreased $77.5 million or 25.3% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The decrease was primarily attributed to 22.7% lower volumes in our wheels business due to lower demand and a change in product mix despite a higher average selling price during the nine months ended May 31, 2024.

Maintenance Services Cost of revenue decreased $76.5 million or 27.4% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The decrease was primarily due to operating at lower volumes and a change in product mix during the nine months ended May 31, 2024.

Maintenance Services Margin as a percentage of revenue increased 2.6% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase in margin percentage was primarily attributed to change in product mix and favorable pricing during the nine months ended May 31, 2024.

Maintenance Services Operating profit decreased $2.2 million for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The decrease in Operating profit was primarily attributed to operating at lower volumes during the nine months ended May 31, 2024.

 

 

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Leasing & Management Services Segment

		Nine months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Revenue		$	166.0			$	134.9			$	31.1				23.1	%
Cost of revenue		$	54.3			$	41.0			$	13.3				32.4	%
Margin (%)			67.3	%			69.6	%			(2.3	%)		*
Operating profit ($)		$	100.0			$	82.2			$	17.8				21.7	%
Operating profit (%)			60.2	%			60.9	%			(0.7	%)		*

 

* Not meaningful

 

Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet, providing various management services, syndication revenue associated with leases attached to new railcar sales, interim rent on leased railcars for syndication and the sale of railcars purchased from third parties with the intent to resell.

Leasing & Management Services Revenue increased $31.1 million or 23.1% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase was primarily attributed to an increase of $14.9 million in rents associated with a larger fleet and improved lease rates, an $8.9 million increase in the sale of railcars which we had purchased from third parties with the intent to resell and $7.0 million higher interim rent on leased railcars for syndication during the nine months ended May 31, 2024.

Leasing & Management Services Cost of revenue increased $13.3 million or 32.4% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase was primarily due to higher costs from an increase in the volume of railcars sold that we purchased from third parties and a larger fleet and during the nine months ended May 31, 2024.

Leasing & Management Services Margin as a percentage of revenue decreased 2.3% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. Margin as a percentage of revenue for the nine months ended May 31, 2024 was negatively impacted by higher sales of railcars that we purchased from third parties which have lower margin percentages.

Leasing & Management Services Operating profit increased $17.8 million or 21.7% for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023. The increase was primarily attributed to higher rents from a larger fleet and improved lease rates during the nine months ended May 31, 2024.

 

 

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Selling and Administrative Expense

 

		Nine months ended May 31,
(in millions)		2024				2023				Increase (Decrease)				% Change
Selling and administrative expense		$	179.2			$	175.7			$	3.5				2.0	%

 

Selling and administrative expense was $179.2 million or 7.2% of Revenue for the nine months ended May 31, 2024 compared to $175.7 million or 6.0% of Revenue for the prior comparable period. The $3.5 million increase was primarily attributed to an increase in employee related costs including higher long-term incentive compensation during the nine months ended May 31, 2024.

Net Gain on Disposition of Equipment

 

Net gain on disposition of equipment typically includes the sale of assets from our lease fleet (Equipment on operating leases, net) and disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to optimize our fleet and to manage risk and liquidity.

Net gain on disposition of equipment was $12.6 million for the nine months ended May 31, 2024 compared to a gain of $15.2 million for the prior comparable period. The decrease in Net gain on disposition of equipment was primarily attributed to fewer sales of assets from our lease fleet during the nine months ended May 31, 2024.

 

Asset Impairment, Disposal and Exit Costs

 

The nine months ended May 31, 2023 included an impairment of long-lived assets of $24.2 million related to our change in the future use of our Gunderson Facility, loss on the sale of Gunderson Marine of $14.3 million and $2.1 million of severance associated with ceasing rail production at the Gunderson Facility.

Interest and Foreign Exchange

Interest and foreign exchange expense was composed of the following:

		Nine months ended May 31,
(in millions)		2024				2023				Increase (Decrease)
Interest and foreign exchange:
Interest and other expense		$	69.2			$	58.7			$	10.5
Foreign exchange loss			3.3				5.3				(2.0	)
		$	72.5			$	64.0			$	8.5

 

The $8.5 million increase in Interest and foreign exchange expense for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023 was primarily attributed to an increase in interest expense from higher borrowings and interest rates.

 

Income Tax

 

For the nine months ended May 31, 2024, we had Income tax expense of $30.0 million on pre-tax income of $128.2 million for an effective tax rate of 23.4%. The effective tax rate benefited from net favorable discrete items related to U.S. tax credits and changes in foreign currency exchange rates for our U.S. Dollar denominated foreign operations.

 

For the nine months ended May 31, 2023, we had Income tax expense of $11.7 million on pre-tax income of $49.3 million for an effective tax rate of 23.7%. Tax expense included net favorable discrete items primarily related to changes in foreign currency exchange rates for our U.S. Dollar denominated foreign operations.

 

The provision for income taxes during interim quarterly reporting periods is based on our estimates of the effective tax rates for the full fiscal year and may be positively or negatively impacted by adjustments that are required to be reported in the quarter. The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and

---

domestic pre-tax earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result, the partnership’s entire pre-tax earnings are included in earnings before income taxes and earnings from unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.

Earnings From Unconsolidated Affiliates

 

Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from these unconsolidated affiliates on an after-tax basis.

 

Earnings from unconsolidated affiliates were $9.2 million and $8.6 million for the nine months ended May 31, 2024 and May 31, 2023, respectively. The increase was primarily related to $4.4 million higher earnings at our Brazil operations during the nine months ended May 31, 2024. This was partially offset by a $3.7 million lower earnings related to a temporarily idle facility during the nine months ended May 31, 2024.

 

Noncontrolling Interest

 

Net earnings attributable to noncontrolling interest was $8.9 million for the nine months ended May 31, 2024 compared to $8.5 million for the nine months ended May 31, 2023. Net earnings attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations.

 

 

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Liquidity and Capital Resources

		Nine months ended May 31,
(in millions)		2024				2023
Net cash provided by operating activities		$	138.4			$	1.2
Net cash used in investing activities			(254.3	)			(174.8	)
Net cash provided by (used in) financing activities			106.1				(59.2	)
Effect of exchange rate changes			(1.1	)			15.2
Decrease in Cash and cash equivalents and Restricted cash		$	(10.9	)		$	(217.6	)

 

We have been financed through cash generated from operations and borrowings. At May 31, 2024 Cash and cash equivalents and Restricted cash were $291.8 million, a decrease of $10.9 million from $302.7 million at August 31, 2023.

 

Cash Flows From Operating Activities

The $137.2 million increase in cash from operating activities for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023 was primarily due to a $61.2 million increase in Net earnings and $56.2 million net change in working capital.

 

Cash Flows From Investing Activities

Cash used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets and investment activity with our unconsolidated affiliates. Proceeds from the sale of assets primarily relate to fleet sales in our Leasing & Management Services segment. The $79.5 million increase in cash used in investing activities for the nine months ended May 31, 2024 was primarily attributable to a $70.8 million increase in capital expenditures compared to the nine months ended May 31, 2023.

 

		Nine months ended May 31,
(in millions)		2024				2023
Capital expenditures:
Leasing & Management Services		$	241.1			$	205.4
Manufacturing			70.8				41.0
Maintenance Services			12.8				7.5
Total capital expenditures (gross)		$	324.7			$	253.9
Proceeds from sales of assets			(67.9	)			(76.3	)
Total capital expenditures (net of proceeds)		$	256.8			$	177.6

Capital expenditures primarily relate to additions to our lease fleet and on-going investments into the safety and productivity of our facilities. Proceeds from the sale of assets primarily relate to sales of railcars from our lease fleet within Leasing & Management Services. Assets from our lease fleet are periodically sold in the normal course of business to accommodate customer demand and to manage risk and liquidity. Proceeds from sales of assets are expected to be approximately $75 million for 2024.

Gross capital expenditures for 2024 are expected to be approximately $280 million for Leasing & Management Services, approximately $150 million for Manufacturing and approximately $15 million for Maintenance Services. Capital expenditures for 2024 primarily relate to additions to our lease fleet reflecting our leasing strategy and continued investments into the safety and productivity of our facilities.

Cash Flows From Financing Activities

The $165.3 million increase in cash flow from financing activities for the nine months ended May 31, 2024 compared to the nine months ended May 31, 2023 was primarily attributed to a $71.6 million increase in net proceeds from revolving notes and $53.7 million higher proceeds from the issuance of notes payable, net of repayments. During the nine months ended May 31, 2024 we issued $178.5 million of asset backed securities and used proceeds to pay down $139.9 million of our GBX Leasing warehouse facility. We also drew $146.9 million on the GBX Leasing warehouse facility to grow the fleet. In February 2024, we paid $47.7 million to retire our 2024 Convertible Notes.

 

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Dividend & Share Repurchase Program

A quarterly dividend of $0.30 per share was declared on July 2, 2024.

 

The Board of Directors has authorized our company to repurchase shares of our common stock. The share repurchase program has an expiration date of January 31, 2025. Under the share repurchase program, shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. The timing and amount of purchases is based upon market conditions, securities law limitations and other factors. The program may be modified, suspended or discontinued at any time without prior notice. The share repurchase program does not obligate us to acquire any specific number of shares in any period.

During the nine months ended May 31, 2024, we purchased a total of 38 thousand shares for $1.3 million. As of May 31, 2024, the amount remaining for repurchase under the share repurchase program was $45.1 million. During the nine months ended May 31, 2023, we purchased a total of 1.7 million shares for $49.4 million.

 

Cash, Borrowing Availability and Credit Facilities

As of May 31, 2024, we had $271.6 million in Cash and cash equivalents and $333.7 million in available borrowings. The available balance to draw under committed credit facilities includes $223.7 million on the North American credit facility, $39.0 million on the European credit facilities and $71.0 million on the Mexican credit facilities.

Senior secured credit facilities aggregated to $1.4 billion as of May 31, 2024 which consisted of the following components:

Nonrecourse credit facilities

GBX Leasing – As of May 31, 2024, a $550.0 million non-recourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under this facility bear interest at SOFR plus 1.85% plus 0.11% as a SOFR adjustment. Interest rate swap agreements cover approximately 99% of the outstanding balance to swap the floating interest rate to a fixed rate. The warehouse credit facility converts to a term loan in August 2025 and matures in August 2027.

Other credit facilities

North America – As of May 31, 2024, a $600.0 million revolving line of credit, maturing August 2026, secured by substantially all our U.S. assets not otherwise pledged as security for term loans or the warehouse credit facility, existed to provide working capital and interim financing of equipment, principally for our U.S. and Mexican operations. Advances under this North American credit facility bear interest at SOFR plus 1.50% plus 0.10% as a SOFR adjustment or Prime plus 0.50% depending on the type of borrowing. Available borrowings under the credit facility are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios.

Europe – As of May 31, 2024, lines of credit totaling $76.4 million secured by certain of our European assets, with variable rates that range from WIBOR plus 1.10% to WIBOR plus 1.45% and EURIBOR plus 1.90%, were available for working capital needs of our European manufacturing operations. The European lines of credit include $32.5 million which is guaranteed by us. European credit facilities are regularly renewed. Currently, these European credit facilities have maturities that range from July 2024 through November 2025.

Mexico – As of May 31, 2024, our Mexican railcar manufacturing operations had lines of credit totaling $196.0 million for working capital needs, $96.0 of which we and our joint venture partner have each guaranteed 50%. Advances under these facilities bear interest at variable rates that range from SOFR plus 2.22% to SOFR plus 4.25%. The Mexican credit facilities have maturities that range from February 2025 through January 2027.

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Credit facility balances:

(in millions)		May 31, 2024				August 31, 2023
Nonrecourse credit facility balances
GBX Leasing		$	146.0			$	139.9
Other credit facility balances
North America			40.0				—
Europe			37.4				47.2
Mexico			125.0				110.0
Total Revolving notes		$	348.4			$	297.1

 

Outstanding commitments under the North American credit facility included letters of credit which totaled $5.9 million and $4.9 million as of May 31, 2024 and August 31, 2023, respectively.

 

Other Information

The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive of which, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into financing leases; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all our assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of May 31, 2024, we were in compliance with all such restrictive covenants.

 

From time to time, we may seek to repurchase or otherwise retire or exchange securities, including outstanding convertible notes, borrowings and equity securities, and take other steps to reduce our debt, extend the maturities of our debt or otherwise improve our balance sheet. These actions may include open market repurchases, unsolicited or solicited privately negotiated transactions or other retirements, repurchases or exchanges. Such retirements, repurchases or exchanges of one note or security for another note or security (now or hereafter existing), if any, will depend on a number of factors, including, but not limited to, prevailing market conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable. The amounts involved in any such transactions may, individually or in the aggregate, be material and may involve all or a portion of a particular series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other indebtedness which remain outstanding.

 

We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency, we enter into foreign currency forward exchange contracts with established financial institutions to protect the margin on a portion of foreign currency sales in firm backlog.

 

To mitigate the exposure to changes in interest rates, we have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $659.7 million of variable rate debt to fixed rate debt as of May 31, 2024.

 

Given the strong credit standing of the counterparties, no provision has been made for credit loss due to counterparty non-performance.

 

We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing credit facilities and long-term financings, to be sufficient to fund expected debt repayments, working capital needs, planned capital expenditures, additional investments in our unconsolidated affiliates and dividends during the next twelve months.

Off-Balance Sheet Arrangements

We do not currently have off balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our Consolidated Financial Statements.

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Critical Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgment on the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates.

Impairment of long-lived assets - We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed based upon estimated undiscounted cash flows expected to be realized over the remaining useful life of the asset group. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group.

An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, and the determination of the fair value of real and personal property. Estimates of future cash flows are by nature highly uncertain and contemplate factors that may change over time.

Goodwill - We evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amounts of our reporting units exceed their fair value. When we perform a quantitative assessment, we exercise judgment to develop estimates of the fair values of our reporting units based on a weighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimated future cash flows which incorporates forecasted revenues, long-term growth rate, gross margin percentages, operating expenses, and the use of discount rates. Under the market approach, we estimate the fair value based on observed market multiples for comparable businesses. If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit.

We make certain estimates and assumptions to determine our reporting units and whether the fair value of each reporting unit is greater than its respective carrying value. The above highlighted judgments contemplated estimates and effects of macroeconomic trends that are inherently uncertain. Changes in these estimates, which may include the effects of inflation and policy reactions thereto, increases in pricing of materials and components, changes in demand, or potential macroeconomic events may cause future assessment conclusions to differ.

In 2023, we performed a quantitative goodwill impairment test and determined that the estimated fair values of all reporting units with goodwill exceeded their carrying values. We performed a qualitative assessment for our annual goodwill impairment test during the third quarter of 2024 and determined that it was more likely than not that the fair values of all reporting units with goodwill exceeded their carrying values; therefore, we concluded that goodwill was not impaired. For further information, see Note 5 to the Condensed Consolidated Financial Statements.

Income taxes - The asset and liability method is used to account for income taxes. We are required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for each tax jurisdiction to determine the amount of deferred tax assets and liabilities. Deferred income taxes are provided for the temporary effects of differences between assets and liabilities recognized for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized. We recognize a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities.

Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Judgment is required in determining our tax expense and in evaluating our tax positions, as tax laws are complex and subject to different interpretations by taxpayers and government taxing authorities. Our income tax rate is affected by the tax rates that apply to our foreign earnings and could be adversely

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impacted by higher or lower earnings than anticipated in a particular jurisdiction. In addition to local country tax laws and regulations, our income tax rate depends on the extent that our foreign earnings are taxed by the U.S. through provisions such as the global intangible low-taxed income (GILTI) tax and base erosion and anti-abuse tax (BEAT). We review our deferred tax assets and tax positions quarterly and adjust the balances as new information becomes available.

Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for known environmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonably estimated based on currently available information. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures for which reserves are established are made.

Judgments used in determining if a liability is estimable are subjective and based on known facts and our historic experience. If further developments in or resolution of an environmental matter result in facts and circumstances that differ from those assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated or overstated. Due to the uncertain nature of environmental matters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us. For further information regarding our environmental costs, see Note 15 to the Condensed Consolidated Financial Statements.

 

 

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Exchange Risk

 

We have global operations that conduct business in their local currencies as well as other currencies. To mitigate the exposure to transactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protect revenue or margin on a portion of forecasted foreign currency sales and expenses. At May 31, 2024 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros; and the purchase of Mexican Pesos and the sale of U.S. Dollars aggregated to $126.9 million. Because of the variety of currencies in which purchases and sales are transacted and the interaction between currency rates, it is not possible to predict the impact that a movement in a single foreign currency exchange rate would have on future operating results.

In addition to exposure to transaction gains or losses, we are also exposed to foreign currency exchange risk related to the net asset position of our foreign subsidiaries. At May 31, 2024, net assets of foreign subsidiaries aggregated to $155.3 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $15.5 million, or 1.2% of Total equity - Greenbrier. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. Dollar.

Interest Rate Risk

We have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $659.7 million of variable rate debt to fixed rate debt. Notwithstanding these interest rate swap agreements, we are still exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At May 31, 2024, 85% of our outstanding debt had fixed rates and 15% had variable rates. At May 31, 2024, a uniform increase by 10% in variable interest rates would result in approximately $1.4 million of additional annual interest expense.

Item 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management has evaluated, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective as of such date due to the material weakness in internal control over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023.

 

Ongoing Remediation of Previously Identified Material Weakness

 

The Company’s management, under the oversight of the Audit Committee, has designed and implemented corrective actions to remediate the control deficiencies that contributed to the material weakness. These remediation actions included:

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As we continue to evaluate and enhance our internal control over financial reporting, we may determine that additional measures to address the material weaknesses or adjustments to the remediation plan may be required. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control over Financial Reporting

 

Except for the changes noted above, there have been no changes in our internal control over financial reporting during the quarter ended May 31, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

There is hereby incorporated by reference the information disclosed in Note 15 to the Condensed Consolidated Financial Statements, Part I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

This Form 10-Q should be read in conjunction with Part I Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2023. There have been no material changes in the risk factors described in our Annual Report on Form 10-K for the year ended August 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The Board of Directors has authorized the Company to repurchase shares of the Company’s common stock. The share repurchase program has an expiration date of January 31, 2025. The amount remaining for purchase was $45.1 million as of May 31, 2024. There were no share repurchases under this program during the three months ended May 31, 2024.

Item 5. Other Information

On July 2, 2024, the compensation committee of the Board of Directors of the Company adopted The Greenbrier Companies, Inc. Executive Officer Severance Policy.

The policy provides severance benefits to executive officers upon a “qualifying termination” unrelated to a change in control (subject to participant’s execution and, to the extent applicable, non-revocation of a release). The severance benefits are equal to (1) a cash amount equal to a number of months of the executive officer’s base salary; (2) a prorated annual bonus for the year of termination (based on actual achievement of performance goals); (3) a cash amount equal to a number of months of health benefit premiums; and (4) outplacement services not to exceed $12,000. With respect to clauses (1), (3) and (4), the number of applicable months is 24 for the Company’s Chief Executive Officer, 18 for the Company’s Chief Financial Officer, Chief Operations Officer and Business Unit Presidents, and 12 for all other executive officers. For purposes of the policy, a “qualifying termination” means the termination of a participant’s employment by (1) the Company or any successor thereto without “cause” or (2) the participant for “good reason”, each as defined in the policy. The foregoing description of the policy does not purport to be complete and is qualified in its entirety by reference to the full text of the policy, a copy of which will be filed with the Form 10-K for the period ended August 31, 2024.

Trading Plan Arrangements

No other officers or directors, as defined in Rule 16a-1(f), adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Item 408 of Regulation S-K, during the three months ended May 31, 2024.

 

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Item 6. Exhibits

 

3.1		Amended and Restated Bylaws of the Registrant dated April 2, 2024 are incorporated herein by reference to Exhibit 3.1 to the Registrant's Form 10-Q filed April 5, 2024.
10.1*		Transition and Consulting Agreement between The Greenbrier Companies, Inc. and Adrian J. Downes dated April 2, 2024.
10.2*		Employment Agreement between Greenbrier Leasing Company LLC and Michael J. Donfris dated May 8, 2024.
31.1		Certification pursuant to Rule 13a – 14 (a).
32.1		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document.
101.SCH		Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
104		Cover Page Interactive Data File (Formatted as inline XBRL and contained in Exhibit 101).

 

* Management contract or compensatory plan or arrangement

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

			THE GREENBRIER COMPANIES, INC.
Date:	July 8, 2024		By:	/s/ Lorie L. Tekorius
				Lorie L. Tekorius
				Chief Executive Officer
				(Principal Executive Officer and Principal Financial Officer)

 

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