<PAGE>
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, 1996
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
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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)
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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 X
-----
Aggregate market value of the Registrant's Common Stock held by non-affiliates
on October 31, 1996 (based on the closing price of such shares on such date) was
approximately $60,500,000.
The number of shares outstanding of the Registrant's Common Stock on November
15, 1996 was 14,160,000 shares of Common Stock, par value $0.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Registrant's 1996 Annual Report to Stockholders and of Registrant's
Proxy Statement dated November 26, 1996 prepared in connection with the Annual
Meeting of Stockholders to be held on January 14, 1997 are incorporated by
reference into Parts II and III of this Report.
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THE GREENBRIER COMPANIES, INC.
FORM 10-K
TABLE OF CONTENTS
PART I Page
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Item 1. BUSINESS 1
Item 2. PROPERTIES 9
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 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 SCHEDULES, AND REPORTS
ON FORM 8-K 12
SIGNATURES 21
(i)
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PART I.
ITEM 1. BUSINESS
INTRODUCTION
The Greenbrier Companies, Inc. ("Greenbrier" or the "Company") is a leading
supplier of transportation equipment and services to railroad and transportation
industries. The Company's manufacturing segment produces double-stack
intermodal railcars, conventional railcars and marine vessels, and provides rail
services for both intermodal and conventional railcars. In addition to
manufacturing, Greenbrier is engaged in complementary leasing activities
including third-party transportation logistics. Lease fleets of approximately
27,000 railcars and 16,000 domestic containers and intermodal and highway
trailers are owned or managed by the leasing segment. Greenbrier believes both
of the lease fleets are among the largest non-railroad owned fleets in the
United States. The combined average utilization rate of the fleets was 99
percent as of August 31, 1996.
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 and management of surface transportation equipment and related
services, including third-party transportation logistics. A summary of selected
consolidated financial information for these two business segments as well as
domestic and foreign operations is set forth in Note 17 of the Notes to
Consolidated Financial Statements.
INTERMODAL PRODUCTS
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 final destination
without the repeated loading and unloading of the freight required by
traditional shipping methods. A major innovation in intermodal transportation
has been the 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.
DOUBLE-STACK RAILCARS. 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 percent; (iii)
easier terminal handling characteristics; (iv) reduced equipment costs of
approximately 30 percent 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. The Company is the leading manufacturer of double stack
railcars with an estimated cumulative U.S. market share of over 60%. In 1996,
approximately 1,900 double-stack railcars were manufactured and sold by the
Company, which the Company believes represents 100% of total market share during
such period.
1
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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 - The Maxi-Stack is a double-stack railcar that features the
ride-quality and operating efficiency of articulated stack cars and the
versatility for alternating platforms to carry a variety of cargo. The
Maxi-Stack III is a five-platform railcar that features the ability to
carry containers up to 53 feet in length, the longest standard-size
shipping containers presently in use. The Maxi-Stack AP is a three-
platform railcar that is more versatile than other intermodal cars that
carry both trailers and containers because it allows the loading of either
one large over-the-road trailer or two 28-foot trailers. It is also able
to carry double-stack containers on the same platform.
HUSKY-STACK - Husky-Stack is a non-articulated (stand-alone) or draw bar
connected double-stack railcar with the capability of carrying containers
up to 42 percent 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.
AUTOSTACK. Autostack is a proprietary system developed and licensed by the
Company to transport automobiles intermodally in standard domestic or
international shipping containers.
The Autostack system provides improvements over existing specialized automobile
transport equipment at a cost that provides an economic advantage when compared
to existing modes of vehicle transportation. Since the vehicles are transported
in fully-enclosed containers, they are protected from environmental damage,
paint contamination and vandalism in transit. The Autostack system, unlike
conventional multi-level railcars, is used in standard rail, ship and highway
intermodal corridors. The Autostack system reduces the possibility of damaging
the vehicles during loading, providing an advantage compared to conventional
systems which require automobiles to be driven directly onto railcars.
The Autostack hardware, which is currently manufactured by unaffiliated
companies, includes the racks, loaders and rack handling equipment. The racks
are designed so that they can be inserted and transported in most sizes of high
cubic capacity intermodal containers presently in use. Utilizing the loaders,
up to six vehicles are loaded into the racks prior to the racks being placed
into standard intermodal containers. The Autostack racks are collapsible and
can be returned to their point of origin, six racks to one container, thereby
reducing transportation costs when no vehicle back-haul traffic is available and
allowing the five remaining containers to be returned carrying other cargo. In
1996, approximately 108,000 vehicles were transported using Autostack equipment.
CONVENTIONAL RAILCARS
The Company has expanded its presence and production capacity in the
conventional railcar market because of increased demand. Greenbrier, through
its subsidiaries Gunderson, Inc. and TrentonWorks Limited, is the leading
manufacturer of boxcars in North America. A wide variety of 100-ton capacity
boxcars are offered. While primarily used in the forest products industry,
custom built high capacity cars are also being manufactured for special
applications such as automotive parts or canstock movement. In addition to
boxcars, the Company is currently manufacturing high cubic capacity covered
hopper railcars for grain transportation and has orders to be manufactured in
1997 for center partition flat cars for lumber and other building materials and
gondolas for scrap steel services. In 1996, approximately 4,500 conventional
railcars were manufactured and leased or sold.
Other conventional railcar designs such as flat cars and woodchip cars have been
manufactured by the Company. The need for expansion and upgrading of the
railcar manufacturing and refurbishing facilities is continually evaluated in
order to take advantage of increased market opportunities for new railcar
designs.
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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. Refurbishing and repair facilities are located in Portland and
Springfield, Oregon and Cleburne, Texas. 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 shops in
Portland and Pine Bluff, Arkansas and is opening a wheel shop in Tacoma,
Washington in December 1996.
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 with an
expansion and upgrade of the marine facilities, which includes the largest side-
launch ways on the West Coast. The upgraded marine facilities also enhance
steel plate burning and fabrication capacity and provide flexibility for railcar
production. Over the past two years, six ocean-going dump barges were
successfully launched. As of August 31, 1996, construction was underway on a
seventh barge, which is anticipated to be complete in December 1996.
Discussions on several potential new orders are in progress, but in the
meantime, the facility will be utilized for railcar repair and refurbishment
activities.
LEASING AND SERVICES
Greenbrier owns or manages lease fleets of railcars, domestic containers and
intermodal and highway trailers. The lease fleet is 42,922 units, of which
approximately 63 percent is comprised of railcars and 37 percent is comprised of
trailers and containers. Within the lease fleet, 30,944 units are owned and
11,978 units are managed for others on a fee basis. Greenbrier participates in
the operating lease segment of the market in which the aggregate rental payments
over the lease term 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 achieve higher rates of return in
the operating lease segment than in finance leasing and can more effectively
manage the risks typically associated with operating leases due to its ability
to exploit its intermodal expertise and its refurbishing and remarketing
capabilities. The Company also participates in the finance lease segment of the
market. Assets from the owned lease fleet are periodically sold to take
advantage of market conditions, manage risk and maintain liquidity.
Leasing services are provided in three primary equipment categories: intermodal
railcars, conventional railcars, and trailers and domestic containers. Most of
the railcar leases are "full service" leases, whereby Greenbrier is responsible
for maintenance, taxes and administration, while many of the trailer and
container leases require that the lessee be responsible for such costs. The
rail fleet is maintained, in part, through Greenbrier's own facilities and
engineering and technical staff.
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The following table summarizes the lease fleet:
<TABLE>
<CAPTION>
FLEET PROFILE
AS OF AUGUST 31, 1996(1)
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Average
Remaining Average
Owned Managed Total % on Lease Term Age
Units Units Units Lease (Yrs.) (Yrs.)
------- ------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
EQUIPMENT SUMMARY
Railcars
Double-stack 7 6,673 6,680 100.0% 1.9 4.62
Conventional 14,883 4,069 18,952 97.8% 5.5 18.34
------- ------- -------
Total Railcars 14,890 10,742 25,632 98.3% 4.5 14.76
Trailers and Containers 14,475 1,236 15,711 99.4% 2.6 6.67
------- ------- -------
Equipment Available for
Revenue Service 29,365 11,978 41,343 98.7% 3.8 11.69
----- --- -----
Railcar Equipment Held for Sale 1,579 - 1,579
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30,944 11,978 42,922
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LESSEE PROFILE
Class I Railroads 17,698 8,885 26,583 100.0% 4.0 13.10
Non-Class I Railroads 1,154 641 1,795 100.0% 3.0 18.96
Leasing Companies 6,335 1,171 7,506 100.0% 4.7 5.85
Shipping Companies 1,890 1,196 3,086 100.0% 3.3 8.75
Daily Rental 1,822 32 1,854 100.0% 0.0 10.69
Off-Lease 466 53 519 - - 20.02
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TOTAL EQUIPMENT UNITS 29,365 11,978 41,343 98.7% 3.8 11.69
------- ------- ------- ----- --- -----
</TABLE>
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(1) Each platform of an articulated car is treated as a separate car.
A substantial portion of the equipment available for lease has been acquired
through agreements with two parties. In August 1990, Greenbrier entered into an
agreement with Southern Pacific Transportation Company ("Southern Pacific"),
which recently merged with Union Pacific Railroad Company, to purchase,
refurbish and remarket over 10,000 railcars. The railcars are refurbished to
predetermined specifications by Greenbrier or by unaffiliated contract shops
after satisfactory remarketing arrangements are in place. Approximately 9,700
railcars have been refurbished as of August 31, 1996, with the remaining 400
railcars to be refurbished through January 1997.
An agreement was entered into in December 1992 with a subsidiary of Chrysler
Corporation under which Greenbrier formed a limited partnership with an
affiliate of Chrysler to acquire Chrysler's entire fleet of 12,466 intermodal
containers and trailers. The partnership is managed and controlled by
Greenbrier. Greenbrier anticipates acquiring the remaining interest in the
partnership in December 1996.
In 1995, the Company entered the highway trailer rental market expecting to
create new growth opportunities as well as extend the economic life and value of
existing intermodal equipment. Rental operations exist at four branch locations
and utilize approximately 2,500 trailers from the Company's lease fleet.
Despite some progress, market conditions are currently soft in this sector,
limiting growth opportunities in the foreseeable future.
4
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TRANSPORTATION LOGISTICS
In the fourth quarter of 1996, Greenbrier acquired Superior Transportation
Systems, Inc. and the remaining interest in Tolan O'Neal Transportation &
Logistics, Inc. Subsequent to year end, Interamerican Logistics Inc. was
acquired. These transactions expand Greenbrier's third-party transportation
logistics services. Logistics is anticipated to complement current operations
by strengthening relationships with customers in the railroad and shipping
industry and by providing access to Greenbrier's lease fleet. Investments in
personnel, systems and equipment may be necessary, but are not expected to be
material.
RAW MATERIALS AND COMPONENTS
Manufactured products require a supply of raw materials including steel plate
and numerous specialty components such as brakes, wheels and axles.
Approximately 50 percent 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 1996, approximately 57 percent of the Company's domestic requirements for
steel plate were purchased from Oregon Steel Mills, Inc. Approximately 87
percent of the Canadian requirements for steel plate were purchased from Algoma
Steel Inc. No other suppliers accounted for in excess of ten percent of total
purchases in 1996, and the top ten suppliers (including Oregon Steel Mills, Inc.
and Algoma Steel Inc.) accounted for approximately 32 percent of total
purchases. 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.
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 and 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 remarketing services, depending on whether
the customer is buying new equipment or refurbishing existing 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 1996, 1995 and
1994 were $597,000, $1,086,000 and $1,158,000, respectively.
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 Burlington Northern Santa Fe ("Burlington Santa Fe"),
Canadian National, Champion International, First Union Rail, General Electric
Railcar Services, Norfolk Southern Railway Company, TTX Company, and Southern
Pacific. In 1996, sales to the largest customer, First Union Rail, accounted
for 28 percent of total revenues.
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The following table lists the Company's backlog in units and dollars for new
railcars at the dates shown:
August 31,
-----------------------------------------
1996 1995 1994
---- ---- ----
New railcar backlog(1) 2,164 4,601 2,974
Estimated value (in thousands) $123,393 $279,900 $149,170
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(1) Each platform of an articulated car is treated as a separate car.
The backlog as of August 31, 1996 extends into the second quarter of 1997. The
decline in backlog is consistent with the overall decline in industry demand
and is believed to be due to the current pause in the market as a result of the
recent merger activity among the Class I railroads and the record railcar
deliveries that occurred over the past several years. The backlog is based on
customer sale 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.
Autostack services are currently provided under agreements with RailVan
Multimodal, Burlington Santa Fe and Sea-Land Service Inc. The agreements expire
at various dates through 1999. Autostack also provides services to Toyota Motor
Sales USA Inc. on a month-to-month basis.
Leasing customers include Class I Railroads, regional and short line railroads,
other leasing companies, shippers and carriers such as Burlington Santa Fe, The
Kansas City Southern Railway Company, First Union Rail, Southern Pacific and
Transamerica Equipment Leasing Company.
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 the United States and Canada. 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.
In railcar leasing, principal competitors include C.I.T., DJ Joseph, First Union
Rail, GATX Corporation, General Electric Railcar Services and Helm Financial
Corp. In trailer and domestic container leasing, the principal competition
includes Genstar Corporation, Transamerica Leasing Inc., and XTRA Corporation.
In automobile transportation systems, at least one other company has developed a
system which is competitive with Autostack.
PATENTS AND TRADEMARKS
Greenbrier pursues a proactive program for protection of intellectual property
resulting from its research and development efforts. With the acquisition of
Gunderson in 1985, the relevant intellectual property estate formerly employed
by the Marine and Rail Equipment Division of FMC Corporation was acquired.
Since 1985, Greenbrier has obtained patent and trademark protection for
significant intellectual property as it relates to its business. The Company
holds several United States and foreign patents and has several patent
applications pending.
Greenbrier holds the exclusive North American worldwide license to use the
Autostack technology until the later of 2007 or the expiration of the last
Autostack patent, subject to the payment of minimum royalties. The basic
Autostack system is covered by a family of related United States patents and
patent applications. Corresponding foreign patent coverage has been obtained,
or is pending, in Australia, Canada, Europe, Mexico, Japan and South Korea.
6
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ENVIRONMENTAL MATTERS
The Company is subject to federal, state, provincial and local environmental
laws and regulations concerning, among other matters, air emissions, waste water
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
federal, state, provincial and local environmental laws and regulations.
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 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 car builder and component manufacturer, and products sold and leased by the
Company must meet AAR, Transport Canada and FRA standards.
EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company.
ALAN JAMES, 66, has been Chairman of the Board of Directors of Greenbrier since
May 1994. Mr. James has been associated with the Company and its predecessor
companies since 1974.
WILLIAM A. FURMAN, 52, has been President, Chief Executive Officer and a
director of Greenbrier since May 1994. Mr. Furman is also Chief Executive
Officer of Gunderson and Managing Director of TrentonWorks. Mr. Furman has been
associated with the Company and its predecessor companies since 1974. Mr.
Furman serves as a director of Schnitzer Steel Industries, Inc., a public
company engaged in steel recycling and manufacturing.
ROBIN D. BISSON, 42, has been Senior Vice President Marketing and Sales of the
Company since January 1996 and President of Greenbrier Railcar, Inc., a
subsidiary that engages in railcar leasing, since 1991. Mr. Bisson is
responsible for the sale and marketing of all railcars as well as rebuilding and
refurbishment work. Mr. Bisson was Vice President of Greenbrier Railcar, Inc.
from 1987 to 1991 and has been Vice President of Greenbrier Leasing Corporation
since 1987.
LARRY G. BRADY, 57, has been Vice President and Chief Financial Officer of the
Company since March 1994. Mr. Brady joined Greenbrier in 1991 as Senior Vice
President of Greenbrier Leasing Corporation. From 1974 to 1990, he was a
partner with Touche Ross & Co. (which subsequently became Deloitte & Touche
LLP).
A. DANIEL O'NEAL, 60, has been Chairman of Greenbrier Logistics, Inc., a
subsidiary formed in March 1996, since its formation, Chairman of Autostack
Corporation, a subsidiary of the Company, since 1992, a director of Gunderson
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.
MARK J. RITTENBAUM, 39, is Vice President and Treasurer of the Company, a
position he has held since May 1994. Mr. Rittenbaum has been with Greenbrier
from 1985 to 1987 and from 1990 until the present. He has also been Vice
President and Treasurer of Greenbrier Capital Corporation, a subsidiary that
engages in the leasing of trailers and containers, since 1990. From 1987 to
1990, he was Director, Aircraft Finance, for CIS Corporation.
7
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TIMOTHY A. STUCKEY, 46, has been 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, 57, is Executive Vice President and General Counsel of the
Company, a position he has held since May 1994. He is Vice President, Secretary
and a director of both Greenbrier Capital Corporation and Gunderson. His tenure
at the Company dates from its formation in 1981.
L. CLARK WOOD, 54, has been President of Gunderson since 1990 and Chief
Executive Officer of TrentonWorks since June 1995. Mr. Wood previously was Vice
President and Director of Railcar Sales at Trinity Industries, Inc., a railroad
freight car manufacturer, a position he held since 1985.
Executive officers are elected by the Board of Directors. There are no
family relationships between any of the executive officers of the Company.
Alan James, Chairman of the Board of Directors, and Mr. Furman have entered
into a Stockholders' Agreement pursuant to which they have agreed to vote as
directors to elect Mr. Furman as President and Chief Executive Officer of the
Company and Mr. James as Chairman and each to vote for the other in electing
directors of the Company.
EMPLOYEES
As of August 31, 1996, Greenbrier had 2,803 full-time employees, consisting
of 2,507 employees engaged in railcar and marine manufacturing, and railcar
services, 19 employees engaged in marketing, 160 employees engaged in
logistics services and 117 administrative employees. A total of 871
employees at the manufacturing facility in Trenton, Nova Scotia, Canada are
covered by collective bargaining agreements. A stock incentive plan and a
stock purchase plan are available for all 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 good.
FORWARD-LOOKING STATEMENTS
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. 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.
The following are among the factors that could cause actual results to differ
materially from the forward-looking statements: business conditions and growth
in the surface transportation industry and general economies, both domestic and
international; lower than expected customer orders, delays in receipt of orders
or cancellation of orders; transportation labor disputes which might disrupt the
flow of cargo; competitive factors, including increased competition, new product
offerings by competitors and price pressures; the availability of raw materials
at reasonable prices; changes in product mix and the mix between manufacturing
and leasing and services revenue; recoverability of investments in new ventures;
and production difficulties and product delivery delays in the future as a
result of, among other matters, changing process technologies and increasing
production. Any forward-looking statements should be considered in light of
these factors.
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ITEM 2. PROPERTIES
The Company's railcar manufacturing, refurbishment and repair facilities are
located in Portland and Springfield, Oregon; Cleburne, Texas; Pine Bluff,
Arkansas; Trenton, Nova Scotia, Canada; and Tacoma, Washington.
The 75-acre Gunderson railcar and marine manufacturing plant located in
Portland, Oregon is owned by the Company. This facility includes
approximately 774,000 square feet of covered manufacturing space, a wheel
mounting shop and a 750-foot side-launch ways for launching ocean-going
vessels. The manufacturing facility in Trenton, Nova Scotia is also owned by
the Company and covers approximately 100 acres with 414,000 square feet of
manufacturing space as well as a forge shop. The Company leases, with an
option to purchase, a railcar repair facility in Cleburne, Texas occupying
approximately 70 acres. The lease expires in November 2002. The
Springfield, Oregon railcar repair facility occupies approximately 5.4 acres
under a lease expiring in 1998, which may be extended until 2004. A small
wheel shop operating in approximately 20,000 square feet of manufacturing
space is leased in Pine Bluff, Arkansas through 1998. The Tacoma, Washington
wheel shop covers approximately 4.6 acres under lease through 2003, which may
be extended, at various intervals, through 2071. Greenbrier's principal
executive offices, including activities related to railcar marketing and
leasing and Autostack, are located in Lake Oswego, Oregon in 23,000 square
feet of leased space. Subsidiaries of the Company occupy leased offices in
various locations throughout the U.S.
Greenbrier believes that its facilities are in good condition and that the
facilities, together with anticipated capital improvements and additions, are
adequate for its operating needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company has been involved in litigation relating to
claims arising out of its operations in the regular course of business. As of
the date of this Annual Report on Form 10-K, the Company is not a party to any
legal proceedings, the adverse outcome of which would, in management's opinion,
have a material adverse effect on the Company's results of operations or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE>
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 40 of the 1996 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 18 of the Company's 1996 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 19 to 23 of the 1996 Annual Report to Stockholders, which
section is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and report of independent
auditors set forth in the 1996 Annual Report to Stockholders are incorporated
herein by reference: Consolidated Balance Sheets as of August 31, 1996 and 1995,
and the Consolidated Statements of Earnings, Consolidated Statements of
Stockholders' Equity and Consolidated Statements of Cash Flows for the years
ended August 31, 1996, 1995 and 1994, on pages 25 to 28, the Notes to
Consolidated Financial Statements on pages 29 to 37, the report of independent
auditors thereon on page 24 and the section entitled Quarterly Results of
Operations-Unaudited on page 38.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
10
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
There is hereby incorporated by reference the information under the caption
"Election of Directors" 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, 1996, 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, 1996.
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, 1996.
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, 1996.
11
<PAGE>
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 November 7, 1996, appearing on pages 24 to 37 of
the 1996 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 1996 Annual Report to Stockholders is not to be deemed filed as part of
this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Annual Report
Page No.
--------
<S> <C>
(a) (1) Financial Statements of the Company - Index 17
Independent Auditors' Report 24
Consolidated Balance Sheets as of August 31, 1996 and 1995 25
Consolidated Statements of Earnings for the years ended
August 31, 1996, 1995 and 1994 26
Consolidated Statements of Stockholders' Equity for the years
ended August 31, 1996, 1995 and 1994 27
Consolidated Statements of Cash Flows for the years ended
August 31, 1996, 1995 and 1994 28
Notes to Consolidated Financial Statements 29
This Filing
Page No.
--------
(2) The following financial statement schedules should be read in
conjunction with the Consolidated Financial Statements in the 1996
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 17
Schedule I - Condensed Financial Information of Registrant 18
Schedule II - Valuation and Qualifying Accounts 20
</TABLE>
(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.
12
<PAGE>
10.1. 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.
10.2.* 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.
10.3.* 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.
10.4. 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.
10.5. Remarketing 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.
10.6. Amendment to Remarketing 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.
10.7. Amendment No. 2 to Remarketing 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.
10.8. Amendment No. 3 to Remarketing 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.
10.9. 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.
10.10. 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
<PAGE>
10.11. 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.
10.12. 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.
10.13. 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. Second Amended and Restated Credit Agreement by and among
Greenbrier Leasing Corporation, Greenbrier Capital Corporation,
Greenbrier Railcar, Inc., Autostack Corporation, The Bank of
California, N.A. and West One Bank, Idaho, N.A., dated as of
April 30, 1994 is incorporated herein by reference to Exhibit
10.14 to Registrant's Registration Statement No. 33-78852, dated
July 11, 1994.
10.15. $10,000,000 Term Loan and $20,000,000 Revolving Loan Agreement by
and among Gunderson, Inc. and United States National Bank of
Oregon and Bank of America Oregon, dated as of January 31, 1994
is incorporated herein by reference to Exhibit 10.15 to
Registrant's Registration Statement No. 33-78852, dated July 11,
1994.
10.16. Asset Purchase Agreement among Chrysler Rail Transportation
Corporation, Greenbrier Transportation Limited Partnership and
Greenbrier Capital Corporation dated as of December 18, 1992 is
incorporated herein by reference to Exhibit 10.16 to Registrant's
Registration Statement No. 33-78852, dated July 11, 1994.
10.17. Autostack Partners Limited Partnership Agreement among Autostack
Corporation, MBK Rail Capital, Inc., Mitsui Nevitt Capital
Corporation effective August 30, 1993 is incorporated herein by
reference to Exhibit 10.17 to Registrant's Registration Statement
No. 33-78852, dated July 11, 1994.
10.18. 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.
10.19. Exclusive License Agreement dated as of December 24, 1987 between
G&G Intellectual Properties, Inc., and Greenbrier Intermodal,
Inc. is incorporated herein by reference to Exhibit 10.19 to
Registrant's Registration Statement No. 33-78852, dated July 11,
1994.
10.20. Manufacturing Agreement dated as of December 24, 1987 between
Greenbrier Intermodal, Inc. and CTNR. J.V., Inc. is incorporated
herein by reference to Exhibit 10.20 to Registrant's Registration
Statement No. 33-78852, dated July 11, 1994.
14
<PAGE>
10.22. Note Agreement dated as of May 31, 1994 among Greenbrier Leasing
Corporation, Greenbrier Railcar, Inc. and The Prudential
Insurance Company of America is incorporated herein by reference
to Exhibit 10.22 to Registrant's Registration Statement No. 33-
78852, dated July 11, 1994.
10.23.* 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.
10.24. 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.
10.25. Asset Purchase Agreement dated as of February 2, 1995 among
TrentonWorks Inc., 2361025 Nova Scotia Limited (which later
changed its name to TrentonWorks Limited), 2196203 Nova Scotia
Inc., and The Greenbrier Companies, Inc. is incorporated herein
by reference to Exhibit 10.25 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1995.
10.26. Stock Purchase and Shareholders' Agreement dated as of March 8,
1995 among The Greenbrier Companies, Inc., Greenbrier Leasing
Corporation, Plunkett Investments Ltd., 2441001 Nova Scotia
Limited, and 2361025 Nova Scotia Limited is incorporated herein
by reference to Exhibit 10.26 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1995.
10.27. Loan Agreement dated as of March 9, 1995 between 2361025 Nova
Scotia Limited and Canadian Imperial Bank of Commerce is
incorporated herein by reference to Exhibit 10.27 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1995.
10.28. Agreement dated as of March 9, 1995 between Her Majesty the Queen
in Right of the Province of Nova Scotia and 2361025 Nova Scotia
Limited is incorporated herein by reference to Exhibit 10.28 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1995.
10.29. Covenant Agreement dated as of March 9, 1995 among Her Majesty
the Queen in Right of the Province of Nova Scotia as Represented
by the Minister Responsible for the Nova Scotia Economic Renewal
Agency and 2361025 Nova Scotia Limited and 2441001 Nova Scotia
Limited is incorporated herein by reference to Exhibit 10.29 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
May 31, 1995.
10.30. Amending Agreement dated as of March 9, 1995 among TrentonWorks
Inc. 2361025 Nova Scotia Limited, 2196203 Nova Scotia Inc., and
The Greenbrier Companies, Inc. is incorporated herein by
reference to Exhibit 10.30 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1995.
15
<PAGE>
10.31. First Amended and Restated $10,000,000 Term Loan and $30,000,000
Revolving Loan Agreement dated as of May 31, 1995 among
Gunderson, Inc., United States National Bank of Oregon and Bank
of America Oregon is incorporated herein by reference to Exhibit
10.31 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1995.
10.32.* 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.
10.33 Stock Purchase Agreement between and among Greenbrier Logistics,
Inc. and A. Daniel O'Neal dated as of June 28, 1996 is
incorporated herein by reference to Exhibit 10.32 to Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 31, 1996.
10.34* Employment Agreement dated June 1, 1996 between Greenbrier
Logistics, Inc. and A. Daniel O'Neal Jr. is incorporated herein
by reference to Exhibit 10.33 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1996.
13. 1996 Annual Report
21.1. List of the subsidiaries of the Registrant
23 Consent of Deloitte & Touche LLP, independent auditor
27. Financial Data Schedule
- -------------
* Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K
None.
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
The Greenbrier Companies, Inc.
We have audited the financial statements of The Greenbrier Companies, Inc. and
Subsidiaries as of August 31, 1996 and 1995, and for each of the three years in
the period ended August 31, 1996, and have issued our report thereon dated
November 7, 1996; such financial statements and report are included in your 1996
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of The Greenbrier
Companies, Inc. and Subsidiaries, listed in Item 14. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
Deloitte & Touche LLP
Portland, Oregon
November 7, 1996
<PAGE>
SCHEDULE I
THE GREENBRIER COMPANIES, INC.
CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
(In thousands)
BALANCE SHEETS
August 31,
------------------------
1996 1995
--------- ---------
ASSETS
Cash and cash equivalents $ 123 $ 529
Accounts and notes receivable from affiliates 26,717 37,308
Investment in subsidiaries 87,024 59,946
Prepaid expenses and other 1,327 1,247
--------- ---------
$ 115,191 $ 99,030
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 3,455 $ 1,922
Deferred income taxes - 290
Stockholders' equity 111,736 96,818
--------- ---------
$ 115,191 $ 99,030
--------- ---------
--------- ---------
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Year Ended August 31,
---------------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Interest and other income $ 2,624 $ 3,402 $ 406
Expenses
Selling and administrative 5,325 4,073 698
Interest 37 18 79
--------- --------- ---------
5,362 4,091 777
--------- --------- ---------
Loss before income tax benefit and equity
in earnings of subsidiaries (2,738) (689) (371)
Income tax benefit 1,153 327 243
--------- --------- ---------
Loss before equity in earnings of subsidiaries (1,585) (362) (128)
Equity in earnings of subsidiaries 19,860 17,027 10,905
--------- --------- ---------
Net earnings $ 18,275 $ 16,665 $ 10,777
--------- --------- ---------
--------- --------- ---------
</TABLE>
18
<PAGE>
SCHEDULE I (CONTINUED)
THE GREENBRIER COMPANIES, INC.
CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
(In thousands)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Year Ended August 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 18,275 $ 16,665 $ 10,777
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Deferred income taxes (679) (2,260) 2,122
Equity in earnings of subsidiary (19,860) (17,027) (10,905)
Other 185 238 -
Decrease (increase) in assets:
Accounts and notes receivable 10,591 (28,211) (6,914)
Prepaid expenses and other 309 (648) (599)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 1,533 (4,050) 5,972
---------- ---------- ----------
Net cash provided by (used in) operating activities 10,354 (35,293) 453
Cash flows from investing activities:
Investment in subsidiary (7,472) (2,119) -
Dividends (3,399) (3,399) -
Proceeds from subsidiary redemption of preferred stock 111 104 101
Special dividend to founding stockholders - - (6,900)
Net proceeds from initial public offering - - 48,261
---------- ---------- ----------
Net cash provided by (used in) investing activities (10,760) (5,414) 41,462
Cash flows from financing activities:
Repayment of borrowings - - (679)
---------- ---------- ----------
Net cash used in financing activities - - (679)
Increase (decrease) in cash (406) (40,707) 41,236
Cash and cash equivalents:
Beginning of year 529 41,236 -
---------- ---------- ----------
End of year $ 123 $ 529 $ 41,236
---------- ---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 37 $ 18 $ 79
</TABLE>
19
<PAGE>
SCHEDULE II
THE GREENBRIER COMPANIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions
----------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
of Period Expenses Accounts(1) Deductions of Period
---------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended August 31, 1996:
Maintenance Reserves $ 22,134 $ 10,526 $ 7,705 $ (14,087) $ 26,278
Warranty Reserves 2,242 1,755 - (597) 3,400
Inventory Reserves 1,428 458 - (345) 1,541
Allowance for Uncollectible Accounts 337 162 106 (10) 595
---------- ---------- ----------- ---------- ---------
Total $ 26,141 $ 12,901 $ 7,811 $ (15,039) $ 31,814
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Year ended August 31, 1995:
Maintenance Reserves $ 13,716 $ 5,400 $ 12,207 $ (9,189) $ 22,134
Warranty Reserves 2,193 410 - (361) 2,242
Inventory Reserves 1,180 339 83 (174) 1,428
Allowance for Uncollectible Accounts 348 60 37 (108) 337
Other 85 - - (85) -
--------- --------- --------- --------- ---------
Total $ 17,522 $ 6,209 $ 12,327 $ (9,917) $ 26,141
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Year ended August 31, 1994:
Maintenance Reserves $ 8,496 $ 4,619 $ 7,313 $ (6,712) $ 13,716
Warranty Reserves 857 1,480 - (144) 2,193
Inventory Reserves 1,081 484 (7) (378) 1,180
Allowance for Uncollectible Accounts 270 92 - (14) 348
Other 692 - - (607) 85
--------- --------- --------- --------- ---------
Total $ 11,396 $ 6,675 $ 7,306 $ (7,855) $ 17,522
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(1) Additions charged to other accounts are primarily executory costs included
in the investment in direct finance leases and amounts received under
maintenance agreements.
20
<PAGE>
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 25, 1996 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 25, 1996
- ------------------------------
Alan James, Chairman
/s/ William A. Furman November 25, 1996
- ------------------------------
William A. Furman, President and
Chief Executive Officer, Director
/s/ Victor G. Atiyeh November 25, 1996
- ------------------------------
Victor G. Atiyeh, Director
/s/ Peter K. Nevitt November 25, 1996
- ------------------------------
Peter K. Nevitt, Director
/s/ A. Daniel O'Neal November 25, 1996
- ------------------------------
A. Daniel O'Neal, Director
/s/ C. Bruce Ward November 25, 1996
- ------------------------------
C. Bruce Ward, Director
/s/ Benjamin R. Whiteley November 25, 1996
- ------------------------------
Benjamin R. Whiteley, Director
/s/ Larry G. Brady November 25, 1996
- ------------------------------
Larry G. Brady, Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
21
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL INFORMATION
YEARS ENDED AUGUST 31
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994 1993 1992
---------------------------------------------------------------------------
STATEMENT OF EARNINGS DATA
<S> <C> <C> <C> <C> <C>
Revenues:
Manufacturing $ 421,456 $ 295,216 $ 234,439 $ 194,501 $ 164,237
Leasing and services 108,554 92,510 87,250 69,810 39,714
---------------------------------------------------------------------------
$ 530,010 $ 387,726 $ 321,689 $ 264,311 $ 203,951
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Earnings before income tax expense and
extraordinary charge:
Manufacturing $ 23,929 $ 18,502 $ 17,093 $ 13,548 $ 13,281
Leasing and services 14,430 16,705 7,115 4,453 975
Corporate (6,996) (5,426) (4,766) (3,722) (2,672)
---------------------------------------------------------------------------
$ 31,363 $ 29,781 $ 19,442 $ 14,279 $ 11,584
---------------------------------------------------------------------------
Net earnings $ 18,275 $ 16,665 $ 10,777(1) $ 8,219 $ 6,482
---------------------------------------------------------------------------
Earnings per share before extraordinary charge $ 1.29 $ 1.18 $ 1.02 $ 0.78 $ 0.61
Extraordinary charge -- -- (.04) -- --
---------------------------------------------------------------------------
Net earnings per share $ 1.29 $ 1.18 $ 0.98 $ 0.78 $ 0.61
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Weighted average shares outstanding 14,160 14,160 11,049 10,576 10,576
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Cash dividends paid per share $ 0.24 $ 0.24 $ -- $ -- $ --
---------------------------------------------------------------------------
BALANCE SHEET DATA
Assets:
Manufacturing $ 182,426 $ 154,768 $ 80,139 $ 58,184 $ 49,908
Leasing and services 433,062 377,621 391,770 323,149 166,810
Notes payable:
Manufacturing $ 13,014 $ 13,512 $ 13,684 $ 14,326 $ 6,702
Leasing and services 202,211 176,276 202,567 163,074 74,089
Subordinated debt $ 44,554 $ 37,762 $ 34,142 $ 34,698 $ 30,618
Minority interest 38,154 38,040 28,823 28,368 298
Stockholders' equity 111,736 96,818 82,786 27,205 19,231
---------------------------------------------------------------------------
Capital base $ 194,444 $ 172,620 $ 145,751 $ 90,271 $ 50,147
---------------------------------------------------------------------------
---------------------------------------------------------------------------
</TABLE>
(1) Includes $500 extraordinary charge for debt prepayment penalties.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
OVERVIEW
Greenbrier currently operates in two primary business segments: the manufacture
of railcars and marine vessels and the refurbishment and repair of railcars; and
the leasing and management of surface transportation equipment and related
services, including third-party transportation logistics. The two business
segments are operationally integrated. The manufacturing operations produce
double-stack intermodal railcars, conventional railcars and marine vessels and
perform refurbishment and maintenance activities, a portion of which is for
railcar leasing operations. The leasing and services operations undertake most
of the sales and marketing activities for the manufacturing operations. New
product development is also conducted on an integrated basis.
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. Revenues do not
include sales of new railcars to, or refurbishment services performed for, the
leasing operations since intercompany transactions are eliminated in preparing
the consolidated financial statements. The margin generated from such
refurbishment or sales activity is realized by the leasing operations over the
term of the related lease or upon sale of the equipment.
Growth in the intermodal transportation market has declined compared to the
double-digit gains achieved over the past few years as the industry absorbs
recent equipment additions. While the mergers among the Class I railroads have
also been a major factor in the transportation industry in 1996, the spin-off of
unproductive or duplicate rail lines to short-line railroads may open new
markets for growth, and the long-term prospects are expected to be positive. In
addition, there is a growing trend among railroads towards outsourcing
traditional functions such as maintenance and refurbishment activities that are
not central to the business of hauling freight. Greenbrier hopes to take
advantage of this trend toward outsourcing and is actively seeking additional
repair and refurbishment contracts.
TRANSPORTATION LOGISTICS. In the fourth quarter of 1996, Greenbrier acquired
Superior Transportation Systems, Inc. and the remaining interest in Tolan O'Neal
Transportation & Logistics, Inc. Subsequent to year end, Interamerican Logistics
Inc. was acquired. These transactions expand Greenbrier's third-party
transportation logistics services. Anticipated synergies with the existing
manufacturing and leasing businesses include building stronger relationships
with customers in the railroad and shipping community and providing access to
Greenbrier's asset base in railcars, trailers and containers. Logistics services
have not had a significant impact on results of operations and are not expected
to contribute to earnings until the acquired entities have completely integrated
their operations.
MARINE VESSEL FABRICATION. In 1995, Greenbrier re-entered the marine vessel
market with an expansion and upgrade of its marine facilities, which includes
the largest side-launch ways on the West Coast. The upgraded marine facilities
also enhance steel plate burning and fabrication capacity and provide
flexibility for railcar production. Five ocean-going dump barges have been
completed and delivered to a West Coast marine construction company and
construction is underway on the sixth barge, which will be completed in
December. Discussions on several potential new orders are in progress, but in
the meantime, attention will turn to railcar repair and refurbishment
activities. The marine business has not had a significant impact on results of
operations.
HIGHWAY RENTAL. During 1995, Greenbrier entered the highway trailer rental
market expecting to create new growth opportunities as well as to extend the
economic life and value of existing intermodal equipment. Rental operations
exist at four branch locations and utilize 2,500 trailers from Greenbrier's
lease fleet. Despite some progress, market conditions are currently soft in this
area, limiting growth opportunities in the foreseeable future. Management is
evaluating this business for opportunities to improve financial results.
<PAGE>
REFURBISHING AND REMARKETING PROGRAMS. In August 1990, an extended remarketing
agreement (the "Golden West Service Program") was entered into with Southern
Pacific Transportation Company ("Southern Pacific"), which recently merged with
Union Pacific Railroad Company, to purchase, refurbish and remarket over 10,000
railcars. As of August 31, 1996, approximately 9,700 railcars had been
refurbished and placed in lease service, principally under ten-year finance
leases with Southern Pacific. The remaining railcars will be refurbished through
January 1997 and will also be placed under ten-year leases. Subject to certain
conditions, Southern Pacific receives a percentage of defined operating earnings
generated from this program. Such amounts are included in leasing and services
expense in the consolidated statements of earnings, and amounts accrued, but not
yet paid, are included as deferred participation in the consolidated balance
sheets. These amounts do not accrue interest, and significant payments do not
begin until 2000.
AUTOSTACK SYSTEM DEVELOPMENT. Autostack was commercially introduced in August
1992 as a patented system to transport automobiles via rail, ocean and highway
in standard domestic or international intermodal shipping containers. Vehicle
transportation services are currently provided under agreements with shippers or
manufacturers whereby a fee is earned for each vehicle transported using
Autostack equipment. Vehicle transportation fees are included in leasing and
services revenues in the consolidated statements of earnings. In August 1993,
Mitsui & Co., Ltd. ("Mitsui") purchased an equity interest in a limited
partnership formed for the purpose of acquiring Autostack equipment. Mitsui's
investment and share of earnings are treated as minority interest in the
consolidated financial statements. The Autostack system transported 108,000
vehicles in 1996 and 141,000 vehicles in 1995. Expectations for Autostack are
tempered by the lack of market acceptance for this product.
RESULTS OF OPERATIONS
The following table sets forth information regarding costs and expenses,
expressed as a percentage of the associated manufacturing or leasing and
services revenue.
YEARS ENDED AUGUST 31 1996 1995 1994
---------------------------------
Manufacturing:
Sales 100.0% 100.0% 100.0%
Cost of sales 89.9 88.7 87.0
Selling and administrative expense 3.6 4.5 4.7
Interest expense 0.8 0.9 1.0
Minority interest -- (0.4) --
Earnings before income taxes 5.7 6.3 7.3
Leasing and services:
Revenues 100.0% 100.0% 100.0%
Operating expense 48.0 41.2 48.8
Selling and administrative expense 15.4 13.0 13.7
Interest expense 20.7 24.2 26.3
Minority interest 2.6 3.5 3.0
Earnings before income taxes 13.3 18.1 8.2
Corporate expenses as a percentage of total
revenue 1.3% 1.4% 1.5%
Income taxes as a percentage of pre-tax earnings 41.7% 44.0% 42.0%
Net earnings as a percentage of total revenue 3.4% 4.3% 3.4%
<PAGE>
REVENUES
Manufacturing revenues increased $126 million, or 43%, from 1995 to 1996 and $61
million, or 26%, from 1994 to 1995. Canadian operations at TrentonWorks
contributed the majority of the increase in 1996 due to an 85% increase in
railcar deliveries and a product mix characterized by higher unit sales value.
Revenue from U.S. operations decreased slightly in 1996 due to a product mix
characterized by higher unit sales value on fewer railcars delivered. The 1995
increase was primarily a result of the addition of TrentonWorks during the third
quarter of 1995 and the larger number of railcars delivered, even though the
product mix included more railcars with a relatively lower sales value than in
the prior period. New railcar deliveries were 6,416 in 1996, 5,061 in 1995 and
4,416 in 1994. As of August 31, 1996, the firm order backlog of new railcars for
sale or lease amounted to approximately 2,200 units, with an estimated sales
value of $123 million. Backlog has declined compared to the near record level at
August 31, 1995. The decline in backlog is consistent with the overall decline
in industry demand and is believed to be due to the current pause in the market
as a result of the recent merger activity among Class I railroads and the record
railcar deliveries that occurred over the past several years.
Leasing and services revenue increased $16 million, or 17%, from 1995 to 1996
and $5 million, or 6%, from 1994 to 1995. Increased revenue in 1996 resulted
from the recently expanded third-party transportation logistics services and
additional railcars placed in lease service, offset by decreased revenue from
automobile transportation services as a result of the lower volume of
automobiles transported. The 1995 period also benefited from an increased number
of railcars under lease as well as from increased vehicle transportation volume.
Pre-tax income realized on disposition of leased equipment amounted to $4.7
million during 1996, compared to $4.5 million in 1995 and $2.6 million in 1994.
Assets from Greenbrier's lease fleet are sold in order to take advantage of
market conditions, manage risk and maintain liquidity.
COST OF SALES AND EXPENSE
The factors influencing cost of sales 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. The gross
margin percentage in 1996 declined slightly from that achieved in 1995. Margins
generated from both domestic and Canadian operations improved in the current
year; however, increased production levels at the Canadian facility, which
operated at lower margins, resulted in the overall decline. Excluding the effect
of the Canadian operation, which suspended production temporarily during May and
June of 1995, the gross margin percentage achieved in 1995 was consistent with
that achieved in 1994.
Leasing and services operating expense as a percentage of revenue increased to
48% in 1996 compared to 41% in 1995. This increase primarily resulted from the
inclusion of third-party transportation logistics, lower automobile
transportation volume generating lower revenue compared to relatively fixed
costs and start-up utilization of the highway trailer rental operation, offset
by a restructuring of certain lease participation costs. Operating expense as a
percentage of revenue decreased in 1995 compared to 1994. This reduction was
primarily a result of improved contribution from automobile transportation, a
reduction in operating and participation costs associated with the sale of lease
equipment and an increase in the number of units under finance leases.
As a percentage of revenue, total selling and administrative expense declined in
1996 compared to 1995 and 1994. The achievement of certain economies of
utilization in manufacturing activities were offset by increased leasing and
services costs associated with the highway trailer rental operations.
The increase in manufacturing interest expense in 1996 related primarily to
working capital borrowings associated with the Canadian operation and to
increased production and inventory levels. The slight increase in leasing and
services interest expense resulted from cur-
<PAGE>
rent year borrowings offset somewhat by normal paydowns of term debt. Interest
expense remained fairly constant in 1995 as compared to 1994 despite the
increased size of the lease fleet, as the proceeds from the initial public
offering of common stock as well as operating cash flow were used to acquire and
refurbish railcars instead of obtaining third-party debt.
Manufacturing minority interest activity relates to the results of the Canadian
operation, which improved in 1996 compared to 1995. The fluctuation in leasing
and services minority interest relates to the minority investors' share of
certain operating earnings from automobile transportation. Earnings from
automobile transportation were reduced in 1996 compared to 1995 and increased in
1995 as compared to 1994.
The 1996 income tax provision represents an effective tax rate of 42% on U.S.
operations, which is consistent with 1995 and 1994. The Canadian operation,
which is not included in the U.S. consolidated tax return, previously generated
operating loss carryforwards, which offset current period earnings. This
resulted in consolidated income taxes as a percentage of pre-tax earnings being
less than 42% in 1996. In 1995, no tax benefit was recognized for the losses
incurred by Canadian operations.
LIQUIDITY AND CAPITAL RESOURCES
Greenbrier's growth has been financed through cash generated from operations,
borrowings from banks and other financial institutions, subordinated debt,
minority investments and proceeds from an initial public offering of the
company's common stock. The Golden West Service Program, Autostack operations
and acquisitions have generally been financed using subordinated debt and
minority investments, which often serve as the capital base to secure senior
term debt. Greenbrier anticipates acquiring a minority investor's interest in a
consolidated subsidiary for $16 million, utilizing operating cash flow and
available lines of credit.
Cash provided by operations totaled $35 million in 1996, compared to $16 million
in 1995 and $33 million in 1994. The fluctuation in cash from operations in 1996
is primarily due to the decrease in inventory as a result of increased railcar
deliveries, offset by purchases of materials required for the construction of
marine barges and increased accounts receivable related to the timing of certain
equipment sales in 1996. Cash provided by operations in 1995 was less than 1994
due to the increase in inventory which resulted from the acquisition of
TrentonWorks, purchase of components which had been anticipated to be in short
supply and material required for the barge contracts. Inventory levels at
TrentonWorks as of August 31, 1995 were higher than anticipated due to the
temporary suspension of production.
Existing credit facilities aggregate $101 million. A $43 million revolving
credit line is available through March 1997, which provides working capital and
interim financing of equipment for leasing and services operations. Borrowings
outstanding under the revolving credit line were $14.5 million as of August 31,
1996. A $30 million operating line for working capital and a $10 million
five-year term loan facility for certain manufacturing capital expenditures are
available through February 1999 and December 1997, respectively, for U.S.
manufacturing operations. Borrowings outstanding under the operating line were
$1.6 million as of August 31, 1996. There were no borrowings outstanding under
the term facility as of August 31, 1996. An $18 million (at the August 31, 1996
exchange rate) operating line is available through March 1997 for working
capital and certain capital expenditures for Canadian operations. Borrowings
outstanding under this line as of August 31, 1996 were $11.7 million. The
weighted average interest rate on amounts outstanding with respect to these
credit facilities was 8.3% for the year ended August 31, 1996.
In June 1995, a private placement of $67 million ten-year limited recourse
senior secured debt was completed to finance the purchase and refurbishment of
certain railcars. The facility is available through December 1996. The debt
bears interest at Libor plus 1.62%, as defined in the agreement until the
facility is fully utilized at which time the loan will convert to a fixed
interest rate ranging from U.S. Treasuries plus 1.75% to 2.10% per annum.
Principal will be repaid over the remaining term of the leases underlying the
railcars, which are used as collateral. Unused funds available under this
agreement, totaling $21 million as of August 31, 1996, are expected to be
utilized by December 1996.
<PAGE>
Capital expenditures totaled $129 million, $91 million and $73 million in 1996,
1995 and 1994. Of these capital expenditures, approximately $122 million, $83
million and $65 million in 1996, 1995 and 1994 were attributable to leasing and
services operations. Significant leasing and services capital expenditure
programs included additions to the lease railcar fleet under the Golden West
Service Program and various additions to the lease fleet related to other
equipment purchases, some of which were syndicated. Capital expenditures for
leasing and services operations in 1997 are expected to be approximately $96
million. Such expenditures are expected to include additions to the lease fleet
under the Golden West Service Program and other lease fleet additions.
Approximately $7 million of the capital expenditures for 1996 and $8 million for
each of 1995 and 1994 were attributable to manufacturing operations. Capital
expenditure programs included new and upgraded manufacturing plant and equipment
to improve efficiencies, increase capacity and expand and upgrade marine
facilities. Capital expenditures for manufacturing additions are expected to be
approximately $8 million in 1997 and will include plant improvements and
equipment acquisitions to further increase production and improve capacity and
efficiency.
Operations in Canada give rise to market risks from changes in foreign currency
exchange rates. To minimize these risks, forward exchange contracts are
utilized. As of August 31, 1996, forward exchange contracts outstanding for the
purchase of Canadian dollars were $16 million and for the purchase of U.S.
dollars were $7 million, maturing at various dates through November 1996.
Realized and unrealized gains and losses from such off-balance sheet contracts
are deferred and recognized in income concurrent with the hedged transaction.
Dividends of $.06 per share have been paid quarterly beginning in 1995. The next
quarterly dividend of $.06 per share was declared in November 1996, to be paid
in December. During 1994, a special one-time dividend of $6.9 million was paid
to the founding stockholders, which was used in part to repay advances from the
company. Future dividends are dependent upon earnings, capital requirements and
financial condition.
Certain loan covenants restrict the transfer of funds from the subsidiaries to
the parent company in the form of cash dividends, loans, or advances. The
restricted net assets of subsidiaries amounted to $32 million as of August 31,
1996. Consolidated retained earnings at August 31, 1996 were not restricted as
to the payment of dividends.
Management expects existing funds and cash generated from operations, together
with borrowings under existing credit facilities, will be sufficient to fund
dividends, working capital needs, planned capital expenditures and expected debt
repayments for the coming year. Management anticipates long-term financing will
be required and will continue to be available for the purchase of equipment to
expand Greenbrier's lease fleet.
This document includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, including, without limitation,
statements as to expectations, beliefs and future financial performance that are
based on current expectations and are subject to a number of risks and
uncertainties. Actual results or outcomes could differ materially from current
expectations due to a number of factors, including general political, regulatory
or economic conditions; competitive factors and pricing pressures; shifts in
market demand; the performance and needs of industries served by Greenbrier;
actual future costs of material and operating expenses such as steel and
employee wages; the financial failure of significant customers; a delay or
failure of new acquisitions or products to compete successfully; as well as the
risks, uncertainties and other factors described from time to time in
Greenbrier's SEC filings and reports.
<PAGE>
- --------------------------------------------------------------------------------
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 contents. 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 generally
accepted accounting principles.
The company maintains a system of internal accounting controls and procedures,
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 generally
accepted auditing standards, 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 Vice President
Chief 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, 1996 and 1995, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the three years in the period ended August 31, 1996. 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 generally accepted auditing
standards. 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, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
1996, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Portland, Oregon
November 7, 1996
<PAGE>
CONSOLIDATED BALANCE SHEETS
AUGUST 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995
------------------------
ASSETS
MANUFACTURING
Current assets:
Cash and cash equivalents $ 2,303 $ 1,653
Accounts receivable 63,009 28,003
Inventories 75,989 86,280
Prepaid expenses 1,512 1,497
------------------------
142,813 117,433
Property, plant and equipment 35,893 33,135
Other 3,720 4,200
------------------------
182,426 154,768
LEASING AND SERVICES
Cash and cash equivalents 3,780 8,697
Restricted cash and investments 6,400 3,664
Accounts and notes receivable 20,353 11,610
Railcars held for refurbishment or sale 14,459 13,559
Investment in direct finance leases 190,307 168,402
Equipment on operating leases 174,394 158,661
Prepaid expenses and other 23,369 13,028
------------------------
433,062 377,621
------------------------
$ 615,488 $ 532,389
------------------------
------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
MANUFACTURING
Current liabilities:
Revolving notes $13,314 $ 27,313
Accounts payable and accrued liabilities 49,924 45,647
Current portion of notes payable 1,053 966
------------------------
64,291 73,926
Notes payable 13,014 13,512
------------------------
77,305 87,438
LEASING AND SERVICES
Revolving notes 14,500 --
Accounts payable and accrued liabilities 68,209 47,767
Deferred revenue 4,377 4,729
Deferred participation 32,316 27,829
Deferred income taxes 22,126 15,730
Notes payable 202,211 176,276
------------------------
343,739 272,331
Subordinated debt 44,554 37,762
Minority interest 38,154 38,040
COMMITMENTS AND CONTINGENCIES (NOTES 3, 19 & 20)
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value, 25,000 shares
authorized, none issued -- --
Common stock - $0.001 par value, 50,000 shares
authorized, 14,160 outstanding 14 14
Additional paid-in capital 49,079 48,894
Retained earnings 62,259 47,383
Foreign currency translation adjustment 384 527
------------------------
111,736 96,818
------------------------
$ 615,488 $ 532,389
------------------------
------------------------
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED AUGUST 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C>
REVENUES
Manufacturing $ 421,456 $ 295,216 $ 234,439
Leasing and services 108,554 92,510 87,250
-----------------------------------------------------
Total revenues 530,010 387,726 321,689
COSTS AND EXPENSES
Cost of manufacturing sales 378,829 261,981 203,958
Leasing and services 52,160 38,148 42,562
Selling and administrative expense:
Manufacturing 15,276 13,407 11,103
Leasing and services 16,754 11,989 11,946
Corporate 6,996 5,426 4,766
-----------------------------------------------------
39,026 30,822 27,815
Interest expense:
Manufacturing 3,235 2,707 2,285
Leasing and services 22,445 22,381 22,948
-----------------------------------------------------
25,680 25,088 25,233
Minority interest:
Manufacturing 187 (1,381) --
Leasing and services 2,765 3,287 2,679
-----------------------------------------------------
2,952 1,906 2,679
-----------------------------------------------------
Total costs and expenses 498,647 357,945 302,247
EARNINGS BEFORE INCOME TAX EXPENSE AND
EXTRAORDINARY CHARGE
Manufacturing 23,929 18,502 17,093
Leasing and services 14,430 16,705 7,115
Corporate (6,996) (5,426) (4,766)
-----------------------------------------------------
31,363 29,781 19,442
Income tax expense (13,088) (13,116) (8,165)
-----------------------------------------------------
EARNINGS BEFORE EXTRAORDINARY CHARGE 18,275 16,665 11,277
Extraordinary charge, net of tax -- -- (500)
-----------------------------------------------------
NET EARNINGS $ 18,275 $ 16,665 $ 10,777
-----------------------------------------------------
-----------------------------------------------------
Earnings per share before extraordinary charge $ 1.29 $ 1.18 $ 1.02
Extraordinary charge -- -- (.04)
-----------------------------------------------------
Net earnings per share $ 1.29 $ 1.18 $ 0.98
-----------------------------------------------------
-----------------------------------------------------
Weighted average shares outstanding 14,160 14,160 11,049
-----------------------------------------------------
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Foreign
Common Stock Additional Currency Due from Total
-------------------- Paid-in Retained Translation Founding Stockholders'
Shares Amount Capital Earnings Adjustment Stockholders Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1993 10,360 $ 10 $ 398 $ 30,240 $ -- $ (3,443) $ 27,205
Net proceeds from initial
public offering 3,800 4 48,257 -- -- -- 48,261
Advances to founding
stockholders -- -- -- -- -- (2,271) (2,271)
Special dividend to
founding stockholders -- -- -- (6,900) -- -- (6,900)
Repayments by founding
stockholders -- -- -- -- -- 5,714 5,714
Net earnings -- -- -- 10,777 -- -- 10,777
----------------------------------------------------------------------------------------------
Balance, August 31, 1994 14,160 14 48,655 34,117 -- -- 82,786
Compensation relating
to non-qualified stock
option plan -- -- 239 -- -- -- 239
Cash dividends
($.24 per share) -- -- -- (3,399) -- -- (3,399)
Foreign currency
translation adjustment -- -- -- -- 527 -- 527
Net earnings -- -- -- 16,665 -- -- 16,665
----------------------------------------------------------------------------------------------
Balance, August 31, 1995 14,160 14 48,894 47,383 527 -- 96,818
Compensation relating
to non-qualified stock
option plan -- -- 185 -- -- -- 185
Cash dividends
($.24 per share) -- -- -- (3,399) -- -- (3,399)
Foreign currency
translation adjustment -- -- -- -- (143) -- (143)
Net earnings -- -- -- 18,275 -- -- 18,275
----------------------------------------------------------------------------------------------
Balance, August 31, 1996 14,160 $ 14 $49,079 $ 62,259 $ 384 $ -- $111,736
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31
(IN THOUSANDS) 1996 1995 1994
------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 18,275 $ 16,665 $ 10,777
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income taxes 6,396 3,331 1,898
Deferred participation 4,487 9,396 7,832
Depreciation and amortization 24,895 23,898 23,040
Gain on sales of equipment (5,324) (5,100) (3,905)
Other 215 771 455
Decrease (increase) in assets:
Accounts and notes receivable (38,377) (5,421) (10,837)
Inventories 10,291 (40,799) (1,898)
Prepaid expenses and other (2,817) (5,811) (6,074)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 17,182 18,633 10,532
Deferred revenue (352) (56) 1,340
------------------------------------------------
Net cash provided by operating activities 34,871 15,507 33,160
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired (1,960) (23,916) --
Principal payments received under direct finance leases 8,402 6,836 5,208
Investment in direct finance leases (26,430) (31,720) (32,571)
Proceeds from sales of equipment 58,328 31,259 18,610
Purchase of property and equipment (94,880) (53,481) (36,348)
Use of (investment in) restricted cash (2,736) 3,224 6,958
------------------------------------------------
Net cash used in investing activities (59,276) (67,798) (38,143)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 48,912 31,530 88,741
Repayments of borrowings (25,375) (24,907) (80,483)
Dividends (3,399) (3,399) --
Proceeds from minority investors -- 9,221 --
Net proceeds from initial public offering -- -- 48,261
Advances to stockholders -- -- (2,271)
Cash portion of special dividend -- -- (1,186)
------------------------------------------------
Net cash provided by financing activities 20,138 12,445 53,062
------------------------------------------------
INCREASE (DECREASE) IN CASH (4,267) (39,846) 48,079
Cash and cash equivalents
Beginning of period 10,350 50,196 2,117
------------------------------------------------
End of period $ 6,083 $ 10,350 $ 50,196
------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 26,166 $ 23,359 $ 21,928
Income taxes 11,038 9,762 5,227
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Equipment obtained through borrowings $ 7,581 $ 5,337 $ 4,441
Repayment of borrowings through return of
railcars held for refurbishment 2,433 7,726 --
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended August 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- NATURE OF OPERATIONS
The Greenbrier Companies, Inc. and Subsidiaries ("Greenbrier" or the "company")
are engaged in developing, manufacturing, marketing and leasing surface
transportation equipment for the railroad and transportation industries.
Greenbrier's manufacturing segment produces double-stack intermodal railcars,
conventional railcars and marine vessels and provides rail services for both
intermodal and conventional railcars. The leasing segment is engaged in
complemen- tary product development, marketing and leasing activities, including
third-party transportation logistics.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The financial statements include the accounts of
the company and all of
its majority-owned subsidiaries. Fifty percent interests in partnerships in
which the company is the general partner and exercises substantive control are
also consolidated. All significant intercompany transactions and balances have
been eliminated upon consolidation.
The financial statements and transactions of the company's Canadian subsidiary
are maintained in its functional currency and translated into U.S. dollars for
purposes of consolidation. Translation adjustments are accumulated as a separate
component of stockholders' equity. Net gains resulting from foreign currency
transactions were $866 and $896 for the years ended August 31, 1996 and 1995.
ACCOUNTING ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
INVENTORIES -- Inventories are valued at the lower of cost (first-in, first-out)
or market. Work-in-process includes material, labor and overhead.
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.
RAILCARS HELD FOR REFURBISHMENT OR SALE -- Railcars held for refurbishment or
sale are hulks that will either be refurbished or sold and which are carried at
the cost of the hulks and any refurbishment costs incurred.
EQUIPMENT ON OPERATING LEASES -- Equipment on operating leases is stated at
cost. Depreciation to residual values is provided on the straight-line method
over the estimated useful lives of five to sixteen years for trailers and
containers, five to twenty years for railcar equipment and five to ten years for
vehicle transportation equipment. Certain equipment is designed for particular
purposes. Management evaluates the remaining life and recoverability of such
equipment in light of current conditions. If business conditions change, such
estimates could also change.
PREPAID EXPENSES AND OTHER ASSETS -- Loan fees are capitalized and amortized as
interest expense over the life of the related borrowings. Goodwill is amortized
over twelve years.
MINORITY INTEREST -- Minority interest represents unaffiliated investors'
capital investment and interest in the undistributed earnings and losses of
consolidated
entities.
REVENUE RECOGNITION -- Revenue from railcar manufacturing or refurbishment is
recognized at the time railcars are completed and accepted by unrelated
customers.
Direct finance lease revenue is recognized as a constant yield on asset-carrying
values. Certain interim rentals are based on estimated costs. Revenue from
direct finance leases is impacted by estimated residual values.
Operating lease revenue is recognized as earned under the lease terms. Payments
received in advance are deferred until earned.
<PAGE>
MAINTENANCE AND WARRANTY RESERVES -- Maintenance reserves are estimated and
provided over the term of the underlying lease agreement. Warranty reserves are
estimated and charged to operations in the period
provided.
INCOME TAXES -- The liability method is used to account for income taxes.
Deferred income taxes are provided for the effects of temporary differences
arising from differences in the recognition of revenues and expenses for
financial statement and income tax reporting purposes.
FORWARD EXCHANGE CONTRACTS -- Operations in Canada give rise to market risks
from changes in foreign currency exchange rates. Forward exchange contracts are
entered into to hedge the risk of foreign currency fluctuations of a subsidiary.
Realized and unrealized gains and losses are deferred and recognized in earnings
concurrent with the hedged transaction. Even though forward exchange contracts
are entered to mitigate the impact of currency fluctuations, certain exposure
remains, which will impact operating results.
NET EARNINGS PER SHARE -- Net earnings per share is computed on the basis of the
weighted average number of common shares outstanding.
STATEMENTS OF CASH FLOWS -- All highly-liquid investments with a maturity of
three months or less are considered cash equivalents.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior years'
consolidated financial statements to conform with the 1996 presentation.
PROSPECTIVE ACCOUNTING CHANGES -- Greenbrier has not elected early adoption of
Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
Management does not believe adoption of the statement will have a material
effect on either financial position or results of operations.
Greenbrier has not elected early adoption of SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123 will have no effect on the financial
position or results of operations because compensation expense for its
stock-based employee compensation plans will be measured using the method
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees. Upon
adoption of SFAS No. 123 in 1997, pro forma disclosures of net income and
earnings per share will be provided as if the method prescribed by SFAS No. 123
had been applied in measuring compensation expense.
NOTE 3 -- ACQUISITIONS
In the fourth quarter of 1996, Greenbrier acquired Superior Transportation
Systems, Inc. and the remaining interest in Tolan O'Neal Transportation &
Logistics, Inc. ("TOT&L"). Subsequent to year end, Interamerican Logistics Inc.
was acquired. These transactions expand Greenbrier's third-party transportation
logistics services. The acquisitions were accounted for using the purchase
method, whereby assets and liabilities were valued at estimated fair value and
consist primarily of accounts receivable, accounts payable and accrued
liabilities. A portion of the purchase price is based on future earnings and
will result in an adjustment of goodwill. Goodwill arising out of the initial
purchase price is included in other assets and amortized on a straight-line
basis over 12 years. The acquisitions were financed primarily through cash from
operations. Operations of the entities purchased prior to year end have been
included in the accompanying financial statements from the date of acquisition.
<PAGE>
NOTE 4 -- CASH AND INVESTMENTS
Cash is temporarily invested in high-quality, short-term investments,
principally commercial paper, and carried at cost, which approximates market.
Restricted cash and investments may only be used for equipment acquisitions and
partnership distributions in accordance with loan or partnership agreements.
Such restricted cash is invested in U.S. Treasury bills, banker's acceptances,
commercial paper and money market funds, and is carried at cost, which
approximates market.
NOTE 5 -- INVENTORIES
1996 1995
----------------------------
Manufacturing supplies
and raw materials $ 5,856 $ 7,832
Work-in-process 60,474 78,448
Assets held for sale 9,659 --
----------------------------
$ 75,989 $ 86,280
----------------------------
----------------------------
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
1996 1995
----------------------------
Land and improvements $ 8,064 $ 8,067
Buildings and improvements 11,383 9,106
Machinery and equipment 28,027 21,182
Other 2,798 5,287
----------------------------
50,272 43,642
Accumulated depreciation (14,379) (10,507)
----------------------------
$ 35,893 $ 33,135
----------------------------
----------------------------
NOTE 7 -- INVESTMENT IN DIRECT FINANCE LEASES
1996 1995
----------------------------
Future minimum receipts
on lease contracts $354,538 $347,270
Less amounts for
maintenance, insurance
and taxes (74,561) (69,863)
----------------------------
Net minimum lease receipts 279,977 277,407
Unguaranteed residual
values 56,695 48,933
Unearned finance charges (146,365) (157,938)
----------------------------
$190,307 $168,402
----------------------------
----------------------------
Minimum future receipts on the direct finance lease contracts are as follows:
YEAR ENDING AUGUST 31,
1997 $ 52,240
1998 51,480
1999 50,444
2000 48,667
2001 47,470
Thereafter 104,237
-------------
$ 354,538
-------------
-------------
NOTE 8 -- EQUIPMENT ON OPERATING LEASES
1996 1995
-------------------------------
Trailers and containers $ 123,863 $ 119,527
Railcar equipment
and other 113,621 88,756
-------------------------------
237,484 208,283
Accumulated depreciation (63,090) (49,622)
-------------------------------
$ 174,394 $ 158,661
-------------------------------
-------------------------------
In addition to the above equipment, certain railcar equipment is leased by the
company and subleased to customers under noncancelable operating leases.
Aggregate minimum future amounts receivable under all noncancelable operating
leases and subleases are as follows:
YEAR ENDING AUGUST 31,
1997 $ 21,157
1998 17,450
1999 15,025
2000 10,634
2001 10,151
Thereafter 35,110
---------------
$ 109,527
---------------
While the minimum future rentals receivable are less than the carrying value of
equipment on operating leases, certain equipment is also operated under daily,
monthly or mileage arrangements. Associated revenues amounted to $28,460,
$22,870 and $21,265 for the years ended August 31, 1996, 1995 and 1994.
<PAGE>
NOTE 9 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
1996 1995
MANUFACTURING
Accounts payable and
accrued liabilities $ 37,165 $ 33,603
Accrued payroll and
related liabilities 9,545 10,034
Warranty reserves 3,214 2,010
-----------------------------
$ 49,924 $ 45,647
-----------------------------
-----------------------------
LEASING AND SERVICES
Accounts payable and
accrued liabilities $ 25,891 $ 9,314
Accrued payroll and
related liabilities 5,298 4,628
Maintenance and
warranty reserves 26,464 22,369
Other 10,556 11,456
------------------------------
$ 68,209 $ 47,767
------------------------------
------------------------------
NOTE 10 -- REVOLVING NOTES
A $30,000 operating line of credit, bearing interest primarily at prime, is
available through February 1999 to provide working capital for the domestic
manufacturing operations based on defined receivables and inventory. Borrowings
outstanding as of August 31, 1996 and 1995 were $1,650 and $9,915.
An $18,260 (at the August 31, 1996 exchange rate) operating line of credit,
bearing interest primarily at prime plus 1.125%, is available through March 1997
for working capital and certain capital expenditures for the Canadian
manufacturing operation based on defined receivables and inventory. Borrowings
outstanding as of August 31, 1996 and 1995 were $11,664 and $17,398.
Revolving lines of credit aggregating $43,000, bearing interest primarily at
prime plus .125%, are available through March 1997 to provide working capital
and interim financing of equipment for the leasing and services operations based
on defined equipment. Borrowings outstanding as of August 31, 1996 were $14,500
and there were no borrowings outstanding as of August 31, 1995. A minority
investor's interest in a consolidated subsidiary is expected to be acquired for
$16 million, utilizing operating cash flow and available lines of credit.
The applicable prime rate for the domestic borrowings and Canadian borrowings
was 8.25% and 5.75% as of August 31, 1996.
NOTE 11 -- NOTES PAYABLE
1996 1995
-------------------------------
MANUFACTURING
Term loans, interest
at 11%, due in
monthly installments
through June 2008 $ 12,051 $ 12,328
Other notes payable 2,016 2,150
-------------------------------
14,067 14,478
Less current portion (1,053) (966)
-------------------------------
$ 13,014 $ 13,512
-------------------------------
A $10,000, five-year, term loan facility is available through December 1997 to
fund certain domestic manufacturing capital expenditures. As of August 31, 1996
and 1995, there were no borrowings outstanding under this facility; however, the
facility was securing a $1 million outstanding letter of credit issued for
inventory purchases and to secure certain rental payments as of August 31, 1996.
1996 1995
-------------------------------
LEASING AND SERVICES
Equipment notes payable $200,705 $173,547
Other notes payable 422 --
-------------------------------
201,127 173,547
Notes payable -- hulks 1,084 2,729
-------------------------------
$202,211 $176,276
-------------------------------
Equipment notes payable, bearing interest at rates varying from Libor plus 1.6%
to fixed rates of 7.1% to 10.8% are due in varying installments through June
2005. Substantially all assets of the company are pledged as collateral for the
notes payable and revolving notes. The Libor interest rate was 5.44% as of
August 31, 1996. The weighted average remaining contractual life and weighted
average interest rate of equipment notes payable as of August 31, 1996 and 1995,
of which $151,744 and $172,062 bear fixed rates of interest, was approximately
71 and 72 months and 8.5% and 9.2%.
<PAGE>
Principal payments on the notes payable are as
follows:
LEASING
MANUFACTURING AND SERVICES
----------------------------
YEAR ENDING AUGUST 31,
1997 $ 1,053 $ 28,378
1998 1,068 32,145
1999 991 41,361
2000 1,052 24,039
2001 911 24,721
Thereafter 8,992 51,567
----------------------------
$14,067 $202,211
----------------------------
----------------------------
Notes payable -- hulks mature upon receipt of the railcars for refurbishment,
which is anticipated to occur over the next year.
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 by subsidiaries and require certain levels of tangible net worth,
ratio of debt to equity and debt service coverage.
NOTE 12 -- SUBORDINATED DEBT
1996 1995
----------------------------
Subordinated notes -- hulks $ 2,886 $ 4,542
Subordinated notes 41,668 33,220
----------------------------
$ 44,554 $ 37,762
----------------------------
----------------------------
As part of the agreement described in Note 20, a group of railcars was acquired
in May 1991 in exchange for notes payable -- hulks and subordinated notes --
hulks. Until the cars are delivered to the company, they are being operated by
the seller under a lease arrangement with no stated lease rate. Additionally,
the notes bear no stated interest rate until the cars are delivered. The
implicit interest expense on the notes and the offsetting implicit lease revenue
of $717, $1,312 and $1,855 for the years ended August 31, 1996, 1995 and 1994
are reflected in the financial statements at rates which approximate the stated
rate of interest of 11% in effect on the notes after delivery of the equipment.
Deliveries are anticipated to occur over the next year, at which time the notes
payable -- hulks of $1,084 mature and the subordinated notes -- hulks of $2,886
convert to subordinated notes with terms as described below. The railcars are
included in the consolidated balance sheet as railcars held for refurbishment or
sale.
Subordinated notes of $41,668 as of August 31, 1996 were issued for railcars
purchased as part of the agreement described above. The notes bear interest
at 9% and 11%, with substantially all of the principal repayment due ten
years from the date of the note, and are subordinated to all other
liabilities of a subsidiary. Approximately $858 becomes due in 1997, $96 in
1998 and $268 in 2001, with the remaining balance due after 2001.
NOTE 13 -- STOCKHOLDERS' EQUITY
In July 1994, the company completed an initial public offering of its common
stock in which 5,520 shares were sold at $14 per share. Of the shares sold,
3,800 were sold by the company and the balance were sold by founding
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. The
restricted net assets of subsidiaries amounted to $32,058 as of August 31, 1996.
Consolidated retained earnings at August 31, 1996 were not restricted as to the
payment of dividends.
A stock incentive plan was adopted July 1, 1994 which provides for granting
compensatory and non-compensatory options to employees and others. Outstanding
options generally vest at 50% two years from grant with the balance five years
from grant. The following table summarizes the stock option transactions:
Shares Option
Under Price
Option Per Share
----------------------------
Balance at August 31, 1994 714 $14
Options granted 4 14-17
Options canceled (36) 14
----------------------------
Balance at August 31, 1995 682 14-17
Options granted 162 11-12
Options canceled (56) 11-12
----------------------------
Balance at August 31, 1996 788 11-17
----------------------------
----------------------------
As of August 31, 1996, options to purchase 321 shares were exercisable and 592
shares were available for grant.
<PAGE>
Additionally, a supplementary stock option plan was adopted under which options
to purchase 60 shares of common stock were granted to employees by the founding
stockholders at a purchase price of $4 per share. The effects of the plan are
not material to the financial condition or results of operations of the
company.
The Chairman and the Chief Executive Officer, 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.
NOTE 14 -- RELATED PARTY TRANSACTIONS
Fees for managing certain trailers and containers of $562, $563 and $500 were
paid to an affiliated partnership for the years ended August 31, 1996, 1995 and
1994. Maintenance, management and other fees received from a related entity
under an agreement were $930, $884 and $438 for the years ended August 31, 1996,
1995 and 1994. Marketing fees of $2,219
for the year ended August 31, 1994 were paid to that entity under an agreement
which was terminated in July 1994.
In July 1996, Greenbrier acquired the remaining 50% of TOT&L from an executive
officer and director. The purchase price included $500 cash, a $250 note payable
bearing interest at 7% and due on or before July 2000 and a contingent amount
based on the future value of certain operations.
NOTE 15 -- EMPLOYEE BENEFIT PLANS
A defined contribution 401(k) plan is available to substantially all U.S.
employees. Contributions are based on a percentage of employee contributions and
amounted to $651, $584 and $512 for the years ended August 31, 1996, 1995 and
1994.
A defined benefit pension plan is provided for Canadian employees covered by
collective bargaining agreements. The plan provides 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 plan's assets,
obligations and pension cost are not material to Greenbrier.
NOTE 16 -- INCOME TAXES
Components of income tax expense are as follows:
1996 1995 1994
--------------------------------------------
Current:
Federal $ 5,390 $ 7,906 $ 5,932
State 1,302 1,879 335
------------------------------------------
6,692 9,785 6,267
Deferred:
Federal 5,237 2,723 798
State 1,159 608 1,100
------------------------------------------
6,396 3,331 1,898
------------------------------------------
$13,088 $13,116 $ 8,165
--------------------------------------------
Income tax expense is computed at rates different than the statutory rates. The
reconciliation between effective and statutory rates is as follows:
1996 1995 1994
------------------------------------------
Statutory rates 35.0% 35.0% 34.0%
State income taxes,
net of federal benefit 5.1 5.3 5.0
Impact of foreign taxes (0.2) 1.7 --
Other 1.8 2.0 3.0
------------------------------------------
Income tax combined
effective rate 41.7% 44.0% 42.0%
------------------------------------------
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities are as follows:
1996 1995
-----------------------------
Deferred tax assets:
Alternative minimum
tax credit carryforward $(14,650) $(15,051)
Deferred participation (13,918) (11,132)
Maintenance and
warranty reserves (11,524) (9,756)
Accrued payroll and
related liabilities (5,101) (4,087)
Deferred revenue (1,381) (1,943)
Inventories and other (2,051) (1,251)
Net operating loss
carryforward (548) (913)
-----------------------------
(49,173) (44,133)
Valuation allowance 639 986
-----------------------------
(48,534) (43,147)
Deferred tax liabilities:
Accelerated depreciation 66,152 55,416
Other 4,508 3,461
-----------------------------
Net deferred tax liability $ 22,126 $ 15,730
-----------------------------
-----------------------------
<PAGE>
A Canadian net operating loss carryforward of $1,438 as of August 31, 1996,
which expires August 31, 2002, is available to offset Canadian earnings. A
valuation allowance has been provided for Canadian deferred tax assets.
NOTE 17 -- SEGMENT INFORMATION
The two business segments in which the company operates are manufacturing and
leasing and services of transportation equipment. A summary of selected
consolidated information for the industry segments is as follows:
1996 1995 1994
---------------------------------------------
Revenues:
Manufacturing $ 485,765 $ 329,327 $ 257,380
Elimination of
intersegment
sales (64,309) (34,111) (22,941)
---------------------------------------------
421,456 295,216 234,439
---------------------------------------------
Leasing and
services 129,312 108,593 101,589
Elimination of
intersegment
sales (20,758) (16,083) (14,339)
---------------------------------------------
108,554 92,510 87,250
---------------------------------------------
Total $ 530,010 $ 387,726 $ 321,689
---------------------------------------------
---------------------------------------------
Capital expenditures:
Manufacturing $ 6,690 $ 7,946 $ 8,042
Leasing and
services 122,201 82,592 65,318
---------------------------------------------
Total $ 128,891 $ 90,538 $ 73,360
---------------------------------------------
---------------------------------------------
Depreciation and
amortization:
Manufacturing $ 3,997 $ 3,123 $ 2,160
Leasing and
services 20,898 20,775 20,880
---------------------------------------------
Total $ 24,895 $ 23,898 $ 23,040
---------------------------------------------
---------------------------------------------
Revenues generated from the refurbishment of railcars for the leasing and
services segment are eliminated from manufacturing revenues. Marketing fees paid
to the leasing and services segment by the manufacturing segment are eliminated
from leasing and services revenue.
Sales and marketing expenses of $5,103, $4,561 and $4,259 for the years ended
August 31, 1996, 1995 and 1994 have been allocated from the leasing and services
segment to the manufacturing segment. Such expenses represent costs which, in
the opinion of management, are reasonably allocable to the manufacturing
segment.
The leasing and services segment includes current and deferred income taxes
which are corporate liabilities.
A portion of Greenbrier's manufacturing operations are located in Canada since
an acquisition in March 1995. The following table summarizes selected geographic
information:
1996 1995
-------------------------------
Revenues:
United States $355,128 $354,888
Canada 174,882 32,838
-------------------------------
Total $530,010 $387,726
-------------------------------
-------------------------------
Earnings (loss) before
income tax expense:
United States $ 26,865 $ 31,218
Canada 4,498 (1,437)
-------------------------------
Total $ 31,363 $ 29,781
-------------------------------
-------------------------------
Identifiable assets:
United States $570,743 $483,203
Canada 44,745 49,186
-------------------------------
Total $615,488 $532,389
-------------------------------
-------------------------------
Intercompany sales between geographic areas, primarily from Canada to the U.S.,
were $28,049 and $467 during 1996 and 1995.
NOTE 18 -- CUSTOMER CONCENTRATION
Revenue from the manufacturing segment's largest customer was 28% of total
revenues for the year ended August 31, 1996. Accounts receivable from this
customer was 9% of manufacturing receivables as of August 31, 1996. Other
significant customers accounted for 42% and 12% of 1995 revenues, with accounts
receivable from these customers representing 50% of manufacturing receivables as
of August 31, 1995. Significant customers accounted for 31%, 11% and 13% of 1994
revenues.
Substantially all of the leasing and services receivables as of August 31, 1996
and 1995 are due from one customer.
<PAGE>
NOTE 19 -- LEASE COMMITMENTS
Lease expense for railcar equipment leased under non-cancelable leases was
$3,204, $1,250 and $3,675 for the years ended August 31, 1996, 1995 and 1994.
Aggregate minimum future amounts payable under non-cancelable railcar equipment
leases are as follows:
YEAR ENDING AUGUST 31,
1997 $ 4,021
1998 4,021
1999 3,888
2000 3,142
2001 1,067
Thereafter 4,534
--------------
$ 20,673
--------------
--------------
An operating lease for a manufacturing and refurbishment facility, which
contains an option to purchase the property at a specified price, expires in
November 2002. Rental payments are secured by a $1,000 letter
of credit and amounted to $380 for the year ended August 31, 1996 and $330 for
each of the years ended August 31, 1995 and 1994.
Office space and certain manufacturing and office equipment are rented under
operating leases which expire at various dates through June 2001. Rental expense
was $1,643, $955 and $1,228 for the years ended August 31, 1996, 1995 and 1994.
Aggregate minimum future amounts payable under non-cancelable operating leases
are as follows:
YEAR ENDING AUGUST 31,
1997 $ 4,151
1998 3,974
1999 3,681
2000 3,278
2001 2,898
Thereafter 2,501
--------------
$ 20,483
--------------
NOTE 20 --COMMITMENTS AND CONTINGENCIES
As part of an agreement entered into in 1990 under which the company agreed to
purchase and refurbish over ten thousand used railcars, there remains a
commitment to refurbish approximately four hundred railcars which are expected
to be completed by January 1997. The refurbished railcars will be placed into
service, principally under ten year leases with the seller. In addition to the
revolving credit lines discussed in Note 10, an unused long-term financing
commitment of $21,000 for financing refurbishment activity is available through
December 1996 and is expected to be utilized by such time.
The agreement includes an option, which, 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.
The agreement also provides that, under certain conditions, the seller will
receive a percentage of operating earnings, as defined. Amounts accrued are
referred to as participation and are included in deferred participation. Payment
of deferred participation is estimated to be $947 in 2000 and $3,190 in 2001,
with remaining balance due after 2001. Participation expense was $8,670, $9,918
and $10,073 for the years ended August 31, 1996, 1995 and 1994.
As of August 31, 1996, forward exchange contracts entered into to hedge the risk
of foreign currency fluctuations of U.S. dollar accounts receivable related to
firm commitments for the sale of railcars to be manufactured in Canada were $16
million. Forward exchange contracts for U.S. dollar purchases for railcars to be
manufactured in Canada were $7 million. These agreements mature at various dates
through November 1996. No credit loss from counterparty non-performance is
anticipated.
<PAGE>
Environmental studies have been conducted by the company of its owned and leased
properties which indicate additional investigation and some remediation may be
necessary. The outcome cannot be predicted with certainty; however, management
believes that any ultimate liability resulting from environmental issues will
not materially affect the financial position or results of operations of the
company. Management believes that its operations adhere to sound environmental
practices, applicable laws, and regulations.
The company is involved as a defendant in litigation in the ordinary course of
business, the outcome of which cannot be predicted with certainty. Management
believes that any ultimate liability will not materially affect the financial
position or results of operations of the company.
Agreements were entered into with several equipment manufacturers for the
purchase of leasing and services operating equipment and as of August 31, 1996
approximately $575 of equipment remained to be purchased under these agreements.
Effective July 1, 1994, the company entered into employment agreements, which
expire August 31, 2004, with the Chairman and the Chief Executive Officer, which
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 $600 and the maximum is $2,000.
NOTE 21-- FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the company's financial instruments and the methods
and assumptions used to estimate such fair values, are as follows:
1996
---------------------------------
Carrying Estimated
amount fair value
---------------------------------
Notes payable and
subordinated debt $260,832 $257,078
Deferred participation 32,316 17,618
1995
---------------------------------
Carrying Estimated
amount fair value
---------------------------------
Notes payable and
subordinated debt $228,516 $228,249
Deferred participation 27,829 15,336
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.
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Unaudited operating results by quarter for 1996 and 1995 are as follows:
First Second Third Fourth
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Manufacturing revenues $ 95,109 $117,394 $ 95,842 $113,111
Leasing and services revenues 21,656 24,697 25,298 36,903
---------------------------------------------------------------------------
Total revenues $116,765 $142,091 $121,140 $150,014
---------------------------------------------------------------------------
Earnings before income tax expense:
Manufacturing $ 5,511 $ 7,733 $ 5,496 $ 5,189
Leasing and services 2,299 3,740 4,121 4,270
Corporate (1,554) (1,914) (1,487) (2,041)
---------------------------------------------------------------------------
$ 6,256 $ 9,559 $ 8,130 $ 7,418
---------------------------------------------------------------------------
Net earnings $ 3,363 $ 5,579 $ 4,901 $ 4,432
---------------------------------------------------------------------------
Net earnings per share $ 0.24 $ 0.39 $ 0.35 $ 0.31
---------------------------------------------------------------------------
1995
Manufacturing revenues $ 57,250 $ 63,301 $ 94,756 $ 79,909
Leasing and services revenues 22,411 22,802 22,568 24,729
---------------------------------------------------------------------------
Total revenues $ 79,661 $ 86,103 $117,324 $104,638
---------------------------------------------------------------------------
Earnings before income tax expense:
Manufacturing $ 3,097 $ 2,300 $ 9,299 $ 3,806
Leasing and services 3,395 3,845 3,579 5,886
Corporate (1,200) (1,578) (1,711) (937)(1)
---------------------------------------------------------------------------
$ 5,292 $ 4,567 $ 11,167 $ 8,755
---------------------------------------------------------------------------
Net earnings $ 3,069 $ 2,649 $ 6,287 $ 4,660
---------------------------------------------------------------------------
Net earnings per share $ 0.22 $ 0.19 $ 0.44 $ 0.33
---------------------------------------------------------------------------
</TABLE>
(1) Primary reason for fluctuations are adjustments to incentive compensation
accruals.
<PAGE>
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
- --------------------------------------------------------------------------------
CORPORATE OFFICES:
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035
(503) 684-7000
ANNUAL STOCKHOLDERS' MEETING:
January 14, 1997, 2:00 p.m.
Hilton Hotel
921 S.W. Sixth Avenue
Portland, Oregon
FINANCIAL INFORMATION:
Requests for copies of this annual report and other financial information should
be made to Investor Relations, The Greenbrier Companies, Inc.,
One Centerpointe Drive, Suite 200,
Lake Oswego, Oregon 97035
LEGAL COUNSEL:
Tonkon, Torp, Galen, Marmaduke &Booth
Portland, Oregon
INDEPENDENT AUDITORS:
Deloitte & Touche LLP
Portland, Oregon
TRANSFER AGENT:
Harris Trust Company of California
c/o Harris Trust and Savings
311 W. Monroe Street
Chicago, Illinois 60606
(800) 554-3406
Greenbrier's Transfer Agent maintains stockholder records, issues stock
certificates and will distribute dividends. Requests concerning these matters
should be directed to Harris Trust Company of California.
STOCKHOLDER INQUIRIES:
Please contact Mark Rittenbaum, Investor Relations
(503) 684-7000
COMMON STOCK:
Greenbrier's common stock has been traded on the New York Stock Exchange under
the symbol GBX since July 14, 1994. The following table sets forth, for the
fiscal quarters indicated, the high and low sales prices for the common stock on
the New York Stock Exchange.
High Low
---------------------------
FISCAL 1996
First quarter $13.00 $10.50
Second quarter $13.00 $10.38
Third quarter $17.88 $11.25
Fourth quarter $16.00 $11.38
FISCAL 1995
First quarter $19.38 $16.25
Second quarter $17.75 $14.25
Third quarter $16.50 $13.38
Fourth quarter $15.75 $12.00
FISCAL 1994
Fourth quarter $18.50 $14.00
Cash dividends of $.06 per share have been paid quarterly on the common stock
since December 1994. There is no assurance as to future dividends as they are
dependent upon future earnings, capital requirements and financial condition.
<PAGE>
Exhibit 21.1
THE GREENBRIER COMPANIES, INC.
LIST OF SUBSIDIARIES
Names Under
State of Which Does
Name Incorporation Business
- ---- ------------- --------
Autostack Corporation OR N/A
Autostack General Partner, Inc. DE N/A
Autostack Partners Limited Partnership DE N/A
Coast Transportation Systems, Inc. OR STS - LTL
Division
Greenbrier Capital Corporation (formerly
known as Greenbrier Intermodal, Inc.) CA N/A
Greenbrier Holdings, Inc. (formerly known
as Greenbrier Intermodal, Inc.) OR N/A
Greenbrier Leasing Corporation DE Greenbrier
Intermodal
Greenbrier Logistics, Inc. OR N/A
Greenbrier Partners, Inc. CA N/A
Greenbrier Partners Limited Partnership CA N/A
Greenbrier Railcar, Inc. DE N/A
Greenbrier Rail Car Services, Inc. DE N/A
Greenbrier Rental Services, Inc. CA N/A
Greenbrier Transportation, Inc. DE N/A
Greenbrier Transportation Limited Partnership DE N/A
Gunderson, Inc. (formerly known as BW
Industries, Inc.) OR N/A
Gunderson Leasing, Inc. OR N/A
Gunderson Marine, Inc. OR N/A
Gunderson Southwest, Inc. OR N/A
Gunderson Springfield, Inc. (formerly known
as Gunderson Rail Car Services, Inc.) OR N/A
Gunderson Wheel Services, Inc. OR N/A
Interamerican Logistics Inc. Ontario, N/A
Canada
Redon General Partnership GA N/A
Superior Transportation Systems, Inc. OR N/A
Tolan O'Neal Transportation & Logistics, Inc. WA N/A
TrentonWorks Limited Nova Scotia, N/A
Canada
2441001 Nova Scotia Limited Nova Scotia, N/A
Canada
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No. 333-
08035, 33-3392, and 33-80869 of The Greenbrier Companies, Inc. on Forms S-8 of
our reports dated November 7, 1996, appearing in the and incorporated by
reference in this Annual Report on Form 10-K of The Greenbrier Companies, Inc.
for the year ended August 31, 1996.
DELOITTE & TOUCHE LLP
Portland, Oregon
November 25, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDED AUGUST 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 12,483<F1>
<SECURITIES> 0
<RECEIVABLES> 83,362
<ALLOWANCES> 0
<INVENTORY> 75,989
<CURRENT-ASSETS> 142,813
<PP&E> 35,893
<DEPRECIATION> 0
<TOTAL-ASSETS> 615,488
<CURRENT-LIABILITIES> 64,291
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 111,722
<TOTAL-LIABILITY-AND-EQUITY> 615,488
<SALES> 0
<TOTAL-REVENUES> 530,010
<CGS> 430,989
<TOTAL-COSTS> 498,647
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,680
<INCOME-PRETAX> 31,363
<INCOME-TAX> 13,088
<INCOME-CONTINUING> 18,275
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,275
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.29
<FN>
<F1>OF THIS AMOUNT, $6,400 IS RESTRICTED.
</FN>
</TABLE>
