<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended November 30, 1997
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)(I.R.S. Employer Identification No.)
One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035
(Address of principal executive offices) (Zip Code)
(503)684-7000
(Registrant's telephone number, including area code)
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
The number of shares of the registrant's common stock, $0.001
par value per share, outstanding on December 31, 1997 was
14,178,800 shares.
<PAGE>
THE GREENBRIER COMPANIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts, unaudited)
November 30, August 31,
1997 1997
___________ ___________
Assets
Cash and cash equivalents $ 55,047 $ 14,384
Restricted cash and investments 19,637 7,360
Accounts and notes receivable 66,136 61,024
Inventories 68,305 87,233
Equipment held for refurbishment or sale 5,624 64,358
Investment in direct finance leases 179,725 182,421
Equipment on operating leases 77,243 102,120
Property, plant and equipment 44,989 44,925
Prepaid expenses and other 13,638 16,693
___________ ___________
$530,344 $ 580,518
=========== ===========
Liabilities and Stockholders' Equity
Revolving notes $ 27,337 $ 57,709
Accounts payable and accrued liabilities 127,586 107,738
Deferred participation 40,564 39,032
Deferred income taxes 6,124 13,909
Notes payable 165,228 201,786
Subordinated debt 37,994 38,089
Minority interest 18,417 18,183
Commitments and contingencies (Note 5)
Stockholders' equity
Preferred stock - $0.001 par value, 25,000 shares
authorized, none issued - -
Common stock - $0.001 par value, 50,000 shares
authorized, 14,167 outstanding 14 14
Additional paid-in capital 49,242 49,135
Retained earnings 57,915 54,689
Foreign currency translation adjustment (77) 234
___________ ___________
107,094 104,072
___________ ___________
$530,344 $ 580,518
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
THE GREENBRIER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
Three Months Ended
November 30,
1997 1996
--------- ---------
Revenues
Manufacturing $114,436 $101,879
Leasing and services 23,584 25,472
--------- ---------
Total revenues 138,020 127,351
Costs and expenses
Cost of manufacturing sales 106,608 94,121
Leasing and services 9,762 11,303
Selling and administrative expense:
Manufacturing 3,929 3,787
Leasing and services 2,621 3,114
Corporate 1,822 1,627
--------- ---------
8,372 8,528
Interest expense:
Manufacturing 635 582
Leasing and services 5,301 5,861
--------- ---------
5,936 6,443
Minority interest:
Manufacturing 151 499
Leasing and services 150 627
--------- ---------
301 1,126
--------- ---------
Total costs and expenses 130,979 121,521
Earnings from continuing operations
before income tax expense
Manufacturing 3,113 2,890
Leasing and services 5,750 4,567
Corporate (1,822) (1,627)
--------- ---------
7,041 5,830
Income tax expense (2,965) (2,249)
--------- ---------
Earnings from continuing operations 4,076 3,581
Discontinued operations:
Loss on operations (net of tax benefit
of $486 in 1996) - (661)
--------- ---------
Net earnings $ 4,076 $ 2,920
========= =========
Earnings per share from
continuing operations $ 0.29 $ 0.25
========= =========
Earnings per share $ 0.29 $ 0.21
========= =========
Weighted average shares outstanding 14,163 14,160
========= =========
Dividends declared per share $ 0.06 $ 0.06
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
THE GREENBRIER COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
Three Months Ended
November 30,
1997 1996
--------- ---------
Cash flows from operating activities
Net earnings $ 4,076 $ 2,920
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income taxes (7,785) 920
Deferred participation 1,532 2,047
Depreciation and amortization 5,226 6,903
Gain on sales of equipment (906) (586)
Other 190 277
Decrease (increase) in assets:
Accounts and notes receivable (5,402) 43,803
Inventories 18,928 6,634
Prepaid expenses and other 2,718 (4,002)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 13,152 (7,925)
--------- ---------
Net cash provided by operating activities 31,729 50,991
--------- ---------
Cash flows from investing activities
Principal payments received under
direct finance leases 3,766 2,796
Investment in direct finance leases - (6,227)
Proceeds from sales of equipment 92,549 3,703
Purchase of property and equipment (7,325) (15,699)
Investment in restricted cash and investments (12,277) (373)
--------- ---------
Net cash provided by (used in)
investing activities 76,713 (15,800)
--------- ---------
Cash flows from financing activities
Proceeds from borrowings - 609
Repayments of borrowings (66,929) (26,613)
Dividends (850) (850)
--------- ---------
Net cash used in financing activities (67,779) (26,854)
--------- ---------
Increase in cash and cash equivalents 40,663 8,337
Cash and cash equivalents
Beginning of period 14,384 6,083
--------- ---------
End of period $ 55,047 $ 14,420
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 4,346 $ 6,420
Income taxes 15 26
Supplemental schedule of noncash investing and
financing activities
Equipment obtained through borrowings $ - $ 3,327
Repayment of borrowings through return of railcars
held for refurbishment or sale 96 -
The accompanying notes are an integral part of these statements.
<PAGE>
THE GREENBRIER COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, unaudited)
Note 1 - INTERIM FINANCIAL STATEMENTS
The consolidated financial statements of The Greenbrier Companies,
Inc. and Subsidiaries ("Greenbrier" or the "company") as of
November 30, 1997 and for the three months ended November 30, 1997
and 1996, have been prepared without audit and reflect all
adjustments (consisting of normal recurring accruals) which, in
the opinion of management, are necessary for a fair presentation
of the financial position and operating results for the periods
indicated. The results of operations for the three months ended
November 30, 1997 are not necessarily indicative of the results to
be expected for the entire year ending August 31, 1998.
Certain notes and other information have been condensed or omitted
from the interim financial statements presented in this Quarterly
Report on Form 10-Q. Therefore, these financial statements should
be read in conjunction with the consolidated financial statements
contained in Greenbrier's 1997 Annual Report incorporated by
reference into the company's 1997 Annual Report on Form 10-K.
Note 2 - INVENTORIES
November 30, August 31,
1997 1997
---------- ----------
Manufacturing supplies and raw materials $ 7,355 $ 5,999
Work-in-process 41,485 42,582
Assets held for sale 19,465 38,652
---------- ----------
$ 68,305 $ 87,233
========== ==========
Note 3 - DISCONTINUED OPERATIONS AND DIVESTITURES
During 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 business
operations of manufacturing and related leasing and services.
In December 1997 the sale of a majority of the assets of the third-
party transportation logistics segment was completed. The
remainder of the logistics operations is anticipated to be
disposed of during 1998.
In October 1997 the sale of substantially all of the remaining
trailer and container fleet, which was included in Equipment held
for sale or refurbishment as of August 31, 1997, was completed.
Note 4 - EQUIPMENT ON OPERATING LEASES
During the first quarter, equipment with a net book value of
approximately $22,000 was sold to a third party in the normal
course of operations. This equipment is being leased back by
Greenbrier on a short-term basis.
Note 5 - COMMITMENTS AND CONTINGENCIES
Purchase commitments of approximately $7,700 for leasing and
services operating equipment were outstanding as of November 30,
1997.
Greenbrier is involved as a defendant in litigation in the
ordinary course of business, the outcome of which cannot be
predicted with certainty. Management believes that any ultimate
liability will not materially affect the financial position or
results of operations of the company.
<PAGE>
THE GREENBRIER COMPANIES, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Greenbrier 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 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 leases
and/or manages a fleet of approximately 27,000 railcars for its
own account or for third parties such as railroads, institutional
investors and other leasing companies. Sales, marketing and new
product development are conducted on an integrated basis.
The following table sets forth information regarding costs and
expenses from continuing operations, expressed as a percentage of
the associated revenue.
Three Months Ended
November 30,
-------------------
1997 1996
--------- ---------
Manufacturing:
Sales 100.0% 100.0%
Cost of sales 93.2 92.4
Selling and administrative expense 3.4 3.7
Interest expense 0.6 0.6
Minority interest 0.1 0.5
Earnings before income tax expense 2.7 2.8
Leasing and services:
Revenues 100.0% 100.0%
Operating expense 41.4 44.4
Selling and administrative expense 11.1 12.2
Interest expense 22.5 23.0
Minority interest 0.6 2.5
Earnings before income tax expense 24.4 17.9
Corporate expense as a percentage of total revenues 1.3 1.3
Income tax expense as a percentage of
pre-tax earnings 42.1 38.6
Net earnings as a percentage of total revenues 3.0 2.3
Three Months Ended November 30, 1997 Compared to Three Months
Ended November 30, 1996
Revenues. Manufacturing revenues for the three-month period
ended November 30, 1997 amounted to $114 million on deliveries of
1,900 railcars compared to $102 million on deliveries of 1,600
railcars in the corresponding prior period, an increase of $12
million, or 12%. Deliveries were higher than the prior period due
to an overall stronger market demand for general freightcars and a
rebound in the intermodal transportation industry where Greenbrier
is a market leader. In the quarter ended November 30, 1997, 50% of
total new railcar deliveries were double-stack railcars while
virtually all of the deliveries in the quarter ended November 30,
1996 were conventional railcars. The manufacturing backlog of
railcars for sale and lease as of November 30, 1997 was
approximately 6,600 railcars with an estimated value of $326
million compared to 2,600 railcars valued at $133 million as of
August 31, 1997. Subsequent to quarter end, additional orders for
1,000 new railcars valued at approximately $60 million were
received.
Leasing and services revenue decreased $2 million, or 7%, for the
quarter ended November 30, 1997 compared to the quarter ended
November 30, 1996. This decrease is primarily due to reduced
revenue from trailer and container leasing operations as
substantially all of these assets were sold during the quarter,
partially offset by an increase in revenue from automobile
transportation services as a result of the unusually high volume
of automobiles transported.
Pre-tax earnings realized on the disposition of leased equipment
in the normal course of operations during the quarter amounted to
$583 compared to $538 realized in the corresponding prior period.
<PAGE>
THE GREENBRIER COMPANIES, INC.
Cost of Manufacturing Sales. Cost of sales as a percentage of
manufacturing revenue increased in the quarter ended November 30,
1997 to 93.2% from 92.4% in the quarter ended November 30, 1996
primarily due to production line changeovers and a highly
competitive market environment at the time the orders were
received for the current period production.
Leasing and Services Expense. Leasing and services expense as a
percentage of revenue was 41.4% for the quarter ended November 30,
1997 compared to 44.4% for the corresponding prior period. This
change results primarily from the sale of trailer and container
leasing assets during in the current period, as these assets
operated at a higher expense ratio than railcars. In addition,
lower depreciation of vehicle transportation equipment as a result
of a reduction in carrying value recorded in the fourth quarter of
1997 contributed to the improved ratio.
Selling and Administrative Expense. Total selling and
administrative expense for the three months ended November 30,
1997 decreased compared to the corresponding prior period
primarily due to the winding down of the trailer and container
leasing operations offset somewhat by international business
development expenses.
Interest Expense. Total interest expense declined due to lower
working capital borrowings and paydowns of term debt associated
with the trailer and container leasing operation in the current
period.
Minority Interest. Manufacturing minority interest decreased as
a result of reduced earnings of the Canadian operation. Leasing
and services minority interest decreased due to the acquisition of
a minority investor's interest in a consolidated subsidiary in the
second quarter of 1997.
Income Tax Expense. The income tax provision for the quarter
ended November 30, 1997 represents an effective tax rate of 42% on
U.S. operations which is consistent with the corresponding prior
period. Consolidated income taxes as a percentage of pre-tax
earnings are greater than 42% as a result of the tax rate used on
Canadian operations. In the prior period, the Canadian operation
utilized operating loss carryforwards to offset earnings which
resulted in a consolidated income tax rate of less than 42%.
Liquidity and Capital Resources
Cash provided by operations totaled $32 million for the three-
month period ended November 30, 1997 compared to $51 million for
the corresponding prior period. The decrease in cash from
operations is primarily due to the increase in accounts receivable
of $5 million in the current period compared to the decrease of
$44 million in the prior comparable period. The accounts
receivable activity in the prior period resulted from collections
on receivables related to significant sales of newly manufactured
railcars completed prior to August 31, 1996. This decrease was
offset somewhat by increased accounts payable and a larger
decrease in inventory compared to the prior period resulting from
increased railcar deliveries.
Overall liquidity improved in the current period due to the
completion of the sale of substantially all of the remaining
trailer and container fleet and the sale, in the normal course of
business, of a significant group of railcars on operating lease.
These transactions contributed $87 million of the $93 million in
proceeds from sales of equipment during the current quarter.
Revolving credit facilities aggregated $118 million as of
November 30, 1997. A $60 million revolving line of credit is
available through May 1999 to provide working capital and interim
financing of equipment for the leasing and services operations.
Advances under this facility bear interest at rates which vary
depending on the type of borrowing and certain defined ratios.
There were no borrowings outstanding under this line of credit as
of November 30, 1997. A $30 million operating line of credit to be
used for working capital, bearing interest primarily at prime, and
a $10 million five-year term loan facility to be used for certain
manufacturing capital expenditures are available through February
2000 and December 1998 for U.S. manufacturing operations.
Borrowings outstanding under the operating line were $6 million as
of November 30, 1997 and there were no borrowings outstanding
under the term facility. An $18 million (at the November 30, 1997
exchange rate) operating line of credit, bearing interest at
Canadian prime plus 1.125%, is available through March 1998 for
working capital and certain capital expenditures for Canadian
operations. An additional $10 million temporary borrowing
facility, bearing interest at Canadian prime plus 1.125% is
available through December 1997 for financing certain Canadian
receivables. Borrowings outstanding under these operating lines
were $21 million as of November 30, 1997.
<PAGE>
THE GREENBRIER COMPANIES, INC.
Capital expenditures totaled $7 million for the three months
ended November 30, 1997 compared to $25 million for the three
months ended November 30, 1996. Of these capital expenditures,
approximately $5 million and $23 million, respectively, were
attributable to leasing and services operations. Leasing and
services capital expenditures for the remainder of 1998 are
expected to be approximately $24 million.
Approximately $2 million of the total capital expenditures for
the three months ended November 30, 1997 and November 30, 1996
were attributable to manufacturing operations. Manufacturing
capital expenditures for the remainder of 1998 are expected to be
approximately $6 million. Capital expenditure programs include new
and upgraded manufacturing plant and equipment to improve
efficiencies and increase capacity.
Operations in Canada give rise to market risks from changes in
foreign currency exchange rates. To minimize these risks, forward
exchange contracts are utilized. As of November 30, 1997 forward
exchange contracts outstanding for the purchase of Canadian
dollars were $99 million and for the purchase of U.S. dollars were
$71 million, maturing at various dates through May 1998. Realized
and unrealized gains and losses from such off-balance sheet
contracts are deferred and recognized in income concurrent with
the hedged transaction.
Dividends of $.06 per share have been paid quarterly beginning in
1995. The most recent quarterly dividend of $.06 per share was
declared in January 1998 to be paid in February 1998.
Management expects existing funds and cash generated from
operations, together with borrowings under existing credit
facilities, will be sufficient to fund dividends, working capital
needs, planned capital expenditures and expected debt repayments.
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.
Forward-Looking Statements
Statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations that are not
statements of historical fact may include 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. 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; business
conditions and growth in the surface transportation industry, both
domestic and international; lower than expected customer orders;
the ability to consummate expected sales; delays in receipt of
orders or cancellation of orders; transportation labor disputes
which might disrupt the flow of cargo; competitive factors,
including increased competition, new product offerings by
competitors and price pressures; actual future costs and
availability of materials and a trained workforce; labor disputes;
changes in product mix and the mix between manufacturing and
leasing and services revenue; a delay or failure of products or
services to compete successfully; shifts in market demand; changes
in interest rates; financial condition of principal customers; and
production difficulties and product delivery delays in the future
as a result of, among other matters, changing process technologies
and increasing production. Any forward-looking statements should
be considered in light of these factors.
<PAGE>
THE GREENBRIER COMPANIES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE>
THE GREENBRIER COMPANIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE GREENBRIER COMPANIES, INC.
Date:January 13,1998 By:/s/Larry G. Brady
--------------- ------------------------
Larry G. Brady
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the company's
consolidated financial statements for the quarter ended November 30, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 74,684<F1>
<SECURITIES> 0
<RECEIVABLES> 66,136
<ALLOWANCES> 0
<INVENTORY> 68,305
<CURRENT-ASSETS> 0
<PP&E> 44,989
<DEPRECIATION> 0
<TOTAL-ASSETS> 530,344
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 107,080
<TOTAL-LIABILITY-AND-EQUITY> 530,344
<SALES> 0
<TOTAL-REVENUES> 138,020
<CGS> 116,370
<TOTAL-COSTS> 130,979
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,936
<INCOME-PRETAX> 7,041
<INCOME-TAX> 2,965
<INCOME-CONTINUING> 4,076
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,076
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<FN>
<F1>Of this amount, $19,637 is restricted.
</FN>
</TABLE>
