<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, 1998
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ___________ to ___________
Commission File No. 1-13146
___________________________
THE GREENBRIER COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 93-0816972
(State of Incorporation) (IRS Employer Identification No.)
ONE CENTERPOINTE DRIVE, SUITE 200
LAKE OSWEGO, OREGON 97035
(Address of principal executive offices)
(503) 684-7000
(Registrant's telephone number, including area code)
____________________________
Securities registered pursuant to Section 12(b) of the Act:
(Title of Each Class) (Name of Each Exchange
COMMON STOCK, on Which Registered)
PAR VALUE $0.001 PER SHARE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /
Aggregate market value of the Registrant's Common Stock held by non-affiliates
on October 30, 1998 (based on the closing price of such shares on such date) was
approximately $87,000,000.
The number of shares outstanding of the Registrant's Common Stock on October 30,
1998 was 14,254,132 shares of Common Stock, par value $0.001 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Registrant's 1998 Annual Report to Stockholders and of Registrant's
Proxy Statement dated November 30, 1998 prepared in connection with the Annual
Meeting of Stockholders to be held on January 12, 1999 are incorporated by
reference into Parts II and III of this Report.
<PAGE>
THE GREENBRIER COMPANIES, INC.
FORM 10-K
TABLE OF CONTENTS
PART I PAGE
Item 1. BUSINESS 1
Item 2. PROPERTIES 8
Item 3. LEGAL PROCEEDINGS 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 9
Item 6. SELECTED FINANCIAL DATA 9
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK 9
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 9
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 9
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT 10
Item 11. EXECUTIVE COMPENSATION 10
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 10
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 11
SIGNATURES 18
(i)
<PAGE>
PART I.
FORWARD-LOOKING STATEMENTS
From time to time, The Greenbrier Companies, Inc. ("Greenbrier" or the
"Company") or its representatives have made or may make forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, including, without limitation, statements as to expectations,
beliefs and strategies regarding the future. Such forward-looking statements
may be included in, but not limited to, press releases, oral statements made
with the approval of an authorized executive officer or in various filings
made by the Company with the Securities and Exchange Commission. The
following are among the factors that could cause actual results or outcomes
to differ materially from the forward-looking statements: general political,
regulatory or economic conditions; changes in interest rates; business
conditions and growth in the surface transportation industry, both domestic
and international; currency and other risks associated with international
operations; shifts in market demand; a delay or failure of acquisitions,
products or services to compete successfully; changes in product mix and the
mix between manufacturing and leasing and services revenue; transportation
labor disputes or operating difficulties which might disrupt the flow of
cargo; competitive factors, including increased competition, new product
offerings by competitors and price pressures; actual future costs and
availability of materials and a trained workforce; labor disputes; production
difficulties and product delivery delays in the future as a result of, among
other matters, changing process technologies and increasing production; lower
than expected customer orders; the ability to consummate expected sales;
delays in receipt of orders or cancellation of orders; financial condition of
principal customers; and the impact of year 2000 compliance by the Company or
by its customers, suppliers or service partners. Any forward-looking
statements should be considered in light of these factors.
ITEM 1. BUSINESS
INTRODUCTION
Greenbrier is a leading supplier of transportation equipment and
services to the railroad and related industries. The Company's manufacturing
segment produces double-stack intermodal railcars, conventional railcars and
marine vessels, and provides repair and refurbishment for both intermodal and
conventional railcars at locations throughout North America and more recently
Europe. In addition to manufacturing, Greenbrier is engaged in complementary
leasing and services activities. The lease fleet consists of 27,748 owned or
managed railcars as of August 31, 1998. Greenbrier believes this fleet is
among the larger non-railroad owned fleets in the United States.
In September 1998, Greenbrier acquired a majority interest in a railcar
and specialty container manufacturer located in Swidnica, Poland. Polish
investors will maintain a significant ownership interest in the manufacturer.
This acquisition establishes a European manufacturing base and is expected to
provide access to the European markets, particularly the market in Poland.
Initially, the Polish facility is not expected to have a material impact on
Greenbrier's overall financial condition or results of operations, and the
investment will be funded through existing cash balances. This expansion will
require the development of a sales and marketing force knowledgeable about
the European market.
Also in September 1998, Greenbrier entered into a joint venture to build
railroad freight cars at an existing manufacturing facility in Sahagun,
Mexico. Each party will maintain a 50 percent interest in the joint venture.
The facility will serve the North American marketplace and provide better
access to the growing market in Mexico. Operations are expected to commence
in the first quarter of 1999 and capacity is anticipated to grow to 3,000 new
cars annually. Required capital expenditures and working capital needs are
expected to be funded by existing operating cash flow and cash balances.
Subsequent to year end, Greenbrier entered into the following
maintenance and refurbishment agreements:
- - A long-term contract to manage maintenance on 7,000 covered hopper cars
owned by Burlington Northern Santa Fe ("BNSF") that is anticipated to
begin in December 1998.
- - An agreement with Canadian Pacific Railway to refurbish and re-market
certain of their used freight cars under a pilot program.
- - An agreement to refurbish and re-market surplus railcars in Europe.
1
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A plan was adopted in 1997 to discontinue the third party transportation
logistics segment, as well as to sell the trailer and container leasing
operation, in order to focus on core railcar operations. The expansion of the
logistics segment during 1996 and 1997 was based on expected complementary
advantages of bringing assets and services together which did not develop.
Industry fundamentals for both businesses were strong; however, rates of
return on capital invested were less than desired. In July and October 1997,
Greenbrier divested its fleet of domestic containers, intermodal and highway
trailers and chassis. In December 1997 the sale of the intermodal marketing
and truck brokerage operations of the logistics business segment was
completed. These operations constituted the majority of the logistics
operations. In August 1998 the sale of the remainder of the logistics
operation was completed.
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. A summary of selected consolidated financial information for these
two business segments as well as domestic and foreign operations is set forth
in Note 16 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 its
final destination without the repeated loading and unloading of freight
required by traditional shipping methods. A major innovation in intermodal
transportation has been the articulated double-stack railcar which transports
stacked containers on a single platform. An articulated railcar is a unit
comprised of up to five platforms, each of which is linked by a common set of
wheels and axles.
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.
Greenbrier is the leading manufacturer of double-stack railcars with an
estimated cumulative North American market share of 60 percent. In 1998,
4,800 double-stack railcars were manufactured and sold by the Company, which
it believes represents 52 percent of the North American market during such
period.
Greenbrier's comprehensive line of articulated and non-articulated
double-stack railcars offers varying load capacities and configurations.
Current double-stack products include:
MAXI-STACK -Registered Trademark-- The Maxi-Stack is a series of double-stack
railcars that features the ride-quality and operating efficiency of
articulated stack cars. The Maxi-Stack III is a five-platform railcar that
features the ability to carry containers up to 53 feet in length, the longest
shipping containers presently in use. The Maxi-Stack AP is a three-platform
all-purpose railcar that is more versatile than other intermodal cars because
it allows the loading of either trailers or double-stack containers on the
same platform.
HUSKY-STACK -Registered Trademark- - The Husky-Stack is a non-articulated
(stand-alone) or draw bar connected series of double-stack railcars with the
capability of carrying containers up to 42 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.
2
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AUTOSTACK. Autostack is a proprietary system developed and licensed by the
Company to transport vehicles intermodally in standard domestic or
international shipping containers and, unlike conventional multi-level
railcars, can be used in standard rail, ship and highway intermodal
corridors. In 1997, Greenbrier recorded a $7 million write-down of the
carrying value of the Autostack operating equipment to approximate the
anticipated net realizable value of the assets based on projected future
performance under existing contracts. Greenbrier believes Autostack will
remain a niche player in the vehicle transportation industry. The Autostack
system transported approximately 74,000 vehicles in 1998.
CONVENTIONAL RAILCARS
Greenbrier is the leading manufacturer of boxcars in North America. A
wide variety of 100-ton capacity boxcars, primarily used in the forest
products industry, are offered as well as custom built high capacity railcars
for special applications such as automotive parts or canstock movement. In
addition to boxcars, center-partition cars for lumber and other building
materials, flatcars for auto-rack service, high cubic capacity covered hopper
railcars for grain transportation, gondolas for scrap steel services and
various other conventional railcar types are manufactured. In 1998,
approximately 3,000 conventional railcars were manufactured and sold.
The recently acquired facility in Swindica, Poland will initially
produce pressurized tank cars for liquid petroleum gas, non-pressurized tank
cars for light oil products and an articulated flat car. Each of these
products have been produced in the recent past at this facility.
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.
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; Cleburne, Texas and Finley,
Washington. 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, Oregon; Pine Bluff,
Arkansas and Tacoma, Washington.
MARINE VESSEL FABRICATION
The Portland, Oregon manufacturing facility is located on a deep water
port on the Willamette River. Until 1984, the Company's predecessor designed
and built ocean-going barges and other types of marine vessels for maritime
shipping companies. In 1995, Greenbrier re-entered the marine vessel market
and expanded and upgraded the marine facilities, which includes the largest
side-launch ways on the West Coast. The upgraded marine facilities also
enhance steel plate burning and fabrication capacity providing flexibility
for railcar production. Since 1995 vessels manufactured include conventional
deck barges for aggregates and other heavy industrial products and
ocean-going dump barges.
LEASING AND SERVICES
Greenbrier currently manages a lease fleet of railcars of which 53
percent are owned and the remainder are managed for institutional investors,
railroads and other leasing companies. Management services include equipment
marketing and re-marketing, maintenance management and administration.
Greenbrier participates in both the finance and the operating lease segments
of the market. The aggregate rental payments over the operating lease terms
do not fully amortize the acquisition costs of the leased equipment. As a
result, the Company is subject to the customary risk that it may not be able
to sell or re-lease equipment after the operating lease term expires.
However, the Company believes it can effectively manage the risks typically
associated with operating leases due to its railcar expertise and its
refurbishing and re-marketing capabilities. Most of the leases are "full
service" leases, whereby Greenbrier is responsible for maintenance, taxes and
administration. The fleet is maintained, in part, through Greenbrier's own
facilities and engineering and technical staff. Assets from the owned lease
fleet are periodically sold to take advantage of market conditions, manage
risk and maintain liquidity. Railcar equipment held for sale consists mainly
of hulks that will either be refurbished or sold.
3
<PAGE>
The following table summarizes the lease fleet:
<TABLE>
<CAPTION>
FLEET PROFILE
AS OF AUGUST 31, 1998(1)
----------------------------------------------------
Percent Average
of Owned Age of
Owned Managed Total Units on Owned
Units Units Units Lease Units (Yrs.)
----- ------- ----- -------- -----------
<S> <C> <C> <C> <C> <C>
Railcars Available for
Revenue Service 14,125 13,011 27,136 98.1 20.0
Railcar Equipment Held
for Sale 612 - 612
------ ------ ------
14,737 13,011 27,748
------ ------ ------
------ ------ ------
Lessee Profile:
Class I Railroads 10,993 9,147 20,140
Non-Class I Railroads 1,345 1,290 2,635
Shipping Companies 1,309 2,243 3,552
Leasing Companies 215 121 336
Off-Lease 263 210 473
------ ------ ------
Total Revenue Units 14,125 13,011 27,136
------ ------ ------
------ ------ ------
</TABLE>
__________
(1) Each platform of an articulated car is treated as a separate car.
A substantial portion of the equipment in the lease fleet has been
acquired through an agreement entered into in August 1990 with Southern
Pacific Transportation Company, which has since merged with Union Pacific
Corporation ("Union Pacific"), to purchase, refurbish and re-market over
10,000 railcars. The railcars were refurbished to predetermined
specifications by Greenbrier or unaffiliated contract shops after
satisfactory re-marketing arrangements were in place.
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 1998, approximately 71 percent of the Company's Canadian requirements
for steel plate were purchased from Algoma Steel Inc. and approximately 47
percent of the domestic requirements were purchased from Oregon Steel Mills,
Inc. No other suppliers accounted for in excess of 10 percent of total
purchases in 1998, and the top ten suppliers (including Oregon Steel Mills,
Inc. and Algoma Steel Inc.) accounted for approximately 34 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. A member of the TrentonWorks
Limited board of directors serves as Chairman of the board of directors of
Algoma Steel Inc.
4
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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 re-marketing
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
1998, 1997 and 1996 were $1,470,000, $1,097,000 and $597,000, respectively.
During 1997, Greenbrier completed the prototype and began commercial
testing of Auto-Max-Registered Trademark- , a two-unit articulated railcar
that can be configured for either tri-level or bi-level vehicle
transportation service. Auto-Max was originally expected to be produced in
late 1998, but production was delayed due to demand for manufacturing line
space. The first order has been received and Auto-Max production is
anticipated to begin in late 1999.
CUSTOMERS AND BACKLOG
The manufacturing customer base includes every transportation company
that utilizes double-stack or conventional railcars as well as financial
institutions that provide equipment to the transportation industry. A portion
of the customer base includes TTX Company, BNSF, Union Pacific, Canadian
National Railway Company, First Union Rail, NorRail, Inc., General Electric
Railcar Services, and Norfolk Southern Railway Company.
The following table lists the Company's backlog in units and dollars for new
railcars at the dates shown:
<TABLE>
<CAPTION>
August 31,
-------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
New railcar backlog(1) 6,200 2,600 2,200
Estimated value (in thousands) $375,000 $133,000 $123,000
</TABLE>
__________
(1) Each platform of an articulated car is treated as a separate car.
The backlog is based on customer purchase or lease orders that the
Company believes are firm. Customer orders, however, are subject to
cancellation and other customary industry terms and conditions. Historically,
little variation has been experienced between the number of railcars ordered
and the number of railcars actually sold. The backlog is not necessarily
indicative of future results of operations. Payment for railcars manufactured
is typically received when the cars are completed and accepted by a
third-party customer.
Leasing customers include Class I Railroads, regional and short line
railroads, other leasing companies, shippers and carriers such as Union
Pacific, BNSF, Railtex, Oregon Steel Mills, and First Union Rail.
In 1998, sales to the two largest customers, TTX Company and BNSF,
accounted for 25 percent and 16 percent of total revenues. No other customers
accounted for more than 10 percent of total revenues.
COMPETITION
Greenbrier is affected by a variety of competitors in each of its
principal business activities. There are currently seven major railcar
manufacturers competing in North America. Two of these producers build
railcars principally for their own fleets and five producers - Trinity
Industries, Inc., Thrall Car Manufacturing Co., Johnstown America Corp.,
National Steel Car, Ltd. and the Company - compete principally in the general
railcar market. Some of these producers have substantially greater resources
than the Company. Greenbrier competes on the basis of type of product,
reputation for quality, price, reliability of delivery and customer service
and support.
5
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In railcar leasing, principal competitors include The CIT Group, DJ
Joseph, First Union Rail, GATX Corporation, General Electric Railcar
Services, NorRail, Inc. and Helm Financial Corp.
PATENTS AND TRADEMARKS
Greenbrier pursues a proactive program for protection of intellectual
property resulting from its research and development efforts. Greenbrier has
obtained patent and trademark protection for significant intellectual
property as it relates to its business. The Company holds several United
States and foreign patents and has several patent applications pending.
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.
6
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EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company.
ALAN JAMES, 68, is Chairman of the Board of Directors of Greenbrier, a
position he has held since May 1994. Mr. James was President of Greenbrier
from 1974 to 1994.
WILLIAM A. FURMAN, 54, is President, Chief Executive Officer and a director
of Greenbrier, positions he has held since May 1994. Mr. Furman is also Chief
Executive Officer of Gunderson, Inc. and Managing Director of TrentonWorks,
Limited. Mr. Furman was Vice President of Greenbrier from 1974 to 1994. Mr.
Furman serves as a director of Schnitzer Steel Industries, Inc., a steel
recycling and manufacturing company.
ROBIN D. BISSON, 44, has been Senior Vice President Marketing and Sales since
January 1996 and President of Greenbrier Railcar, Inc., a subsidiary that
engages in railcar leasing, since 1991. Mr. Bisson was Vice President of
Greenbrier Railcar, Inc. from 1987 to 1991 and has been Vice President of
Greenbrier Leasing Corporation, a subsidiary that engages in railcar leasing,
since 1987.
LARRY G. BRADY, 59, is Senior Vice President and Chief Financial Officer of
the Company. Prior to becoming Senior Vice President in January 1998 he was
Vice President and Chief Financial Officer since May 1994. Mr. Brady has been
Senior Vice President of Greenbrier Leasing Corporation since he joined
Greenbrier in 1991. From 1974 to 1990, he was a partner with Touche Ross &
Co. (which subsequently became Deloitte & Touche LLP).
A. DANIEL O'NEAL, 62, has been Chairman of Autostack Corporation, a
subsidiary that engages in vehicle transportation, since 1992; a director of
Gunderson, Inc. since 1985 and serves as a director of the Company. From 1973
until 1980, Mr. O'Neal served as a commissioner of the Interstate Commerce
Commission, and from 1977 until 1980 served as its Chairman. From 1989 until
1996 he was chief executive officer and owner of a freight transportation
services company. He is currently Chairman of Powertech Toolworks, Inc., a
computer services and training company.
MARK J. RITTENBAUM, 41, is Vice President and Treasurer of the Company, a
position he has held since May 1994. Mr. Rittenbaum is also Vice President of
Greenbrier Leasing Corporation and Greenbrier Railcar, Inc., positions he has
held since 1993 and 1994.
TIMOTHY A. STUCKEY, 48, 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, 59, is Executive Vice President and General Counsel of the
Company, a position he has held since May 1994. He is also Vice President,
Secretary and a director of Gunderson, Inc. Mr. Webb was Vice President of
the Company from 1981 to 1994.
L. CLARK WOOD, 56, has been President of Manufacturing Operations since April
1998, President of Gunderson, Inc. since 1990 and Chief Executive Officer of
TrentonWorks Limited since June 1995. Mr. Wood was Vice President and
Director of Railcar Sales at Trinity Industries, Inc., a railroad freight car
manufacturer from 1985 to 1990.
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, among other
things, to vote as directors to elect Mr. Furman as President and Chief
Executive Officer of the Company, Mr. James as Chairman, and certain persons
as executive officers and each to vote for the other and for the remaining
existing directors in electing directors of the Company.
7
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EMPLOYEES
As of August 31, 1998, Greenbrier had 2,865 full-time employees, consisting of
2,743 employees engaged in railcar and marine manufacturing, and railcar
services, and 122 employees engaged in leasing and services activities. A total
of 1,017 employees at the manufacturing facility in Trenton, Nova Scotia, Canada
are covered by collective bargaining agreements which expire in 2000. 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 generally good.
ITEM 2. PROPERTIES
The Company operates at the following facilities as of August 31, 1998:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION SIZE LOCATION STATUS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Railcar and marine 75 acres including 774,000 sq. ft. of Portland, Oregon Owned
manufacturing facility covered manufacturing space and a 750-
foot side-launch ways for launching
ocean-going vessels
- --------------------------------------------------------------------------------------------------------------------------------
Railcar manufacturing and 100 acres with 414,000 sq. ft. of Trenton, Nova Scotia Owned
forge facility manufacturing space as well as a forge
shop
- --------------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 70 acres Cleburne, Texas Leased through 2002 with an
option to purchase
- --------------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 40 acres Finley, Washington Leased through 2015 with an
option to purchase
- --------------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 5.4 acres Springfield, Oregon Leased through 2004
Wheel shop 4.6 acres Tacoma, Washington Leased through 2003 with
extensions through 2071
- --------------------------------------------------------------------------------------------------------------------------------
Wheel shop 20,000 sq. ft. Pine Bluff, Arkansas Leased through 1999
- --------------------------------------------------------------------------------------------------------------------------------
Executive offices, 23,000 sq. ft. Lake Oswego, Oregon Leased through 2001
including railcar marketing
and leasing activities
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Marketing and administrative offices are also leased in various
locations throughout the U.S. and Europe. Greenbrier believes that its
facilities are in good condition and that the facilities, together with
anticipated capital improvements and additions, are adequate to meet its
operating needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
Greenbrier is involved as a defendant in litigation in the ordinary
course of business, the outcome of which cannot be predicted with certainty.
Litigation has been initiated by former shareholders of Interamerican
Logistics Inc. ("Interamerican"), which was acquired in the fall of 1996. The
plaintiffs allege that Greenbrier violated the agreements pursuant to which
it acquired ownership of Interamerican and seek damages aggregating $4
million Canadian. Management contends the claim to be without merit and
intends to vigorously defend its position. Management believes that any
ultimate liability resulting from litigation will not materially affect the
financial position, results of operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
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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 1998 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 1998 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 1998 Annual Report to Stockholders, which
section is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Greenbrier has assessed its exposure to market risk for its variable
rate debt and foreign currency exposures and believes that exposures to such
risks are not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements and report of
independent auditors set forth in the 1998 Annual Report to Stockholders are
incorporated herein by reference: Consolidated Balance Sheets as of August
31, 1998 and 1997, and the Consolidated Statements of Operations,
Consolidated Statements of Stockholders' Equity and Consolidated Statements
of Cash Flows for each of the years ended August 31, 1998, 1997 and 1996, 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.
9
<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, 1998, 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, 1998.
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, 1998.
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, 1998.
10
<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 October 23, 1998, appearing on pages 24 to 37 of
the 1998 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 1998 Annual
Report to Stockholders is not to be deemed filed as part of this Annual Report
on Form 10-K.
Annual Report
Page No.
------------
(a) (1) Financial Statements of the Company - Index 17
Independent Auditors' Report 24
Consolidated Balance Sheets as of August 31, 1998 and 1997 25
Consolidated Statements of Operations for each of the years
ended August 31, 1998, 1997 and 1996 26
Consolidated Statements of Stockholders' Equity for each of
the years ended August 31, 1998, 1997 and 1996 27
Consolidated Statements of Cash Flows for each of the
years ended August 31, 1998, 1997 and 1996 28
Notes to Consolidated Financial Statements 29
This Filing
Page No.
-----------
(2) The following financial statement schedule should be read
in conjunction with the Consolidated Financial Statements
in the 1998 Annual Report to Stockholders. All other
schedules have been omitted because they are inapplicable,
not required or because the information is given in the
Consolidated Financial Statements or related Notes to
Consolidated Financial Statements.
Independent Auditors' Report 15
Schedule I - Condensed Financial Information of Registrant 16
(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.
11
<PAGE>
10.1.* Employment Agreement dated as of July 1, 1994, between
Alan James and Registrant is incorporated herein by reference
to Exhibit 10.2 filed with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1994.
10.2.* Employment Agreement dated as of July 1, 1994, between
William A. Furman and Registrant is incorporated herein by
reference to Exhibit 10.3 filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended May 31, 1994.
10.3* Employment Agreement dated 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.
10.4.* 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.
10.5* Greenbrier Leasing Corporations Manager Owned Target Benefit
Plan dated as of January 1, 1996 is incorporated herein by
reference to Exhibit 10.35 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1997.
10.6.* 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.
10.7. 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.
10.8. Amendment No. 1 to the 1994 Stock Incentive Plan, dated July 14,
1998.
10.9. 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.
10.10. 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.
10.11. 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.
10.12. 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.
10.13. 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.
12
<PAGE>
10.14. 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.
10.15. 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.
10.16. 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.
10.17. Re-marketing Agreement dated as of November 19, 1987 among
Southern Pacific Transportation Company, St. Louis Southwestern
Railway Company, Greenbrier Leasing Corporation and Greenbrier
Railcar, Inc. is incorporated herein by reference to Exhibit 10.5
to Registrant's Registration Statement No. 33-78852, dated
July 11, 1994.
10.18. Amendment to Re-marketing Agreement among Southern Pacific
Transportation Company, St. Louis Southwestern Railway Company,
Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. dated
as of November 15, 1988 is incorporated herein by reference to
Exhibit 10.6 to Registrant's Registration Statement No. 33-78852,
dated July 11, 1994.
10.19. Amendment No. 2 to Re-marketing Agreement among Southern Pacific
Transportation Company, St. Louis Southwestern Railway Company,
Greenbrier Leasing Corporation and Greenbrier Railcar, Inc. is
incorporated herein by reference to Exhibit 10.7 to Registrant's
Registration Statement No. 33-78852, dated July 11, 1994.
10.20. Amendment No. 3 to Re-marketing Agreement dated November 19, 1987
among Southern Pacific Transportation Company, St. Louis
Southwestern Railway Company, Greenbrier Leasing Corporation and
Greenbrier Railcar, Inc. dated as of March 5, 1991 is
incorporated herein by reference to Exhibit 10.8 to Registrant's
Registration Statement No. 33-78852, dated July 11, 1994.
10.21 Credit Agreement dated as of September 1, 1997 among Greenbrier
Leasing Corporation, Greenbrier Capital Corporation, Greenbrier
Partners Inc., Greenbrier Railcar, Inc., Autostack Corporation,
Greenbrier Transportation Limited Partnership, Autostack General
Partner, Inc. and Greenbrier Rental Services, Inc. with Bank of
America National Trust and Savings Association and Union Bank of
California, N.A. is incorporated herein by reference to
Exhibit 10.34 to Registrant's Annual Report on Form 10-K for
the year ended August 31, 1997.
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. 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.
13
<PAGE>
13. 1998 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
14
<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, 1998 and 1997, and for each of the three years in
the period ended August 31, 1998, and have issued our report thereon dated
October 23, 1998; such financial statements and report are included in your 1998
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of The Greenbrier
Companies, Inc. and Subsidiaries, listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Deloitte & Touche LLP
Portland, Oregon
October 23, 1998
<PAGE>
SCHEDULE I
THE GREENBRIER COMPANIES, INC.
CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
(In thousands)
<TABLE>
<CAPTION>
BALANCE SHEETS
August 31,
----------------------
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 169 $ 21
Accounts receivable 2,623 48
Due from affiliates 13,972 11,832
Investment in subsidiaries 119,246 95,370
Prepaid expenses and other 2,764 1,582
--------- ---------
$ 138,774 $ 108,853
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 3,259 $ 1,115
Due to affiliates 12,457 3,077
Deferred income taxes 2,216 589
Stockholders' equity 120,842 104,072
--------- ---------
$ 138,774 $ 108,853
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Year ended August 31,
-----------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Interest and other income $ 612 $ 1,044 $ 2,624
Expenses
Selling and administrative 8,859 4,571 5,325
Interest 326 26 37
------- -------- --------
9,185 4,597 5,362
------- -------- --------
Loss before income tax benefit and equity
in earnings of subsidiaries (8,573) (3,553) (2,738)
Income tax benefit 3,601 1,496 1,153
------- -------- --------
Loss before equity in earnings (loss)
of subsidiaries (4,972) (2,057) (1,585)
Equity in earnings (loss) of subsidiaries 25,304 (2,114) 19,860
------- -------- --------
Net earnings (loss) $20,332 $ (4,171) $ 18,275
------- -------- --------
------- -------- --------
</TABLE>
15
<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,
-----------------------------
1998 1997 1996
------- -------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $20,332 $ (4,171) $18,275
Adjustments to reconcile net earnings to
net cash provided by (used in)
operating activities:
Deferred income taxes 1,627 978 (679)
Equity in earnings of subsidiary (25,304) (8,564) (19,860)
Other 54 56 185
Decrease (increase) in assets:
Accounts and notes receivable (2,575) 10 (22)
Due from affiliates (2,140) 14,827 10,613
Prepaid expenses and other (1,182) (644) 309
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 2,144 (1,740) 1,480
Due to affiliates 9,380 2,477 53
------- ------- -------
Net cash provided by operating activities 2,336 3,229 10,354
Cash flows from investing activities:
Investment in subsidiary - - (7,472)
------- ------- -------
Net cash used in investing activities - - (7,472)
Cash flows for financing activities:
Dividends (3,409) (3,399) (3,399)
Proceeds from stock options 1,221 - -
Proceeds from subsidiary redemption
of preferred stock - 68 111
------- ------- -------
Net cash used in financing activities (2,188) (3,331) (3,288)
Increase (decrease) in cash 148 (102) (406)
Cash and cash equivalents:
Beginning of year 21 123 529
------- ------- -------
End of year $ 169 $ 21 $ 123
------- ------- -------
------- ------- -------
Supplemental disclosures of cash
flow information:
Cash paid during the year for interest $ 326 $ 26 $ 37
</TABLE>
16
<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 23, 1998 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 23, 1998
- ---------------------------------
Alan James, Chairman of the Board
/s/ William A. Furman November 23, 1998
- ---------------------------------
William A. Furman, President and
Chief Executive Officer, Director
/s/ Victor G. Atiyeh November 23, 1998
- ---------------------------------
Victor G. Atiyeh, Director
/s/ Peter K. Nevitt November 23, 1998
- ---------------------------------
Peter K. Nevitt, Director
/s/ A. Daniel O'Neal November 23, 1998
- ---------------------------------
A. Daniel O'Neal, Director
/s/ C. Bruce Ward November 23, 1998
- ---------------------------------
C. Bruce Ward, Director
/s/ Benjamin R. Whiteley November 23, 1998
- ---------------------------------
Benjamin R. Whiteley, Director
/s/ Larry G. Brady November 23, 1998
- ---------------------------------
Larry G. Brady, Sr. Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
17
<PAGE>
Exhibit 10.8
AMENDMENT NO. 1
to
1994 STOCK INCENTIVE PLAN
Pursuant to the authority conferred by Article XI of the 1994 Stock Incentive
Plan of The Greenbrier Companies, Inc. (the "Plan"), Article VII.G.3 of the Plan
is amended in its entirety to read as follows:
"3. In the event of the death of a Holder of an Option
while employed by, or providing service to, the Company or
any Affiliate, such Option shall become immediately
exercisable in its entirety and may be exercised at any time
prior to the expiration date of the Option, but only by the
person or persons to whom such Holder's rights under the
Option shall pass by the Holder's will or by the laws of
descent and distribution of the state or country of domicile
at the time of death."
Except as modified by this Amendment No. 1, the Plan shall remain in full force
and effect and be unamended.
Adopted by the Board of Directors on July 14, 1998.
/s/ Kenneth D. Stephens
----------------------------------------
Kenneth D. Stephens, Secretary
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Selected Financial Information 18
Management's Discussion and Analysis of
Results of Operations and Financial Condition 19
Reports of Management and Independent Auditors 24
Consolidated Balance Sheets 25
Consolidated Statements of Operations 26
Consolidated Statements of Stockholders' Equity 27
Consolidated Statements of Cash Flows 28
Notes to Consolidated Financial Statements 29
Quarterly Results of Operations 38
Directors & Officers 39
Investor Information 40
Locations 41
</TABLE>
[PHOTO]
[PHOTO]
[PHOTO]
[PHOTO]
[PHOTO]
GUNDERSON'S TTX EXCELLENT SUPPLIER AWARDS -- SEVEN CONSECUTIVE YEARS FOR FREIGHT
CAR MANUFACTURING AND SIX CONSECUTIVE YEARS FOR WHEEL SERVICES.
Financial Review The Greenbrier Companies 1998 Annual Report 17
<PAGE>
SELECTED FINANCIAL INFORMATION
YEARS ENDED AUGUST 31
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1996 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue:
Manufacturing $ 451,706 $ 325,501 $ 421,456 $ 295,216 $ 234,439
Leasing and services 88,655 105,419 98,484 92,510 87,250
-----------------------------------------------------------------------------
$ 540,361 $ 430,920 $ 519,940 $ 387,726 $ 321,689
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Earnings from continuing operations $ 20,332(1) $ 6,021(2) $ 18,613 $ 16,665 $ 11,277
Discontinued operations:
Loss on operations(3) $ -- $ (2,512) $ (338) $ -- $ --
Estimated loss on disposal(4) $ -- $ (7,680) $ -- $ -- $ --
Net earnings (loss) $ 20,332 $ (4,171) $ 18,275 $ 16,665 $ 10,777(5)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Basic earnings per share:
From continuing operations $ 1.43 $ 0.43 $ 1.31 $ 1.18 $ 1.02
Net earnings (loss) $ 1.43 $ (0.29) $ 1.29 $ 1.18 $ 0.98(5)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Diluted earnings per share:
From continuing operations $ 1.42 $ 0.43 $ 1.31 $ 1.17 $ 1.02
Net earnings (loss) $ 1.42 $ (0.29) $ 1.29 $ 1.17 $ 0.97(5)
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Weighted average shares outstanding:
Basic 14,203 14,160 14,160 14,160 11,049
Diluted 14,346 14,160 14,170 14,230 11,065
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Cash dividends paid per share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ --
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Balance Sheet Data
Assets:
Cash(6) $ 57,909 $ 21,744 $ 12,483 $ 14,014 $ 56,980
Manufacturing inventories 73,639 87,233 75,989 86,280 31,518
Leased equipment(7) 256,509 284,541 364,701 327,063 296,515
All other 117,432 187,000 162,315 105,032 86,896
-----------------------------------------------------------------------------
$ 505,489 $ 580,518 $ 615,488 $ 532,389 $ 471,909
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Debt:
Revolving $ -- $ 57,709 $ 27,814 $ 27,313 $ --
Term 147,876 201,786 216,278 190,754 217,453
-----------------------------------------------------------------------------
$ 147,876 $ 259,495 $ 244,092 $ 218,067 $ 217,453
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
Subordinated debt $ 37,932 $ 38,089 $ 44,554 $ 37,762 $ 34,142
Minority interest 9,783 18,183 38,154 38,040 28,823
Stockholders' equity 120,842 104,072 111,736 96,818 82,786
-----------------------------------------------------------------------------
Capital base $ 168,557 $ 160,344 $ 194,444 $ 172,620 $ 145,751
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
</TABLE>
(1) Includes a gain of $2,250 resulting from exiting the trailer and container
leasing operation more favorably than anticipated.
(2) Includes $8,348 of special charges related to an adjustment to the carrying
value of vehicle transportation equipment and the divestiture of the
trailer and container lease fleet.
(3) Net of income taxes of $1,784 in 1997 and $244 in 1996.
(4) Net of income taxes of $5,120.
(5) Includes extraordinary charge for debt prepayment penalties.
(6) Includes restricted cash and investments.
(7) Includes both operating and direct finance leases.
18 The Greenbrier Companies 1998 Annual Report Financial Review
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Greenbrier operates in two primary business segments: manufacturing and leasing
and services. The two business segments are operationally integrated. The
manufacturing segment produces double-stack intermodal railcars, conventional
railcars, marine vessels and forged steel products and performs railcar
refurbishment and maintenance activities, a portion of which is for the leasing
operation. The leasing and services segment owns or manages a fleet of
approximately 28,000 railcars for railroads, institutional investors and other
leasing companies.
Railcars are generally manufactured under firm orders from third parties, and
revenue is recognized when the cars are completed and accepted by the
customer. From time to time Greenbrier commits to manufacture railcars prior
to receipt of firm orders to maintain continuity of manufacturing operations
and may also build cars for its own lease fleet. Revenues do not include
sales of new railcars to, or refurbishment services performed for, the
leasing operation since intercompany transactions are eliminated in preparing
the consolidated financial statements. The margin generated from such sales
or refurbishment activity is realized by the leasing segment over the term of
the related lease or upon sale of the equipment.
EXPANSION AND ACQUISITIONS
MANUFACTURING FACILITIES
In September 1998, Greenbrier acquired a majority interest in a railcar and
specialty container manufacturer located in Swidnica, Poland. Polish investors
will maintain a significant ownership interest in the manufacturer. This
acquisition establishes a European manufacturing base and is expected to provide
access to the European markets, particularly the market in Poland. Initially,
the Polish facility is not expected to have a material impact on Greenbrier's
overall financial condition or results of operations, and the investment will be
funded through existing cash balances. This expansion will require the
development of a sales and marketing force knowledgeable about the European
market.
Also in September 1998, Greenbrier entered into a joint venture
to build railroad freight cars at an existing manufacturing facility in Sahagun,
Mexico. Each party will maintain a 50% interest in the joint venture. Operations
are expected to commence in the first quarter of 1999, and capacity is
anticipated to grow to 3,000 new cars annually. Required capital expenditures
and working capital needs are expected to be funded by existing operating cash
flow and cash balances.
MAINTENANCE AND REFURBISHMENT PROGRAMS
Subsequent to year end, Greenbrier entered into the following maintenance and
refurbishment agreements:
- - A long-term contract to manage the maintenance of 7,000 covered hopper cars
owned by Burlington Northern Santa Fe that is anticipated to begin in
December 1998.
- - An agreement with Canadian Pacific Railway to refurbish and re-market
certain of their used freight cars under a pilot program.
- - An agreement to refurbish and re-market surplus railcars in Europe.
MINORITY INTEREST
In February 1998, the unaffiliated investors' interest in the automobile
transportation business was acquired for $8 million through the use of
restricted cash. In December 1996, a minority investor's interest in the trailer
and container operation was acquired for $16 million utilizing operating cash
flow and available lines of credit.
[PHOTO]
TECHNOLOGY OF THE AUTO-MAX RAILCAR ALLOWS A HIGHER CAPACITY MIX OF VEHICLES
IN EVERY LOAD.
Financial Review The Greenbrier Companies 1998 Annual Report 19
<PAGE>
DISCONTINUED OPERATIONS AND DIVESTITURES
A plan was adopted in 1997 to discontinue the third party transportation
logistics segment, as well as to sell the trailer and container leasing
operation, in order to focus on core railcar operations.
The divestiture of the logistics segment was accounted for as a discontinued
operation. Accordingly, the results of logistics operations have been excluded
from continuing operations in the consolidated statements of operations for all
applicable periods. An estimated loss on disposal of approximately $13 million
($7.7 million net of income taxes), which included an adjustment of assets to
market value, estimated closedown expenses and anticipated operating losses
through final disposal, was included in the 1997 consolidated statements of
operations. In 1998, the disposition of the operating assets was concluded. The
determination of the adequacy of the remaining reserve will not be known until
certain litigation is resolved.
A portion of the trailer and container fleet was sold during the fourth quarter
of 1997. In 1998, the sale of the remaining trailer and container fleet, which
was included in leasing equipment held for refurbishment or sale as of August
31, 1997, was completed. The aggregate proceeds from all of the sales amounted
to approximately $86 million. Trailer and container leasing operations have been
included in leasing and services continuing operations.
RESULTS OF OPERATIONS
MANUFACTURING
Manufacturing revenues of $452 million, $326 million and $421 million for the
years ended 1998, 1997 and 1996 resulted from railcar and marine production,
forging, and refurbishment and maintenance activities. Revenues resulted
primarily from new railcar deliveries which were 7,800 in 1998, 4,500 in 1997
and 6,400 in 1996. Increased revenues in 1998 are due to a rebound in the
intermodal transportation industry and overall strong market demand for freight
cars. Revenue in 1997 decreased due to fewer railcar deliveries in a softer
market environment, partially offset by higher per unit sales value. Intermodal
products comprised over 50% of 1998 deliveries while 1997 deliveries were
virtually all conventional equipment. As of August 31, 1998, the firm order
backlog of new railcars for sale or lease amounted to approximately 6,200 units
with an estimated sales value of $375 million compared to 2,600 units valued at
$133 million as of August 31, 1997.
The factors influencing cost of revenue and gross margin in a given period
include order size (which affects economies of plant utilization), product mix,
changes in manufacturing costs, product pricing and currency exchange rates. The
gross margin of 9% in 1998 compares favorably to 7% in 1997 as a result of the
efficiencies of longer production runs and strong market demand for railcars.
The gross margin in 1997 declined from the 10% achieved in 1996, reflecting a
highly competitive market, a less favorable product mix and shorter production
runs.
LEASING AND SERVICES
Leasing and services revenue includes revenue from the trailer and container
fleet that was sold in October 1997, but excludes revenue from logistics
services which was classified as a discontinued operation. Revenue decreased $17
million, or 16%, in 1998 from 1997 primarily due to the sale of the trailer and
container leasing operation. Revenue increased $7 million, or 7%, in 1997 over
1996 as a result of additional railcars placed in lease service, as well as
gains realized on the sale of railcar leasing equipment. Assets from
Greenbrier's lease fleet are
[CHART]
TOTAL REVENUE
(IN MILLIONS)
- - LEASING & SERVICES
- - MANUFACTURING
[CHART]
GREENBRIER RAILCAR
PRODUCTION
- - CONVENTIONAL
- - INTERMODAL
[CHART]
GREENBRIER RAILCAR
BACKLOG
(DOLLARS IN MILLIONS)
20 The Greenbrier Companies 1998 Annual Report Financial Review
<PAGE>
periodically sold in the normal course of business in order to take advantage of
market conditions, manage risk and maintain liquidity.
Pre-tax earnings realized on the disposition of leased equipment amounted to $9
million during 1998, compared to $7 million during 1997, and $5 million during
1996.
Leasing and services operating margin as a percentage of revenue improved to 60%
in 1998 compared to 56% in both 1997 and 1996. The improvement resulted
primarily from the sale of the trailer and container leasing assets which
generally operated at a higher expense ratio than the railcar leasing assets.
The improvement was offset somewhat by higher vehicle transportation operating
costs.
OTHER COSTS
Selling, administrative and other expense amounted to $38 million in 1998, $37
million in 1997 and $38 million in 1996. The increase in 1998 compared to 1997
is primarily due to international business development, sales and marketing
expenses and incentive compensation offset by the reduction resulting from the
sale of the trailer and container leasing operations. The decrease in 1997
compared to 1996 relates to lower incentive compensation offset somewhat by
increased research and development costs.
Interest expense declined $6 million to $21 million in 1998 from $27 million in
1997 due to increased liquidity resulting from equipment sales and improved
earnings. Interest expense increased slightly in 1997 compared to 1996 due to
greater usage of revolving credit lines for interim financing of railcar
production.
Special charges - leasing and services in 1997 represented a $7 million
adjustment to writedown the carrying value of vehicle transportation equipment
to its anticipated net realizable value and anticipated costs associated with
the divestiture of the trailer and container leasing operations. The sale of the
trailer and container fleet was completed in 1998, and the results associated
with the sale of the operations were more favorable than originally anticipated
resulting in a $2 million benefit in 1998.
The increase in minority interest reflects the improved contribution from the
Canadian operation offset by the effects of the acquisitions of minority
investors' ownership interests in 1998 and 1997.
The income tax provision represents an effective tax rate of 42% on U.S.
operations. Foreign operations reflect varying effective rates resulting in a
consolidated effective tax rate of 41.8%, 39.5% and 38.4% for 1998, 1997 and
1996. In 1997 and 1996, the effective tax rate was reduced by the utilization of
Canadian operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Greenbrier's growth has been financed through cash generated from operations,
borrowings from banks and other financial institutions, issuance of subordinated
debt and capital from minority investors.
Overall liquidity has improved as a result of the disposition of the trailer and
container lease fleet, improved operating results and the sale from
manufacturing inventory of assets held for sale. As a result, cash and
restricted cash increased $36 million to $58 million and revolving notes of $58
million at August 31, 1997 were repaid in 1998. In addition, $31 million of term
notes payable were retired in 1998 from a portion of the proceeds of the sale of
the trailer and container lease fleet.
Credit facilities aggregated $120 million as of August 31, 1998. A $60 million
revolving line of credit is available through May 2000 to provide working
capital and interim financing of equipment for the leasing and services
operations. A $40 million operating line of credit to be used for working
capital is available through February 2001 for U.S. manufacturing operations.
Advances under both the revolving and operating lines of credit bear interest at
rates which vary depending on the type of borrowing and certain defined ratios.
A $16 million (at the August 31, 1998 exchange rate) operating line of credit,
bearing interest primarily at Canadian prime plus .75%, is available through
March 1999 for working capital and certain capital expenditures for Canadian
operations. An additional $4 million, five-year term loan facility is available
for Canadian capital expenditures. There were no borrowings outstanding under
any of the operating lines or the term facility as of August 31, 1998.
[CHART]
GREENBRIER CASH AND RESTRICTED CASH
(IN MILLIONS)
Financial Review The Greenbrier Companies 1998 Annual Report 21
<PAGE>
In 1999, management anticipates refinancing $22 million of leasing term debt
which, when completed, will result in a pre-tax prepayment penalty estimated to
be $1.3 million to $1.8 million.
Capital expenditures totaled $51 million, $80 million, and $129 million in 1998,
1997 and 1996. Of these, approximately $39 million, $70 million and $122 million
in 1998, 1997 and 1996 were attributable to leasing and services operations.
Significant leasing and services capital expenditures in 1996 included additions
to the railcar lease fleet in association with a refurbishment program. Capital
expenditures for additions to the lease fleet in 1999 are expected to be
approximately $28.5 million. Greenbrier regularly sells assets from its lease
fleet, some of which may have been purchased within the current year and
included in capital expenditures.
Approximately $12 million, $10 million and $7 million of the total capital
expenditures for 1998, 1997 and 1996 were attributable to manufacturing
operations. Capital expenditures included improvements to plants and purchases
of new equipment to improve efficiency and increase capacity of the railcar
facilities and to expand and upgrade marine facilities. Capital expenditures for
manufacturing are expected to be approximately $33.4 million in 1999 and will
include plant improvements and equipment acquisitions to further increase
capacity and enhance efficiency.
Operations in Canada give rise to market risks from changes in foreign currency
exchange rates. Forward exchange contracts are utilized to hedge a portion of
the risk of foreign currency fluctuations related to a Canadian subsidiary. As
of August 31, 1998, forward exchange contracts outstanding for the purchase of
Canadian dollars were $58 million maturing at various dates through March 1999.
Realized and unrealized gains and losses from such off-balance sheet contracts
are deferred and recognized in income concurrent with the hedged transaction.
The difference between the contract rates and the spot rate at August 31, 1998
amounted to $3.6 million. Even though forward exchange contracts are entered
into to mitigate the impact of currency fluctuations, certain exposure remains
which may affect operating results.
Dividends of $.06 per share have been paid quarterly since 1995. A quarterly
dividend of $.06 per share was declared in November 1998, to be paid in
December. Future dividends are dependent upon earnings, capital requirements and
financial condition.
Certain loan covenants restrict the transfer of funds from subsidiaries to the
parent company in the form of cash dividends, loans, or advances. The restricted
net assets of subsidiaries amounted to $79 million as of August 31, 1998.
Consolidated retained earnings of $30 million at August 31, 1998 were restricted
as to the payment of dividends. Management expects existing funds and cash
generated from operations, together with borrowings under existing credit
facilities, to 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.
YEAR 2000
The "Year 2000" issue refers to computer programs which use two rather than four
digits to define a given year and which therefore might read a date using "00"
as the year 1900 rather than the year 2000. This could result in the computer
shutting down or performing incorrect computations in programs that have
date-sensitive software. A variety of computer systems, applications and
automated equipment are utilized in daily operations and may be affected by the
Year 2000 issue.
Greenbrier is currently assessing the impact of the Year 2000 issue on both its
information systems and embedded manufacturing control technology. The phases of
this project include inventorying affected technology and assessing the impact
of the Year 2000 issue; developing remediation plans; modification; testing; and
implementation. All components of software and hardware are in various phases of
this process. The company expects to have its information and manufacturing
systems tested and compliant by August 1999.
Greenbrier has key relationships with a number of vendors and suppliers,
including banks and other providers of goods and services. The company has
requested vendors to supply Year 2000 compliance documentation, but it has not
been determined whether all of the vendors and suppliers are Year 2000
compliant. Reliance on single vendor source suppliers, however, is minimal, and
the company seeks to limit sole source supply relationships. The company could
be adversely impacted if its suppliers and vendors do not make necessary changes
to their own systems and products successfully or timely.
[CHART]
CAPITAL EXPENDITURES
(IN MILLIONS)
- - LEASING & SERVICES
- - MANUFACTURING
22 The Greenbrier Companies 1998 Annual Report Financial Review
<PAGE>
The costs to be incurred in responding to Year 2000 computer system
deficiencies, together with the cost of any required modifications to the
company's systems, beyond ongoing hardware replacements and software upgrades
performed in the normal course of business, cannot be accurately estimated at
this time. Monies spent to date in assessing and remediating Year 2000 issues
have not been material.
If the remaining elements of the company's plan to address the Year 2000 issue
are not successfully or timely implemented, more time will need to be devoted to
the process and additional costs may be incurred. In addition, significant
disruptions to operations, including slowing the manufacturing process,
resulting in potential revenue loss and increased costs, could result. Any of
these eventualities could have a material adverse effect on the financial
position, results of operations or cash flows of the company.
A contingency plan has not been established, but one is expected to be
formulated by August 1999 to address unavoided or unavoidable risks.
PROSPECTIVE ACCOUNTING CHANGES
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income, establishes requirements for disclosure of comprehensive
income. The new standard becomes effective in fiscal year 1999. There are not
expected to be any substantial changes to disclosure at the time SFAS No. 130 is
adopted.
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, establishes standards for disclosure about operating segments in
annual financial statements and requires disclosure of selected information
about operating segments in interim financial reports. The new standard becomes
effective in fiscal year 1999. There are not expected to be any substantial
changes to disclosures at the time SFAS No. 131 is adopted.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
requires that all derivatives be recognized as either assets or liabilities
measured at fair value. Greenbrier has not fully evaluated the effect of this
statement. The new standard becomes effective in fiscal year 2000.
The company did not elect early adoption of SFAS No. 130, SFAS No. 131 or SFAS
No. 133.
FORWARD-LOOKING INFORMATION
From time to time, Greenbrier or its representatives have made or may make
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements as to
expectations, beliefs and strategies regarding the future. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the company with the Securities and Exchange Commission.
The following are among the factors that could cause actual results or outcomes
to differ materially from the forward-looking statements: general political,
regulatory or economic conditions; changes in interest rates; business
conditions and growth in the surface transportation industry, both domestic and
international; currency and other risks associated with international
operations; shifts in market demand; a delay or failure of acquisitions,
products or services to compete successfully; changes in product mix and the mix
between manufacturing and leasing and services revenue; transportation labor
disputes or operating difficulties which might disrupt the flow of cargo;
competitive factors, including increased competition, new product offerings by
competitors and price pressures; actual future costs and availability of
materials and a trained workforce; labor disputes; production difficulties and
product delivery delays in the future as a result of, among other matters,
changing process technologies and increasing production; lower than expected
customer orders; the ability to consummate expected sales; delays in receipt of
orders or cancellation of orders; financial condition of principal customers;
and the impact of year 2000 compliance by the company or by its customers,
suppliers or service partners. Any forward-looking statements should be
considered in light of these factors.
[PHOTO]
PLASMA CUTTER USED TO CUT STEEL IN THE MANUFACTURING PROCESS.
Financial Review The Greenbrier Companies 1998 Annual Report 23
<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 content. They reflect amounts based
upon management's best estimates and informed judgments. In management's
opinion, the financial statements present fairly the financial position, results
of operations and cash flows of the company in conformity with generally
accepted accounting principles.
The company maintains a system of internal 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 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 Senior 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, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended August 31, 1998. 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, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Portland, Oregon
October 23, 1998
[PHOTO]
TRENTONWORKS EMPLOYEES.
24 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997
---------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 41,912 $ 14,384
Restricted cash and investments 15,997 7,360
Accounts and notes receivable 47,537 61,024
Manufacturing inventories 73,639 87,233
Leasing equipment held for refurbishment or sale 6,210 64,358
Investment in direct finance leases 160,940 182,421
Equipment on operating leases 95,569 102,120
Property, plant and equipment 49,452 44,925
Prepaid expenses and other 14,233 16,693
---------------------------------------------
$ 505,489 $ 580,518
---------------------------------------------
---------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving notes $ -- $ 57,709
Accounts payable and accrued liabilities 132,121 107,738
Deferred participation 45,243 39,032
Deferred income taxes 11,692 13,909
Notes payable 147,876 201,786
Subordinated debt 37,932 38,089
Minority interest 9,783 18,183
Commitments and contingencies (Notes 3, 18 & 19)
Stockholders' equity
Preferred stock -- $0.001 par value; 25,000 shares
authorized; none outstanding -- --
Common stock -- $0.001 par value; 50,000 shares
authorized; 14,253 and 14,160 outstanding
at August 31, 1998 and 1997 14 14
Additional paid-in capital 50,416 49,135
Retained earnings 71,612 54,689
Foreign currency translation adjustment (1,200) 234
---------------------------------------------
120,842 104,072
---------------------------------------------
$ 505,489 $ 580,518
---------------------------------------------
---------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
Financial Statements The Greenbrier Companies 1998 Annual Report 25
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1998 1997 1996
------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Manufacturing $ 451,706 $ 325,501 $ 421,456
Leasing and services 88,655 105,419 98,484
------------------------------------------------------------------
540,361 430,920 519,940
COST OF REVENUE
Manufacturing 410,553 301,408 378,829
Leasing and services 35,349 46,317 43,019
------------------------------------------------------------------
445,902 347,725 421,848
MARGIN 94,459 83,195 98,092
OTHER COSTS
Selling, administrative and other expense 38,359 36,640 37,525
Interest expense 20,946 27,148 25,670
Special charges -- leasing and services (2,250) 8,348 --
------------------------------------------------------------------
57,055 72,136 63,195
Earnings before income tax expense and
minority interest 37,404 11,059 34,897
Income tax expense (15,643) (4,366) (13,414)
------------------------------------------------------------------
Earnings before minority interest 21,761 6,693 21,483
Minority interest (1,429) (672) (2,870)
------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS 20,332 6,021 18,613
Discontinued operations:
Loss on operations (net of tax benefit of
$1,784 in 1997 and $244 in 1996) -- (2,512) (338)
Estimated loss on disposal (net of tax
benefit of $5,120 in 1997) -- (7,680) --
------------------------------------------------------------------
Net earnings (loss) $ 20,332 $ (4,171) $ 18,275
------------------------------------------------------------------
------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
From continuing operations $ 1.43 $ 0.43 $ 1.31
Discontinued operations -- (0.72) (0.02)
------------------------------------------------------------------
Net earnings (loss) $ 1.43 $ (0.29) $ 1.29
------------------------------------------------------------------
------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
From continuing operations $ 1.42 $ 0.43 $ 1.31
Discontinued operations -- (0.72) (0.02)
------------------------------------------------------------------
Net earnings (loss) $ 1.42 $ (0.29) $ 1.29
------------------------------------------------------------------
------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 14,203 14,160 14,160
Diluted 14,346 14,160 14,170
</TABLE>
The accompanying notes are an integral part of these statements.
26 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Foreign
Common Stock Additional Currency Total
------------------- Paid-in Retained Translation Stockholders'
Shares Amount Capital Earnings Adjustment Equity
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 ($.24 per share) -- -- -- (3,399) -- (3,399)
Foreign currency translation
adjustment -- -- -- -- (143) (143)
Net earnings -- -- -- 18,275 -- 18,275
---------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1996 14,160 14 49,079 62,259 384 111,736
Compensation relating to non-
qualified stock option plan -- -- 56 -- -- 56
Cash dividends ($.24 per share) -- -- -- (3,399) -- (3,399)
Foreign currency translation
adjustment -- -- -- -- (150) (150)
Net loss -- -- -- (4,171) -- (4,171)
---------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1997 14,160 14 49,135 54,689 234 104,072
Stock options exercised 93 -- 1,221 -- -- 1,221
Compensation relating to non-
qualified stock option plan -- -- 60 -- -- 60
Cash dividends ($.24 per share) -- -- -- (3,409) -- (3,409)
Foreign currency translation
adjustment -- -- -- -- (1,434) (1,434)
Net earnings -- -- -- 20,332 -- 20,332
---------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1998 14,253 $ 14 $ 50,416 $ 71,612 $ (1,200) $ 120,842
---------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
Financial Statements The Greenbrier Companies 1998 Annual Report 27
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED AUGUST 31
(IN THOUSANDS) 1998 1997 1996
----------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 20,332 $ (4,171) $ 18,275
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Deferred income taxes (2,217) (8,217) 6,396
Deferred participation 6,211 6,716 4,487
Depreciation and amortization 14,527 27,869 24,895
Discontinued operations -- 9,300 --
Special charges (2,250) 8,348 --
Gain on sales of equipment (9,994) (9,815) (5,324)
Other 1,537 (1,035) 215
Decrease (increase) in assets:
Accounts and notes receivable 13,197 16,504 (38,377)
Inventories 10,110 (11,244) 10,291
Prepaid expenses and other 1,910 (6,074) (2,817)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 22,509 (9,619) 16,830
----------------------------------------------------------------
Net cash provided by operating activities 75,872 18,562 34,871
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired -- -- (1,960)
Principal payments received under direct finance leases 15,102 11,226 8,402
Investment in direct finance leases (856) (11,856) (26,430)
Proceeds from sales of equipment 117,945 58,081 58,328
Purchase of property and equipment (50,345) (64,381) (94,880)
Investment in restricted cash and investments (8,637) (960) (2,736)
----------------------------------------------------------------
Net cash provided by (used in) investing activities 73,209 (7,890) (59,276)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 13,157 47,479 48,912
Repayments of borrowings (124,750) (30,118) (25,375)
Dividends (3,409) (3,399) (3,399)
Purchase of minority interest (7,772) (16,333) --
Proceeds from stock options 1,221 -- --
----------------------------------------------------------------
Net cash provided by (used in) financing activities (121,553) (2,371) 20,138
----------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 27,528 8,301 (4,267)
Cash and cash equivalents
Beginning of period 14,384 6,083 10,350
----------------------------------------------------------------
End of period $ 41,912 $ 14,384 $ 6,083
----------------------------------------------------------------
----------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 20,526 $ 27,451 $ 26,166
Income taxes 13,626 2,914 11,038
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Purchase of minority interest $ 1,580 $ 2,044 $ --
Repayment of borrowings through return of
railcars held for refurbishment or sale 96 11,574 2,433
Equipment obtained through borrowings -- 4,024 7,581
</TABLE>
The accompanying notes are an integral part of these statements.
28 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended August 31, 1998
(Dollars in thousands, except per share amounts)
NOTE 1 -- NATURE OF OPERATIONS
The Greenbrier Companies, Inc. and Subsidiaries ("Greenbrier" or the "company")
currently operates in two primary business segments: manufacturing and leasing
and services. The two business segments are operationally integrated. The
manufacturing segment produces double-stack intermodal and conventional
railcars, marine vessels and forged steel products and performs railcar
refurbishment and maintenance activities, a portion of which is for the leasing
operation. The leasing and services segment owns or manages a fleet of
approximately 28,000 railcars for railroads, institutional investors and other
leasing companies.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The financial statements include the accounts of
the company and its majority-owned subsidiaries. All significant intercompany
transactions and balances are eliminated upon consolidation.
The financial statements and transactions of the Canadian subsidiaries are
maintained in their functional currency and translated into U.S. dollars for
purposes of consolidation. Translation adjustments are accumulated as a separate
component of stockholders' equity.
CASH AND INVESTMENTS -- Cash is temporarily invested primarily in bankers'
acceptances, U.S. Treasury bills, commercial paper and money market funds.
Restricted cash and investments may only be used for equipment acquisitions in
accordance with loan agreements. All highly-liquid investments with a maturity
of three months or less are considered cash equivalents.
MANUFACTURING INVENTORIES -- Inventories are valued at the lower of cost
(first-in, first-out) or market. Work-in-process includes material, labor and
overhead.
LEASING EQUIPMENT HELD FOR REFURBISHMENT OR SALE -- Railcars held for
refurbishment or sale are hulks that will either be refurbished and placed on
lease or sold and are carried at the cost of the hulks and any refurbishment
costs incurred. As discussed in Note 3, the operating assets of the trailer and
container leasing business were included in Leasing equipment held for
refurbishment or sale as of August 31, 1997.
EQUIPMENT ON OPERATING LEASES -- Equipment on operating leases is stated at
cost. Depreciation to estimated salvage value is provided on the straight-line
method over the estimated useful lives of the equipment. Management evaluates
the remaining life and recoverability of equipment in light of current
conditions. If business conditions change, such estimates could also change.
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.
PREPAID EXPENSES AND OTHER ASSETS -- Loan fees are capitalized and amortized as
interest expense over the life of the related borrowings. Goodwill is generally
amortized over twelve years on the straight-line method.
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.
MINORITY INTEREST -- Minority interest represents unaffiliated investors'
capital investment and interest in the undistributed earnings and losses of
consolidated entities.
REVENUE RECOGNITION -- Revenue from manufacturing operations is recognized at
the time products are completed and accepted by unrelated customers.
Direct finance lease revenue is recognized over the lease term in a manner which
produces a constant rate of return on the net investment in the lease. Certain
interim rentals are based on estimated costs.
Operating lease revenue is recognized as earned under the lease terms. Payments
received in advance are deferred until earned.
[PHOTO]
CENTER-PARTITION LUMBER CAR.
Financial Statements The Greenbrier Companies 1998 Annual Report 29
<PAGE>
FORWARD EXCHANGE CONTRACTS -- Operations in Canada give rise to market risks
from changes in foreign currency exchange rates. Forward exchange contracts are
utilized to hedge a portion of the risk of foreign currency fluctuations.
Realized and unrealized gains and losses are deferred and recognized in earnings
concurrent with the hedged transaction. Even though forward exchange contracts
are entered into to mitigate the impact of currency fluctuations, certain
exposure remains, which may affect operating results.
INTEREST RATE INSTRUMENTS -- Interest rate swap agreements are utilized to
reduce the impact of changes in interest rates on certain debt. The net cash
amounts paid or received on the agreements are accrued and recognized as an
adjustment to interest expense.
NET EARNINGS PER SHARE -- In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards ("SFAS") No. 128,
Earnings Per Share, which requires disclosure of basic earnings per share
("EPS") and diluted EPS for periods ending after December 15, 1997. Basic EPS
excludes potential dilution which would occur if additional shares were issued
upon exercise of outstanding stock options, while diluted EPS takes this
potential dilution into account. All EPS amounts have been restated to conform
to the new requirements.
STOCK-BASED COMPENSATION -- Compensation expense for stock-based employee
compensation continues to be measured using the method prescribed by APB Opinion
No. 25, Accounting for Stock Issued to Employees. If material, pro forma
disclosures of net earnings and earnings per share will be made as if the method
prescribed by SFAS No. 123, Accounting for Stock-Based Compensation, had been
applied in measuring compensation expense.
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.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior years'
consolidated financial statements to conform with the 1998 presentation.
PROSPECTIVE ACCOUNTING CHANGES -- SFAS No. 130, Reporting Comprehensive Income,
establishes requirements for disclosure of comprehensive income. The new
standard becomes effective in fiscal year 1999. There are not expected to be any
substantial changes to disclosure at the time SFAS No. 130 is adopted.
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, establishes standards for disclosure about operating segments in
annual financial statements and requires disclosure of selected information
about operating segments in interim financial reports. The new standard becomes
effective in fiscal year 1999. There are not expected to be any substantial
changes to disclosures at the time SFAS No. 131 is adopted.
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
requires that all derivatives be recognized as either assets or liabilities
measured at fair value. Greenbrier has not fully evaluated the effect of this
statement. The new standard becomes effective in fiscal year 2000.
The company did not elect early adoption of SFAS No. 130, SFAS No. 131 or SFAS
No. 133.
NOTE 3 -- DISCONTINUED OPERATIONS AND DIVESTITURES
In 1997, a plan was adopted to discontinue the third-party transportation
logistics segment, as well as to sell the trailer and container leasing
operation, in order to focus on core railcar operations.
DISCONTINUED OPERATIONS -- Under the plan, the third-party transportation
logistics segment was to be discontinued and, accordingly, the results of
operations for logistics have been excluded from continuing operations in the
Consolidated Statements of Operations for all applicable periods. An estimated
pre-tax loss on disposal of $12,800, which included an adjustment of assets to
market value, estimated closedown expenses and anticipated operating losses
through final disposal, was reflected as an anticipated loss on discontinued
operations in 1997. In 1998, the disposition of the operating assets was
concluded. The determination of the adequacy of the remaining reserve will not
be known until certain litigation is resolved. Information relating to the
operating results for the discontinued operations for the years ended August 31,
1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------------
<S> <C> <C>
Revenue $ 53,249 $ 10,070
Costs and expenses 57,545 10,652
----------------------------
Loss before income taxes (4,296) (582)
Less income tax benefit 1,784 244
----------------------------
Net loss $ (2,512) $ (338)
----------------------------
----------------------------
</TABLE>
[PHOTO]
REFURBISHED RAILCAR IN GREENBRIER'S LEASE FLEET.
30 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
DIVESTITURES -- A portion of the trailer and container lease fleet was sold
during the fourth quarter of 1997. In 1998 the sale of the remaining trailer and
container lease fleet, which was included in Leasing equipment held for
refurbishment or sale as of August 31, 1997, was completed. The aggregate
proceeds from all of the sales were approximately $86,000. In 1997, an estimated
pre-tax loss of approximately $1,600 was included in the Consolidated Statements
of Operations in Special charges -- leasing and services for anticipated results
of selling the operation. The results associated with the sale were more
favorable than originally anticipated resulting in a $2,250 benefit in 1998.
Trailer and container leasing operations contributed revenue of approximately
$4,100, $25,800 and $26,800 for the years ended August 31, 1998, 1997 and 1996.
NOTE 4 -- MANUFACTURING INVENTORIES
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
Manufacturing supplies
and raw materials $ 8,750 $ 7,323
Work-in-process 62,267 41,258
Assets held for sale 2,622 38,652
----------------------------
$73,639 $87,233
----------------------------
----------------------------
</TABLE>
NOTE 5 -- INVESTMENT IN DIRECT FINANCE LEASES
<TABLE>
<CAPTION>
1998 1997
------------------------------
<S> <C> <C>
Future minimum receipts
on lease contracts $ 247,842 $ 303,910
Less amounts for
maintenance, insurance
and taxes (55,041) (64,264)
------------------------------
Net minimum lease receipts 192,801 239,646
Estimated residual values 52,323 55,405
Unearned finance charges (84,184) (112,630)
------------------------------
$ 160,940 $ 182,421
------------------------------
------------------------------
</TABLE>
Minimum future receipts on the direct finance lease contracts are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
<S> <C>
1999 $ 50,693
2000 48,275
2001 47,282
2002 38,820
2003 28,242
Thereafter 34,530
-----------
$247,842
-----------
-----------
</TABLE>
NOTE 6 -- EQUIPMENT ON OPERATING LEASES
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Railcar equipment
and other $ 132,049 $ 140,701
Marine equipment 7,563 --
-------------------------------
139,612 140,701
Accumulated depreciation (44,043) (38,581)
-------------------------------
$ 95,569 $ 102,120
-------------------------------
-------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
<S> <C>
1999 $ 15,750
2000 9,792
2001 6,837
2002 5,995
2003 5,156
Thereafter 12,081
-------------
$ 55,611
-------------
-------------
</TABLE>
Certain equipment is also operated under daily, monthly or mileage arrangements.
Associated revenues amounted to $24,472, $33,611 and $28,460 for the years ended
August 31, 1998, 1997 and 1996.
In 1997, the carrying value of vehicle transportation equipment was adjusted to
the anticipated net realizable value of the assets based on projected future
performance under existing contracts. This resulted in a pre-tax charge of
$6,775, which was included in Special charges -- leasing and services in the
Consolidated Statements of Operations, of which $1,200 was allocated to minority
investors.
NOTE 7 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
-----------------------------
<S> <C> <C>
Land and improvements $ 8,440 $ 8,449
Machinery and equipment 41,944 33,082
Buildings and improvements 15,537 13,257
Other 10,747 13,119
-----------------------------
76,668 67,907
Accumulated depreciation (27,216) (22,982)
-----------------------------
$ 49,452 $ 44,925
-----------------------------
-----------------------------
</TABLE>
Financial Statements The Greenbrier Companies 1998 Annual Report 31
<PAGE>
NOTE 8 -- REVOLVING NOTES
A $40,000 operating line of credit is available through February 2001 to provide
working capital for the domestic manufacturing operations based on defined
receivables and inventory. Borrowings under this line bear interest at rates
which vary depending on the type of borrowing and certain defined ratios. There
were no borrowings outstanding as of August 31, 1998. Borrowings outstanding as
of August 31, 1997 were $14,775.
A $16,000 (at the August 31, 1998 exchange rate) operating line of credit,
bearing interest primarily at Canadian prime plus .75%, is available through
March 1999 for working capital and certain capital expenditures for the Canadian
manufacturing operation based on defined receivables and inventory. An
additional $4,000, five-year term loan facility is available for capital
expenditures. There were no borrowings outstanding as of August 31, 1998.
Borrowings outstanding as of August 31, 1997 were $21,934 under the operating
line of credit and a temporary borrowing facility which has expired.
A $60,000 revolving line of credit is available to provide working capital and
interim financing of leased equipment through May 2000. Borrowings under this
line are based on advances against defined leased equipment and bear interest at
rates which vary depending upon the type of borrowing and certain defined
ratios. There were no borrowings outstanding as of August 31, 1998. This
facility replaced a $43,000 agreement which had outstanding borrowings as of
August 31, 1997 of $21,000.
The applicable prime rate for domestic and Canadian borrowings was 8.5% and 7.5%
as of August 31, 1998.
NOTE 9 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Accounts payable and
accrued liabilities $ 71,880 $ 49,746
Maintenance reserves 21,698 27,790
Accrued payroll and
related liabilities 15,412 12,264
Estimated loss on disposal 4,937 12,800
Warranty reserves 4,125 4,536
Other 14,069 602
---------------------------
$132,121 $107,738
---------------------------
---------------------------
</TABLE>
NOTE 10 -- NOTES PAYABLE
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Leasing equipment notes
payable $133,192 $187,553
Manufacturing term loan,
due in monthly
installments through
July 2008 collateralized
by land and a facility 11,579 --
Manufacturing term loan,
interest at 11%, due in
monthly installments
through 2008 -- 11,741
Other manufacturing
notes payable 3,105 2,492
---------------------------
$147,876 $201,786
---------------------------
---------------------------
</TABLE>
Leasing equipment notes payable bear interest at fixed rates of 7.8% to 10.8%
and are due in varying installments through May 2004. The weighted average
remaining contractual life and weighted average interest rate of the notes as of
August 31, 1998 and 1997 was approximately 57 and 58 months and 8.6% for both
years.
A manufacturing term loan bearing interest at 11% was refinanced with a term
loan at LIBOR plus 1.35%. An interest rate swap agreement is being utilized to
reduce the risk of fluctuations in interest rates. The swap agreement has a
notional amount of $11,600 amortizing consistent with principal payments on the
term loan and effectively changes the interest rate exposure from a variable
rate to 7.35%. The swap agreement matures in July 2008. At August 31, 1998 the
LIBOR rate was 5.64%.
Substantially all assets of the company are pledged as collateral for the notes
payable and revolving notes.
Principal payments on the notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
<S> <C>
1999 $ 26,215
2000 27,915
2001 28,665
2002 27,748
2003 17,720
Thereafter 19,613
-----------
$147,876
-----------
-----------
</TABLE>
32 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
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, ratios of debt to equity and debt service
coverage.
NOTE 11 -- SUBORDINATED DEBT
Subordinated notes, amounting to $37,932 and $38,089 at August 31, 1998 and
1997, were issued for railcars purchased as part of an agreement described in
Note 19. The notes bear interest at 11% and 9%, with substantially all of the
principal due ten years from the date of the notes, and are subordinated to all
other liabilities of a subsidiary. Approximately $256 becomes due in 2001,
$10,266 in 2002 and $6,023 in 2003, with the remaining balance due after 2003.
NOTE 12 -- STOCKHOLDERS' EQUITY
The Chairman and the Chief Executive Officer, who are the founding and majority
stockholders, have entered into an agreement whereby they have agreed to vote
their shares together to elect each other as directors of the company and with
respect to all other matters put to a vote of the stockholders.
Certain loan covenants restrict the transfer of funds from the subsidiaries
to the parent company in the form of cash dividends, loans, or advances. The
restricted net assets of subsidiaries amounted to $78,874 as of August 31,
1998. Consolidated retained earnings of $30,332 at August 31, 1998 were
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 stock option transactions for shares
under option and the related weighted average option price:
<TABLE>
<CAPTION>
PRICE
SHARES PER SHARE
----------------------
<S> <C> <C>
Balance at August 31, 1995 682 $ 14
Granted 162 11
Canceled (56) 14
----------------------
Balance at August 31, 1996 788 14
Granted 3 11
Canceled (30) 14
----------------------
Balance at August 31, 1997 761 14
Granted 3 17
Exercised (93) 13
Canceled (24) 14
----------------------
Balance at August 31, 1998 647 $ 14
----------------------
----------------------
</TABLE>
Options outstanding at August 31, 1998 have exercise prices ranging from $11 to
$17 per share and have a remaining contractual life of 4.3 years. As of August
31, 1998, options to purchase 290 shares were exercisable and 733 shares were
available for grant. Options to purchase 619 and 592 shares were available for
grant at August 31, 1997 and 1996.
As discussed in Note 2, the disclosure-only provisions of SFAS No. 123 have been
adopted. Accordingly, no compensation cost has been recognized for stock options
granted with an exercise price equal to the fair value of the underlying stock
on the date of grant. Had compensation costs been determined based on the
estimated fair value of the options at the date of grant, the net earnings
(loss) and net earnings (loss) per share for the years ended August 31, 1998,
1997 and 1996 would not have differed materially from the amounts reported.
NOTE 13 -- RELATED PARTY TRANSACTIONS
In July 1996, the remaining 50% of a subsidiary was acquired from an executive
officer and director. The purchase price included $500 cash, a $250 note payable
bearing interest at 7% due on or before July 2000 and a contingent amount based
on the future value of certain operations.
Maintenance, management and other fees received from a related entity under an
agreement were $888 for both of the years ended August 31, 1998 and 1997 and
$930 for the year ended 1996.
[PHOTO]
HIGHLY SKILLED WELDERS ARE A KEY TO GREENBRIER'S SUCCESS.
Financial Statements The Greenbrier Companies 1998 Annual Report 33
<PAGE>
A member of the board of directors of a Canadian subsidiary also serves as a
director of the company from which the majority of the Canadian subsidiary's
steel requirements are acquired.
NOTE 14 -- EMPLOYEE BENEFIT PLANS
Defined contribution plans are available to substantially all U.S. employees.
Contributions are based on a percentage of employee contributions and amounted
to $649, $737 and $651 for the years ended August 31, 1998, 1997 and 1996.
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 the consolidated financial
statements.
Nonqualified deferred benefit plans exist for certain employees. Expenses
resulting from contributions to the plans, which are based on earnings, were
$2,393, $845 and $626 for the years ended August 31, 1998, 1997 and 1996.
NOTE 15 -- INCOME TAXES
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 13,811 $ 4,547 $ 5,386
State 2,581 284 1,302
Foreign 1,468 715 82
-----------------------------------------------
17,860 5,546 6,770
Deferred:
Federal (491) (1,848) 5,441
State (2,062) 442 1,203
Foreign 336 226 --
-----------------------------------------------
(2,217) (1,180) 6,644
-----------------------------------------------
$ 15,643 $ 4,366 $ 13,414
-----------------------------------------------
-----------------------------------------------
</TABLE>
Income tax expense is computed at rates different than statutory rates. The
reconciliation between effective and statutory tax rates on continuing
operations is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------
<S> <C> <C> <C>
Statutory rates 35.0% 35.0% 35.0%
State income
taxes, net of
federal benefit 4.5 4.8 5.1
Impact of
foreign taxes 0.6 (1.8) (0.2)
Other 1.7 1.5 (1.5)
-------------------------------------
41.8% 39.5% 38.4%
-------------------------------------
-------------------------------------
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
Deferred tax assets:
Alternative minimum
tax credit carryforward $ (9,427) $(18,409)
Deferred participation (18,579) (16,374)
Maintenance and
warranty reserves (11,790) (12,391)
Accrued payroll and
related liabilities (5,352) (4,479)
Deferred revenue (566) (898)
Inventories and other (1,302) (2,533)
Net operating loss
carryforward -- (2,341)
----------------------------
(47,016) (57,425)
Valuation allowance -- 141
----------------------------
(47,016) (57,284)
Deferred tax liabilities:
Accelerated depreciation 63,709 74,072
Other 2,317 4,406
----------------------------
Net deferred tax liability
attributable to continuing
operations 19,010 21,194
Net deferred tax asset
attributable to
discontinued operations (7,318) (7,285)
----------------------------
Net deferred tax liability $ 11,692 $ 13,909
----------------------------
----------------------------
</TABLE>
The valuation allowance as of August 31, 1997 has been eliminated in 1998 as a
result of utilizing Canadian net operating loss carryforwards.
[PHOTO]
TANK CAR IN PRODUCTION AT WAGONYSWIDNICA.
34 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
NOTE 16 -- SEGMENT INFORMATION
Greenbrier has two reportable segments: manufacturing and leasing and services.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. Performance is evaluated based on
gross profit or loss from operations which is presented on the statements of
operations. Intersegment sales and transfers are accounted for as if the sales
or transfers were to third parties, that is, at market prices.
The information in the following tables is derived directly from the segments'
internal financial reports used for corporate management purposes. Unallocated
assets primarily consist of cash, short-term investments and capitalized loan
costs.
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------
<S> <C> <C> <C>
REVENUE:
Manufacturing $ 470,025 $ 408,053 $ 491,080
Leasing & services 107,147 113,229 119,242
Intersegment sales (36,811) (90,362) (90,382)
-------------------------------------------
$ 540,361 $ 430,920 $ 519,940
-------------------------------------------
-------------------------------------------
ASSETS:
Manufacturing $ 162,907 $ 168,878 $ 179,849
Leasing & services 298,811 393,891 425,143
Unallocated 43,771 17,749 10,496
-------------------------------------------
$ 505,489 $ 580,518 $ 615,488
-------------------------------------------
-------------------------------------------
DEPRECIATION AND
AMORTIZATION:
Manufacturing $ 4,774 $ 4,671 $ 3,997
Leasing & services 9,753 23,198 20,898
-------------------------------------------
$ 14,527 $ 27,869 $ 24,895
-------------------------------------------
-------------------------------------------
CAPITAL EXPENDITURES:
Manufacturing $ 11,887 $ 10,173 $ 6,690
Leasing & services 39,314 70,088 122,201
-------------------------------------------
$ 51,201 $ 80,261 $ 128,891
-------------------------------------------
-------------------------------------------
</TABLE>
A portion of the manufacturing operations are located in Canada. The following
table summarizes selected geographic information:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
REVENUE:
United States $ 386,064 $ 321,538 $ 345,058
Canada 169,335 156,103 208,246
Sales
between
geographic
areas (15,038) (46,721) (33,364)
---------------------------------------------
$ 540,361 $ 430,920 $ 519,940
---------------------------------------------
---------------------------------------------
EARNINGS FROM
CONTINUING OPERATIONS
BEFORE INCOME TAX
EXPENSE AND
MINORITY INTEREST:
United States $ 29,740 $ 6,298 $ 30,212
Canada 7,664 4,761 4,685
---------------------------------------------
$ 37,404 $ 11,059 $ 34,897
---------------------------------------------
---------------------------------------------
IDENTIFIABLE ASSETS:
United States $ 452,323 $ 531,500 $ 570,743
Canada 53,166 49,018 44,745
---------------------------------------------
$ 505,489 $ 580,518 $ 615,488
---------------------------------------------
---------------------------------------------
</TABLE>
NOTE 17 -- CUSTOMER CONCENTRATION
Revenues from the two largest customers were 25% and 16% of total revenues for
the year ended August 31, 1998. In 1997, revenues from the two largest customers
were 20% and 11% of total revenues. In 1996, revenue from the largest customer
was 29% of total revenues. No other customers accounted for more than 10% of
total revenues in 1998, 1997 or 1996. Three customers had balances that
individually exceeded 10% of accounts receivable and, in total, represented 60%
of the consolidated balance at August 31, 1998.
Financial Statements The Greenbrier Companies 1998 Annual Report 35
<PAGE>
NOTE 18 -- LEASE COMMITMENTS
Lease expense for railcar equipment leased under non-cancelable leases was
$4,966, $3,767 and $3,204 for the years ended August 31, 1998, 1997 and 1996.
Aggregate minimum future amounts payable under non-cancelable railcar equipment
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
<S> <C>
1999 $ 5,172
2000 4,053
2001 3,067
2002 2,965
2003 2,485
Thereafter 2,009
--------------
$ 19,751
--------------
--------------
</TABLE>
Operating leases for domestic refurbishment facilities expire at various dates
through April 2015. Office space and certain manufacturing and office equipment
are rented under operating leases which expire at various dates through June
2001. Rental expense for facilities, office space and equipment was $1,887,
$2,652 and $2,023 for the years ended August 31, 1998, 1997 and 1996. Aggregate
minimum future amounts payable under non-cancelable operating leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
<S> <C>
1999 $ 1,922
2000 1,882
2001 1,679
2002 1,001
2003 645
Thereafter 1,128
--------------
$ 8,257
--------------
--------------
</TABLE>
NOTE 19 -- COMMITMENTS AND CONTINGENCIES
In 1990 an agreement was entered into for the purchase and refurbishment of over
ten thousand used railcars. 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 of a subsidiary, as defined. Amounts
accrued are referred to as participation and are included as deferred
participation in the Consolidated Balance Sheets. Participation expense related
to this and a similar, but smaller, agreement was $7,238, $9,345 and $8,670 for
the years ended August 31, 1998, 1997 and 1996. Payment of deferred
participation is estimated to be $1,141 in 2000, $2,727 in 2001, $4,421 in 2002
and $11,063 in 2003, with the remaining balance due after 2003.
Forward exchange contracts are entered into to hedge a portion of the risk of
foreign currency fluctuations of U.S. dollar denominated accounts receivable
resulting from firm commitments for the sale of railcars to be manufactured in
Canada. As of August 31, 1998, forward exchange contracts outstanding for the
purchase of Canadian dollars were $58,000 maturing at various dates through
March 1999. The difference between the contracted rate and the spot rate at
August 31, 1998 amounted to $3,600. No credit loss from counterparty
non-performance is anticipated.
Environmental studies have been conducted of owned and leased properties which
indicate additional investigation and some remediation may be necessary. The
outcome of such actions cannot be estimated; however, management believes that
any ultimate liability resulting from environmental issues will not materially
affect the financial position, results of operations or cash flows of the
company. Management believes that its operations adhere to sound environmental
practices and applicable laws and regulations.
36 The Greenbrier Companies 1998 Annual Report Financial Statements
<PAGE>
Greenbrier is involved as a defendant in litigation in the ordinary course of
business, the outcome of which cannot be predicted with certainty. Litigation
has been initiated by former shareholders of Interamerican Logistics Inc.
("Interamerican"), which was acquired in the fall of 1996. The plaintiffs allege
that Greenbrier violated the agreements pursuant to which it acquired ownership
of Interamerican and seek damages aggregating $4,000 Canadian. Management
contends the claim to be without merit and intends to vigorously defend its
position. Management believes that any ultimate liability resulting from
litigation will not materially affect the financial position, results of
operations or cash flows of the company.
Employment agreements, which expire August 31, 2004, with the Chairman and the
Chief Executive Officer, provide each with a minimum annual salary and a bonus
calculated based on operating results, as defined. The minimum annual aggregate
defined payment under the agreements is $720 and the maximum is $2,120.
NOTE 20 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments and the methods and
assumptions used to estimate such fair values, are as follows:
<TABLE>
<CAPTION>
1998
-----------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-----------------------------
<S> <C> <C>
Notes payable and
subordinated debt $185,808 $188,768
Deferred participation 45,243 28,580
<CAPTION>
1997
-----------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
-----------------------------
<S> <C> <C>
Notes payable and
subordinated debt $239,875 $235,257
Deferred participation 39,032 24,170
</TABLE>
The carrying amount of cash and cash equivalents, restricted cash and
investments, accounts and notes receivable, revolving notes and accounts payable
and accrued liabilities is a reasonable estimate of fair value of these
financial instruments. Estimated rates currently available to the company for
debt with similar terms and remaining maturities are used to estimate the fair
value of notes payable and subordinated debt. The fair value of deferred
participation is estimated by discounting the estimated future cash payments
using the company's estimated incremental borrowing rate. The estimated fair
value of forward exchange contracts outstanding at August 31, 1998 is
approximately $3,600 based on the rates available for contracts with similar
maturities.
NOTE 21 -- SUBSEQUENT EVENTS
In September 1998, Greenbrier completed the acquisition of a majority interest
in a railcar and specialty container manufacturer located in Swidnica, Poland.
Polish investors will maintain a significant ownership interest in the
manufacturer. This acquisition establishes a European manufacturing base and is
expected to provide access to the European markets, particularly the market in
Poland. Initially, the Polish facility is not expected to have a material impact
on Greenbrier's overall financial condition or results of operations, and the
investment will be funded through existing cash balances.
Also in September 1998, Greenbrier entered into a joint venture to build
railroad freight cars at an existing manufacturing facility in Sahagun, Mexico.
Each party will maintain a 50% interest in the joint venture. Operations are
expected to commence in the first quarter of 1999. Required capital expenditures
and working capital needs are expected to be funded by existing operating cash
flow and cash balances.
[PHOTO]
SAFETY, QUALITY AND EFFICIENCY ARE PARAMOUNT AT ALL GREENBRIER FACILITIES.
Financial Statements The Greenbrier Companies 1998 Annual Report 37
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Unaudited operating results by quarter for 1998 and 1997 are as follows(1):
<TABLE>
<CAPTION>
First Second Third Fourth Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998
Revenue
Manufacturing $ 114,626 $ 104,349 $ 129,899 $ 102,832 $ 451,706
Leasing and services 23,584 22,443 20,759 21,869 88,655
--------------------------------------------------------------------------
138,210 126,792 150,658 124,701 540,361
Cost of revenue
Manufacturing 106,608 96,580 116,385 90,980 410,553
Leasing and services 9,762 8,487 8,169 8,931 35,349
--------------------------------------------------------------------------
116,370 105,067 124,554 99,911 445,902
Margin $ 21,840 $ 21,725 $ 26,104 $ 24,790 $ 94,459
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net earnings $ 4,076 $ 4,360 $ 5,508 $ 6,388(3) $ 20,332
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net earnings per share(2):
Basic $ 0.29 $ 0.31 $ 0.39 $ 0.45 $ 1.43
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Diluted $ 0.29 $ 0.30 $ 0.38 $ 0.44 $ 1.42
--------------------------------------------------------------------------
--------------------------------------------------------------------------
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997
Revenue
Manufacturing $ 101,879 $ 74,558 $ 55,481 $ 93,583 $ 325,501
Leasing and services 25,472 27,777 27,101 25,069 105,419
--------------------------------------------------------------------------
127,351 102,335 82,582 118,652 430,920
Cost of revenue
Manufacturing 94,121 68,282 52,084 86,921 301,408
Leasing and services 11,303 11,524 11,865 11,625 46,317
--------------------------------------------------------------------------
105,424 79,806 63,949 98,546 347,725
Margin $ 21,927 $ 22,529 $ 18,633 $ 20,106 $ 83,195
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net earnings (loss) $ 2,920 $ 2,177 $ 780 $ (10,048)(4)$ (4,171)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net earnings (loss) per share:
Basic $ 0.21 $ 0.15 $ 0.06 $ (0.71) $ (0.29)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Diluted $ 0.21 $ 0.15 $ 0.06 $ (0.71) $ (0.29)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
(1) Certain amounts differ from the amounts reported previously as a result of
discontinued operations.
(2) The sum of quarterly earnings per share does not equal annual earnings per
share as a result of the computation of quarterly versus annual weighted
average shares outstanding more favorably than anticipated.
(3) Net earnings for the fourth quarter of 1998 includes $1,300 resulting from
exiting the trailer and container leasing operations more favorably than
anticipated.
(4) Net loss for the fourth quarter of 1997 resulted from the write-down of
investments in third-party transportation logistics and vehicle
transportation equipment, coupled with exit costs related to trailer and
container leasing operations.
[PHOTO]
MILL GONDOLAS WILL BE PRODUCED IN SAHAGUN, MEXICO.
38 The Greenbrier Companies 1998 Annual Report
<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 12, 1999, 2:00 p.m.
Benson Hotel
309 SW Broadway
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 LLP
Portland, Oregon
INDEPENDENT AUDITORS:
Deloitte & Touche LLP
Portland, Oregon
TRANSFER AGENT:
First Chicago Trust Company of New York
525 Washington Boulevard, 7th Floor
Jersey City, New Jersey 07303
Greenbrier's Transfer Agent maintains stockholder records, issues stock
certificates and distributes dividends. Requests concerning these matters should
be directed to First Chicago Trust Company of New York.
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. There were approximately 350 holders of
record of common stock as of October 31, 1998. The following table shows the
reported high and low sales price of Greenbrier's common stock on the New York
Stock Exchange.
<TABLE>
<CAPTION>
HIGH LOW
------------------------
<S> <C> <C>
1998
Fourth quarter $ 18.50 $ 14.75
Third quarter $ 19.00 $ 15.75
Second quarter $ 18.38 $ 15.25
First quarter $ 18.00 $ 13.00
<CAPTION>
<S> <C> <C>
1997
Fourth quarter $ 13.38 $ 10.50
Third quarter $ 12.13 $ 8.25
Second quarter $ 11.63 $ 9.38
First quarter $ 11.88 $ 7.75
</TABLE>
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.
[GRAPH]
STOCK PRICES (PER SHARE)
- - HIGH
- - LOW
s The Greenbrier Companies 1998 Annual Report 39
<PAGE>
Exhibit 21.1
THE GREENBRIER COMPANIES, INC.
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Names Under
State of Which Does
Name Incorporation Business
---- ------------- --------
<S> <C> <C>
2441001 Nova Scotia Limited Nova Scotia, N/A
Canada
Autostack Corporation OR N/A
Greenbrier Capital Corporation CA N/A
Greenbrier Europe B.V. Netherlands N/A
Greenbrier
Greenbrier Leasing Corporation DE Intermodal
Greenbrier Leasing Sp z.o.o. Poland N/A
Greenbrier Leasing Limited Nova Scotia, N/A
Canada
Greenbrier Logistics, Inc. OR N/A
Greenbrier Partners, Inc. CA N/A
Greenbrier Rail Services, Inc. DE N/A
Greenbrier Railcar, Inc. DE N/A
Greenbrier Rental Services, Inc. CA N/A
Greenbrier Transportation, Inc. DE N/A
Greenbrier U.K. Limited United Kingdom N/A
Gunderson, Inc. OR N/A
Gunderson Leasing, Inc. OR N/A
Gunderson Marine, Inc. OR N/A
Gunderson Northwest, Inc. (formerly known as Gunderson Springfield, Inc.) OR N/A
Gunderson Southwest, Inc. OR N/A
Gunderson Wheel Services, Inc. OR N/A
InterAmerican Logistics Inc. Ontario, N/A
Canada
Superior Transportation Systems, Inc. OR N/A
Tolan O'Neal Transportation & Logistics, Inc. WA N/A
TrentonWorks Limited Nova Scotia, N/A
Canada
</TABLE>
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements Nos.
333-08035, 33-3392, and 33-80869 of The Greenbrier Companies, Inc. on Forms S-8
of our reports dated October 23, 1998, appearing in and incorporated by
reference in this Annual Report on Form 10-K of The Greenbrier Companies, Inc.
for the year ended August 31, 1998.
DELOITTE & TOUCHE LLP
Portland, Oregon
November 25, 1998
<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, 1998 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-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 57,909<F1>
<SECURITIES> 0
<RECEIVABLES> 47,537
<ALLOWANCES> 0
<INVENTORY> 73,639
<CURRENT-ASSETS> 0
<PP&E> 49,452
<DEPRECIATION> 0
<TOTAL-ASSETS> 505,489
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 120,828
<TOTAL-LIABILITY-AND-EQUITY> 505,489
<SALES> 0
<TOTAL-REVENUES> 540,361
<CGS> 445,902
<TOTAL-COSTS> 502,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,946
<INCOME-PRETAX> 37,404
<INCOME-TAX> 15,643
<INCOME-CONTINUING> 20,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,332
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.42
<FN>
<F1>Of this amount $15,997 is restricted
</FN>
</TABLE>
