<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, 1999
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 29, 1999 (based on the closing price of such shares on such date) was
approximately $57,000,000.
The number of shares outstanding of the Registrant's Common Stock on October 29,
1999 was 14,254,632 shares of Common Stock, par value $0.001 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of Registrant's 1999 Annual Report to Stockholders and of Registrant's
Proxy Statement dated November 22, 1999 prepared in connection with the Annual
Meeting of Stockholders to be held on January 11, 2000 are incorporated by
reference into Parts II and III of this Report.
<PAGE>
THE GREENBRIER COMPANIES, INC.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C> <C>
Item 1. BUSINESS 1
Item 2. PROPERTIES 7
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 17
</TABLE>
(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; labor disputes or
operating difficulties which might disrupt manufacturing operations,
component supplies or 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; 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. With operations in North America and
Europe, the manufacturing segment produces double-stack intermodal railcars,
conventional railcars and marine vessels, and performs repair and refurbishment
activities for both intermodal and conventional railcars. In addition to
manufacturing, Greenbrier is engaged in complementary leasing and services
activities. The lease fleet consists of 33,000 owned or managed railcars as of
August 31, 1999. Greenbrier believes this fleet is among the larger non-railroad
owned fleets in the United States.
In September 1998, Greenbrier acquired a 60 percent interest in a railcar
manufacturer located in Swidnica, Poland. In August 1999, the Company increased
its ownership interest to 84 percent. This facility establishes a European
manufacturing base and provides access to the European markets. This expansion
has required the development of a sales and marketing force knowledgeable about
the European market.
Also in September 1998, Greenbrier entered into a 50 percent joint venture
with Bombardier Transportation to build railroad freight cars at Bombardier's
existing manufacturing facility in Sahagun, Mexico. The facility serves the
North American marketplace and provides better access to the growing market in
Mexico.
Greenbrier is a Delaware corporation formed in 1981. The Company's principal
executive offices are located at One Centerpointe Drive, Lake Oswego, Oregon
97035, and its telephone number is (503) 684-7000.
PRODUCTS AND SERVICES
Greenbrier operates in two primary business segments: the manufacture of
railcars and marine vessels and the refurbishment and repair of railcars; and
the leasing 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 18 of the Notes to Consolidated Financial Statements.
NEW RAILCAR PRODUCTS
INTERMODAL RAILCARS
Intermodal transportation is the movement of cargo in standardized containers
or trailers. Intermodal containers and trailers are generally freely
interchangeable among railcar, truck or ship, making it possible to move cargo
in a single container or trailer from a point of origin to its final destination
without the repeated loading and unloading of freight
1
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required by traditional shipping methods. A major innovation in intermodal
transportation has been the articulated double-stack railcar which transports
stacked containers on a single platform. An articulated railcar is a unit
comprised of up to five platforms, each of which is linked by a common set of
wheels and axles.
The double-stack railcar provides significant operating and capital savings
over other types of intermodal railcars. These savings are the result of (i)
increased train density (two containers are carried within the same longitudinal
space conventionally used to carry one trailer or container); (ii) a railcar
weight reduction per container of approximately 50 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 1999, 3,300 double-stack railcars were manufactured and sold by the Company,
which it believes represents 94 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 IV is a three-platform articulated
railcar with 53-foot wells that can accommodate all current container sizes
in all three wells. The Maxi-Stack III is a five-platform railcar that
features the ability to carry containers up to 48 feet in length in all wells
and up to 53 feet in length on the top level. The Maxi-Stack AP is a
three-platform all-purpose railcar that is more versatile than other
intermodal cars because it allows the loading of either trailers or
double-stack containers on the same platform.
HUSKY-STACK-Registered Trademark- - The Husky-Stack is a non-articulated
(stand-alone) or draw bar connected series of double-stack railcars with the
capability of carrying containers up to 42 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.
CONVENTIONAL RAILCARS
In 1999, over 50 percent of Greenbrier's manufactured railcars were
conventional railcars. The leading manufacturer of boxcars in North America,
Greenbrier produces a wide variety of 100-ton capacity boxcars, which are
primarily used in the forest products industry. Greenbrier also produces
custom-built high-capacity boxcars for special applications such as automotive
parts or canstock movement. In addition to boxcars, center-partition cars for
lumber and other building materials, flat cars 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.
Greenbrier's European facility manufactures pressurized tank cars for liquid
petroleum gas, non-pressurized tank cars for light oil products, coal cars and
articulated flat cars.
Production of Auto-Max-Registered Trademark-, a fully integrated, two-unit
railcar designed to transport a mix of full-size pickups, automobiles and
sport utility vehicles in a tri-level configuration began in the fourth
quarter of 1999. The adjustable decks in Auto-Max can also be moved to a
bi-level configuration, assuring the ability to adjust to automobile industry
model changes.
RAIL SERVICES
Greenbrier is actively engaged in the repair and refurbishment of railcars
for third parties as well as its own lease fleet. In certain situations,
repair and refurbishment of the Company's lease fleet is performed in
unaffiliated facilities. Refurbishment and repair facilities are located in
Portland and Springfield, Oregon; Cleburne and San Antonio, Texas; Finley,
Washington; Atchison, Kansas; and Golden, Colorado (acquired subsequent to
August 31, 1999). The Springfield facility has a long-term contract with a
third-party primarily for the repair of railcars. Greenbrier believes it is
one of only a few railcar lessors with its own refurbishing capabilities. In
addition, Greenbrier operates wheel reconditioning shops in Portland, Oregon;
Pine Bluff, Arkansas; Tacoma, Washington; and Sahagun, Mexico.
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MARINE VESSEL FABRICATION
The Portland, Oregon manufacturing facility is located on a deep water port
on the Willamette River. Until 1984, the Company's predecessor designed and
built ocean-going barges and other types of marine vessels for maritime shipping
companies. In 1995, Greenbrier re-entered the marine vessel market and expanded
and upgraded the marine facilities, which include the largest side-launch ways
on the West Coast. The upgraded marine facilities also enhance steel plate
burning and fabrication capacity providing flexibility for railcar production.
Since 1995 vessels manufactured include conventional deck barges 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 44 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.
The following table summarizes the lease fleet:
<TABLE>
<CAPTION>
FLEET PROFILE
AS OF AUGUST 31, 1999(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 14,587 18,398 32,985 91.9% 21.0
Railcar Equipment Held
for Sale(2) 382 - 382
--------- --------- -----------
14,969 18,398 33,367
========= ========= ===========
Lessee Profile:
Class I Railroads 11,045 13,726 24,771
Non-Class I Railroads 1,240 2,214 3,454
Shipping Companies 896 2,299 3,195
Leasing Companies 222 113 335
Off-Lease 1,184 46 1,230
--------- --------- -----------
Total Revenue Units 14,587 18,398 32,985
========= ========= ===========
</TABLE>
(1) Each platform of an articulated car is treated as a separate car.
(2) Railcar equipment held for sale consists mainly of hulks that will either
be sold or refurbished and placed on lease.
A substantial portion of the equipment in the lease fleet has been acquired
through an agreement entered into in August 1990 with Southern Pacific
Transportation Company, which has since merged with Union Pacific, 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 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
3
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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 1999, approximately 61 percent of domestic requirements for steel were
purchased from Oregon Steel Mills, Inc., approximately 73 percent of the
Company's Canadian requirements were purchased from Algoma Steel Inc., and
approximately 52 percent of the Company's European requirements were purchased
from Czestochowa Steel Works. The top ten suppliers for all inventory purchases
accounted for approximately 29 percent of total purchases, of which no supplier
accounted for more than 10 percent. 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.
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, refurbishing existing equipment, or
seeking to outsource the maintenance or management of equipment.
Through customer relationships, insights are derived into the potential need
for new products and services. Marketing and engineering personnel collaborate
to evaluate opportunities and identify and develop new products. Research and
development costs incurred for new product development during 1999, 1998 and
1997 were $1,107,000, $1,470,000 and $1,097,000, respectively.
CUSTOMERS AND BACKLOG
The manufacturing customer base includes every transportation company that
utilizes double-stack or conventional railcars as well as financial institutions
that provide equipment to the transportation industry. A portion of the customer
base includes TTX Company, Burlington Northern Sante Fe ("BNSF"), Union Pacific,
Canadian National Railway Company, Norfolk Southern Railway Company, NorRail,
Inc. and General Electric Railcar Services.
The following table lists the Company's backlog in units and dollars for new
railcars at the dates shown:
<TABLE>
<CAPTION>
August 31,
------------- ------------ ------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
New railcar backlog(1) 4,000 6,200 2,600
Estimated value (in thousands) $271,000 $375,000 $133,000
</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, Oregon Steel Mills, and First Union Rail.
In 1999, sales to the two largest customers, TTX Company and BNSF, accounted
for 28 percent and 17 percent of total revenues and 34 percent and 18 percent of
manufacturing revenues. Sales to Union Pacific accounted for approximately 41%
of leasing and services revenues. No other customers accounted for more than 10
percent of total, manufacturing or leasing and services revenues.
4
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COMPETITION
Greenbrier is affected by a variety of competitors in each of its principal
business activities. There are currently seven major railcar manufacturers
competing in North America. Two of these producers build railcars principally
for their own fleets and five producers - Trinity Industries, Inc., Thrall Car
Manufacturing Co., Johnstown America Corp., National Steel Car, Ltd. and the
Company - compete principally in the general railcar market. Some of these
producers have substantially greater resources than the Company. Greenbrier
competes on the basis of type of product, reputation for quality, price,
reliability of delivery and customer service and support. Competition in Europe,
with 20-30 railcar producers, is more fragmented than in North America.
In railcar leasing, principal competitors in North America include The CIT
Group, DJ Joseph, First Union Rail, GATX Corporation, General Electric Railcar
Services, NorRail, Inc. and Helm Financial Corp. Greenbrier does not currently
provide significant leasing services in Europe.
PATENTS AND TRADEMARKS
Greenbrier pursues a proactive program for protection of intellectual
property resulting from its research and development efforts. Greenbrier has
obtained patent and trademark protection for significant intellectual property
as it relates to its manufacturing business. The Company holds several United
States and foreign patents of varying duration and has several patent
applications pending.
ENVIRONMENTAL MATTERS
The Company is subject to national, state, provincial and local environmental
laws and regulations concerning, among other matters, air emissions, 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
national, state, provincial and local environmental laws and regulations. Prior
to acquiring manufacturing facilities, the Company conducts investigations to
evaluate the environmental condition of subject properties and negotiates
contractual terms for allocation of environmental exposure arising from prior
uses. Upon commencing operations at acquired facilities, the Company endeavors
to implement environmental practices, which are at least as stringent as those
mandated by applicable laws and regulations. Environmental studies have been
conducted of owned and leased properties, which indicate additional
investigation and some remediation may be necessary.
The Portland, Oregon manufacturing facility is located on the Willamette
River. The U.S. Environmental Protection Agency is considering possible
classification of portions of the river bed, including the portion fronting the
facility, as a federal "superfund" site due to sediment contamination. There is
no indication that Greenbrier has contributed to contamination of theWillamette
River bed, although uses by prior owners of the property may have contributed.
Nevertheless, ultimate classification of the Willamette River may have an impact
on the value of the Company's investment in the property and may require the
Company to initially bear a portion of the cost of any mandated remediation.
Greenbrier may be required to perform periodic maintenance dredging in order to
continue to launch vessels from its launch ways on the river and classification
as a superfund site could result in some limitations on future launch activity.
The outcome of such actions cannot be estimated; however, management believes
that any ultimate liability resulting from environmental issues will not
materially effect the financial position or results of operations of the
Company.
REGULATION
The Federal Railroad Administration (the "FRA") in the United States and
Transport Canada in Canada administer and enforce laws and regulations relating
to railroad safety. These regulations govern equipment and safety appliance
standards for freight cars and other rail equipment used in interstate commerce.
The Association of American Railroads (the "AAR") also promulgates a wide
variety of rules and regulations governing the safety and design of equipment,
relationships among railroads with respect to railcars in interchange and other
matters. The AAR also certifies railcar builders and component manufacturers
that provide equipment for use on North American railroads. The effect of these
regulations is that the Company must maintain its certifications with the AAR as
a car builder and component manufacturer, and products sold and leased by the
Company must meet AAR, Transport Canada and FRA standards.
In Europe, many countries have deregulated their railroads and the
privatization process is underway. However, each country currently has its own
market with different certifications required in each. To address cross-border
issues, the European Union has proposed international rail routes that would run
on a common standard with few customs restrictions.
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EXECUTIVE OFFICERS OF THE COMPANY
The following are the executive officers of the Company.
ALAN JAMES, 69, is Chairman of the Board of Directors of Greenbrier, a position
he has held since 1994. Mr. James was President of Greenbrier from 1974 to 1994.
WILLIAM A. FURMAN, 55, is President, Chief Executive Officer and a director of
Greenbrier, positions he has held since 1994. Mr. Furman is also Chief Executive
Officer of Gunderson, Inc., Managing Director of TrentonWorks Limited, and
Chairman of the Board of Directors of WagonySwidnica, S.A. 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, 45, has been Senior Vice President Marketing and Sales since
1996 and President of Greenbrier Railcar, Inc., a subsidiary that engages in
railcar leasing, since 1991. Mr. Bisson was Vice President of Greenbrier
Railcar, Inc. from 1987 to 1991 and has been Vice President of Greenbrier
Leasing Corporation, a subsidiary that engages in railcar leasing, since 1987.
LARRY G. BRADY, 60, is Senior Vice President and Chief Financial Officer of the
Company. Prior to becoming Senior Vice President in 1998 he was Vice President
and Chief Financial Officer since 1994. Mr. Brady has been Senior Vice President
of Greenbrier Leasing Corporation since he joined the Company in 1991. From 1974
to 1990, he was a partner with Touche Ross & Co. (which subsequently became
Deloitte & Touche LLP).
A. DANIEL O'NEAL, JR., 63, 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 company, and Chairman of World2Market.com, an internet retail
company.
MARK J. RITTENBAUM, 42, is Vice President and Treasurer of the Company, a
position he has held since 1994. Mr. Rittenbaum is also Vice President of
Greenbrier Leasing Corporation and Greenbrier Railcar, Inc., positions he has
held since 1993 and 1994.
TIMOTHY A. STUCKEY, 49, has been President of Gunderson Rail Services since May
1999 and President of Autostack Corporation since 1992, prior to which he served
as Executive Vice President of Autostack since 1990, and Assistant Vice
President of Greenbrier Leasing Corporation since 1987.
NORRISS M. WEBB, 60, is Executive Vice President and General Counsel of the
Company, a position he has held since 1994. He is also Vice President, Secretary
and a director of Gunderson, Inc. Mr. Webb was Vice President of the Company
from 1981 to 1994.
L. CLARK WOOD, 57, 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 among any of the executive officers of the Company. Mr. James,
Chairman of the Board of Directors, and Mr. Furman have entered into a
Stockholders' Agreement pursuant to which they have agreed, among other things,
to vote as directors to elect Mr. Furman as President and Chief Executive
Officer of the Company, Mr. James as Chairman, and certain persons as executive
officers and each to vote for the other and for the remaining existing directors
in electing directors of the Company.
6
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EMPLOYEES
As of August 31, 1999, Greenbrier had 3,737 full-time employees, consisting of
3,609 employees engaged in railcar and marine manufacturing, and railcar
services, and 128 employees engaged in leasing and services activities. A total
of 1,210 employees at the manufacturing facility in Trenton, Nova Scotia, Canada
are covered by collective bargaining agreements which expire in 2000. In
addition, 325 employees at the manufacturing facility in Swidnica, Poland are
also covered by collective bargaining agreements that can be terminated by
either party with three months notice. A stock incentive plan and a stock
purchase plan are available for all North American employees. A discretionary
bonus program is maintained for salaried and most hourly employees not covered
by collective bargaining agreements. Greenbrier believes that its relations with
its employees are generally good.
ITEM 2. PROPERTIES
The Company operates at the following facilities in North America and Europe
as of August 31, 1999:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DESCRIPTION SIZE LOCATION STATUS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Railcar and marine 75 acres including 774,000 sq. Portland, Oregon Owned
manufacturing facility ft. of manufacturing space and a
750-foot side-launch ways for
launching ocean-going vessels
- --------------------------------------------------------------------------------------------------------------------------
Railcar manufacturing and 100 acres with 800,000 sq. ft. of Trenton, Nova Scotia Owned
forge facility manufacturing space as well as a
forge shop
- --------------------------------------------------------------------------------------------------------------------------
Railcar manufacturing facility 112 acres with 676,000 sq. ft. of Swidnica, Poland Owned
manufacturing space
- --------------------------------------------------------------------------------------------------------------------------
Railcar manufacturing and 461,991 sq. ft. of manufacturing Sahagun, Mexico Leased through 2003(1)
wheel reconditioning shop space, which includes a 152,245
sq. ft. wheel reconditioning shop
- --------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 70 acres Cleburne, Texas Leased through 2002 with
an option to purchase
- --------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 40 acres Finley, Washington Leased through 2015 with
an option to purchase
- --------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 18 acres Atchison, Kansas Owned
- --------------------------------------------------------------------------------------------------------------------------
Railcar repair facility 5.4 acres Springfield, Oregon Leased through 2004
- --------------------------------------------------------------------------------------------------------------------------
Wheel reconditioning shop 5.6 acres Tacoma, Washington Leased through 2003 with
extensions through 2071
- --------------------------------------------------------------------------------------------------------------------------
Wheel reconditioning shop 20,000 sq. ft. Pine Bluff, Arkansas Leased through 1999
- --------------------------------------------------------------------------------------------------------------------------
Executive offices, railcar 32,000 sq. ft. Lake Oswego, Oregon Leased through 2001
marketing and leasing
activities
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The property in Sahagun, Mexico, is leased by Gunderson Concarril from
Bombardier Transportation, Greenbrier's joint venture partner.
Marketing and administrative offices are also leased in various locations
throughout North America and Europe. Greenbrier believes that its facilities are
in good condition and that the facilities, together with anticipated capital
improvements and additions, are adequate to meet its operating needs for the
foreseeable future. The need for expansion and upgrading of the railcar
manufacturing and refurbishment facilities is continually evaluated in order to
take advantage of increased market opportunities for new railcar designs and
repair and refurbishment services.
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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. In addition,
litigation has been initiated by former shareholders of Interamerican Logistics
Inc. ("Interamerican"), which was acquired in the fall of 1996. The plaintiffs
allege that Greenbrier violated the agreements pursuant to which it acquired
ownership of Interamerican and seek damages aggregating $4.5 million Canadian.
Management believes the claim is without merit and intends to vigorously defend
its position. Accordingly, management believes that any ultimate liability
resulting from litigation will not materially affect the financial position,
results of operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Reference is made to the information set forth in the section entitled
"Common Stock" on page 44 of the 1999 Annual Report to Stockholders, which
section is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to the information set forth in the section entitled
"Selected Financial Information" on page 22 of the Company's 1999 Annual Report
to Stockholders, which section is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Reference is made to the information set forth in the section entitled
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" on pages 23 to 27 of the 1999 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 1999 Annual Report to Stockholders are incorporated
herein by reference: Consolidated Balance Sheets as of August 31, 1999 and 1998,
and the Consolidated Statements of Operations, Consolidated Statements of
Stockholders' Equity and Comprehensive Income (Loss) and Consolidated Statements
of Cash Flows for each of the years ended August 31, 1999, 1998 and 1997, on
pages 29 to 32, the Notes to Consolidated Financial Statements on pages 33 to
41, the report of independent auditors thereon on page 28 and the section
entitled Quarterly Results of Operations on page 42.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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, 1999, 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, 1999.
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, 1999.
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, 1999.
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 25, 1999, appearing on pages 28 to 41 of
the 1999 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 1999 Annual
Report to Stockholders is not to be deemed filed as part of this Annual Report
on Form 10-K.
<TABLE>
<CAPTION>
Annual Report
Page No.
--------
<S> <C>
(a) (1) Financial Statements of the Company - Index 21
Independent Auditors' Report 28
Consolidated Balance Sheets as of August 31, 1999 and 1998 29
Consolidated Statements of Operations for each of the years ended
August 31, 1999, 1998 and 1997 30
Consolidated Statements of Stockholders' Equity and Comprehensive
Income (Loss) for each of the years ended August 31, 1999, 1998 and 1997 31
Consolidated Statements of Cash Flows for each of the years ended
August 31, 1999, 1998 and 1997 32
Notes to Consolidated Financial Statements 33
<CAPTION>
This Filing
Page No.
--------
<S> <C>
(2) The following financial statement schedule should be read in
conjunction with the Consolidated Financial Statements in the 1999
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 14
Schedule I - Condensed Financial Information of Registrant 15
(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, incorporated herein by reference to Exhibit 10.8 to
the Registrant's Annual Report on Form 10-K for the year ended
August 31, 1998.
10.9. Amendment No. 2 to the 1994 Stock Incentive Plan.
10.10 Amendment No. 3 to the 1994 Stock Incentive Plan.
10.11. 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.
10.12. 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.
10.13. 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.
10.14. 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.
10.15. 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>
10.16. 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.
10.17. 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.
10.18. 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.
10.19. 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.
10.20. 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.
10.21. 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.
10.22. 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.
10.23. Stock Incentive Plan - 2000, dated as of April 6, 1999.
13. 1999 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
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
The Greenbrier Companies, Inc.
We have audited the consolidated financial statements of The Greenbrier
Companies, Inc. and Subsidiaries as of August 31, 1999 and 1998, and for each of
the three years in the period ended August 31, 1999, and have issued our report
thereon dated October 25, 1999; such consolidated financial statements and
report are included in your 1999 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of The Greenbrier Companies, Inc. and Subsidiaries, listed in
Item 14. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Deloitte & Touche LLP
Portland, Oregon
October 25, 1999
14
<PAGE>
SCHEDULE I
THE GREENBRIER COMPANIES, INC.
CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
(In thousands)
BALANCE SHEETS
August 31,
-------------------------------
1999 1998
------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 31 $ 169
Accounts receivable 229 2,623
Due from affiliates 9,898 13,972
Investment in subsidiaries 162,305 119,246
Deferred income taxes 650 -
Prepaid expenses and other 2,282 2,764
------------- --------------
$ 175,395 $ 138,774
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 7,002 $ 3,259
Due to affiliates 34,230 12,457
Deferred income taxes - 1,688
Stockholders' equity 134,163 121,370
------------- --------------
$ 175,395 $ 138,774
============= ==============
<CAPTION>
STATEMENTS OF OPERATIONS
Year ended August 31,
-------------------------------------------------
1999 1998 1997
-------------- ------------- --------------
<S> <C> <C> <C>
Interest and other income $ 1,528 $ 612 $ 1,044
Expenses
Selling and administrative 10,474 8,859 4,571
Interest 1,325 326 26
-------------- ------------- --------------
11,799 9,185 4,597
-------------- ------------- --------------
Loss before income tax benefit and equity
in earnings of subsidiaries (10,271) (8,573) (3,553)
Income tax benefit 4,268 3,601 1,496
-------------- ------------- --------------
Loss before equity in earnings (loss) of subsidiaries (6,003) (4,972) (2,057)
Equity in earnings (loss) of subsidiaries 25,484 25,304 (2,114)
-------------- ------------- --------------
Net earnings (loss) $ 19,481 $ 20,332 $ (4,171)
============== ============= ==============
</TABLE>
15
<PAGE>
SCHEDULE I (CONTINUED)
THE GREENBRIER COMPANIES, INC.
CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
(In thousands)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended August 31,
--------------------------------------------------
1999 1998 1997
-------------- ------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 19,481 $ 20,332 $ (4,171)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Deferred income taxes (2,338) 996 1,081
Equity in earnings of subsidiaries (25,484) (25,304) (8,564)
Other 1,037 685 (47)
Decrease (increase) in assets:
Accounts and notes receivable 2,394 (2,575) 10
Due from affiliates 4,074 (2,140) 14,827
Prepaid expenses and other 482 (1,182) (644)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 3,743 2,144 (1,740)
Due to affiliates 21,773 9,380 2,477
-------------- ------------- --------------
Net cash provided by operating activities 25,162 2,336 3,229
Cash flows from investing activities:
Investment in subsidiary (19,770) - -
--------------- ------------- --------------
Net cash used in investing activities (19,770) - -
Cash flows for financing activities:
Dividends (5,559) (3,409) (3,399)
Proceeds from stock options 29 1,221 -
Proceeds from subsidiary redemption of preferred stock - - 68
-------------- ------------- --------------
Net cash used in financing activities (5,530) (2,188) (3,331)
Increase (decrease) in cash (138) 148 (102)
Cash and cash equivalents:
Beginning of year 169 21 123
-------------- ------------- --------------
End of year $ 31 $ 169 $ 21
============== ============= ==============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1,413 $ 326 $ 26
</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 24, 1999 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.
<TABLE>
<CAPTION>
Signature Date
- --------- ----
<S> <C>
/s/ Alan James November 24, 1999
- -------------------------------
Alan James, Chairman of the Board
/s/ William A. Furman November 24, 1999
- -------------------------------
William A. Furman, President and
Chief Executive Officer, Director
/s/ Victor G. Atiyeh November 24, 1999
- -------------------------------
Victor G. Atiyeh, Director
/s/ Peter K. Nevitt November 24, 1999
- -------------------------------
Peter K. Nevitt, Director
/s/ A. Daniel O'Neal November 24, 1999
- -------------------------------
A. Daniel O'Neal, Director
/s/ C. Bruce Ward November 24, 1999
- -------------------------------
C. Bruce Ward, Director
/s/ Benjamin R. Whiteley November 24, 1999
- -------------------------------
Benjamin R. Whiteley, Director
/s/ Larry G. Brady November 24, 1999
- -------------------------------
Larry G. Brady, Sr. Vice President and
Chief Financial Officer (Principal Financial
and Accounting Officer)
</TABLE>
17
<PAGE>
Exhibit 10.9
AMENDMENT NO. 2
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 VI.B of the Plan is
amended in its entirety to read as follows:
"B. NONDISCRETIONARY AWARDS. Immediately after the close of
each annual meeting of stockholders (commencing with the 1999
annual meeting), the Committee shall automatically grant to
each member of the Board of Directors (including any such
person who is elected at such meeting), other than the
Chairman of the Board of Directors and the President and Chief
Executive Officer of the Company, an option to purchase 2,500
shares of Common Stock. The exercise price and term of such
options shall be the same as provided under Article IX and
such options shall become exercisable in accordance with the
schedule set forth in Article IX.B."
Except as modified by this Amendment No. 2, the Plan, as heretofore amended by
Amendment No. 1, shall remain in full force and effect and be unamended.
Adopted by the Board of Directors.
/s/ Kenneth D. Stephens
-----------------------------------------------
Kenneth D. Stephens, Secretary
<PAGE>
Exhibit 10.10
AMENDMENT NO. 3
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"), the Plan, as
heretofore amended by Amendments 1 and 2, is amended as follows:
A. Article VI.B of the Plan, as heretofore amended by Amendment
No. 2 to the Plan, is deleted from the Plan in its entirety.
B. Article VI.C of the Plan is amended by deleting the last
sentence thereof in its entirety.
Except as modified by this Amendment No. 3, the Plan, as heretofore
amended by Amendment Nos. 1 and 2, shall remain in full force and effect and be
unamended.
Adopted by the Board of Directors.
/s/ Kenneth D. Stephens
-----------------------------------------
Kenneth D. Stephens, Secretary
<PAGE>
Exhibit 10.23
STOCK INCENTIVE PLAN - 2000
I. PURPOSE
The Plan provides a means by which selected Employees, Directors and
Consultants of The Greenbrier Companies, Inc. and Affiliates may be given an
opportunity to acquire stock of the Company. By means of the Plan, the Company
seeks to secure and retain the services of persons who currently are, or may
become, Employees, Directors or Consultants, and to provide incentives for such
persons to exert maximum efforts on behalf of the Company and its Affiliates.
The Plan provides for granting Incentive Stock Options, Non-statutory Stock
Options and Restricted Stock Awards, or any combination of the foregoing, as
may, from time to time, be appropriate, depending upon the requirements of the
Company and the circumstances of the recipient of the Award, as more fully
provided in the Plan.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
the context otherwise requires:
2.01 "1934 ACT" means the Securities Exchange Act of 1934, as amended and
in effect from time to time, or any successor statute.
2.02 "ACQUIRING PERSON" means any person or related person(s) which
constitute a "group" for purposes of Section 13(d) and Rule 13d-5 promulgated
under the Exchange Act, as such Section and Rule are in effect on the date this
Plan was initially adopted; PROVIDED, HOWEVER, that the term Acquiring Person
shall not include (a) the Company or any Subsidiary, (b) any employee benefit
plan of the Company or any Subsidiary, (c) any entity holding voting capital
stock of the Company for or pursuant to the terms of any such employee benefit
plan, or (d) any person or group which, on the date of adoption of the Plan,
held in excess of 25 percent of the outstanding Common Stock.
2.03 "AFFILIATE" means any Parent or Subsidiary.
2.04 "AWARD" means, individually or collectively, any Option, Restricted
Stock Award or Director Option.
2.05 "BOARD" means the Board of Directors of the Company.
2.06 "CHANGE IN CONTROL" means:
(a) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated pursuant to the Exchange Act as in effect on the date
this Plan was initially adopted; PROVIDED that, without limitation, such a
change in control shall be deemed to have occurred at such time as any Acquiring
Person hereafter becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of 30 percent or
more of the combined voting power of the Company's voting securities; or
(b) During any period of 12 consecutive calendar months,
individuals who at the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless the election, or the
nomination for election, by the Company's stockholders of each new Director was
approved by a vote of at least a majority of the Directors then still in office
who were Directors at the beginning of the period; or
(c) There shall be consummated (i) any consolidation, merger or
exchange involving the Company in which the Company is not the continuing or
surviving corporation or pursuant to which voting securities would be converted
into cash, securities, or other property, other than a merger of the Company in
which the holders of voting
<PAGE>
securities immediately prior to the merger have the same, or substantially
the same, proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale, lease, exchange,
or other transfer (in one transaction or a series of related transactions) of
all, or substantially all, of the assets of the Company, or
(d) Approval by the stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company.
2.07 "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute. Reference in the Plan to
any section of the Code shall be deemed to include any amendments or successor
provisions to any such section.
2.08 "COMMITTEE" means not less than two members of the Board who are
selected by the Board as provided in Paragraph 4.01.
2.09 "COMMON STOCK" means the Common Stock, par value $0.001 per share,
of the Company.
2.10 "COMPANY" means The Greenbrier Companies, Inc., a Delaware
corporation.
2.11 "CONSULTANT" means any person, including an adviser, engaged by the
Company or any Affiliate to render services and who does not render such
services as an Employee or Director.
2.12 "DIRECTOR" means an individual elected to the Board by the
stockholders of the Company or by the Board under applicable corporate law who
is serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.
2.13 "DISABILITY" means the condition of being permanently "disabled"
within the meaning of Section 22(e)(3) of the Code, namely being unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
2.14 "ELIGIBLE DIRECTOR" means a Director other than the persons who, on
the date of adoption of the Plan, served as Chairman of the Board of the Company
or the President and Chief Executive Officer of the Company.
2.15 "ELIGIBLE DIRECTOR OPTION" means an Award described in Article 9 of
the Plan.
2.16 "EMPLOYEE" means any person (including a Director, if applicable) in
an employment relationship with the Company or any Affiliate.
2.17 "FAIR MARKET VALUE" means, as of any specified date, the mean of the
reported high and low sales prices of the Common Stock on the composite tape on
that date, or if no prices are reported on that date, on the last preceding date
on which such prices of the Common Stock are so reported. If the Common Stock
is traded over the counter at the time a determination of its fair market value
is required to be made hereunder, its fair market value shall be deemed to be
equal to the average between the reported closing bid and asked prices of Common
Stock on that date, or if no prices are reported on that date, on the last
preceding date on which such prices of Common Stock are so reported. In the
event Common Stock is not publicly traded at the time a determination of its
value is required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
2.18 "HOLDER" means an Employee, CONSULTANT or a Director who has been
granted an Award.
2.19 "INCENTIVE STOCK OPTION" means an incentive stock option within the
meaning of Section 422 of the Code.
2.20 "NON-STATUTORY STOCK OPTION" means a stock option other than an
Incentive Stock Option.
2.21 "OPTION" means an Award described in Article 7 or 9 of the Plan.
2.22 "OPTION Agreement" means a written agreement between the Company and
a Holder with respect to an Option.
<PAGE>
2.23 "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2.24 "PLAN" means The Greenbrier Companies, Inc. Stock Incentive Plan, -
2000 as set forth herein and as may be hereafter amended from time to time.
2.25 "RESTRICTED STOCK AGREEMENT" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
2.26 "RESTRICTED STOCK Award" means an Award described in Article 8 of
the Plan.
2.27 "RULE 16B-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation or
statute fulfilling the same or similar function.
2.28 "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code; namely, any
corporation in which the Company directly or indirectly controls 50 percent or
more of the total combined voting power of all classes of stock having voting
power. For purposes of this Plan, the term "Subsidiary" shall also include a
limited liability company or other entity in which the Company directly or
indirectly controls 50 percent or more of the total combined voting power or
interest in profits and losses, PROVIDED, that for determining eligibility to
receive Incentive Stock Options, the term "Subsidiary" shall be limited to the
term "subsidiary corporation" as defined in Section 424(f) of the Code.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of April 6, 1999; the date of its
adoption by the Board, provided the Plan is approved by the stockholders of the
Company within 12 months thereafter. No further Awards may be granted under the
Plan after April 5, 2009. The Plan shall remain in effect until all Awards
granted under the Plan have been satisfied or expired.
IV. ADMINISTRATION
4.01 COMPOSITION OF COMMITTEE. The Plan shall be administered by a
committee which shall be: (a) appointed by the Board and (b) constituted so as
to permit the Plan to comply with Rule 16b-3. Except as provided in Article IX,
no member of the Committee shall be eligible to receive an Award under the Plan,
and no person who has received an Award (other than an Award described in
Article IX) in the preceding year shall be eligible to serve on the Committee.
The Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. If a Committee is not appointed by the Board, the Plan shall be
administered by the Board and all references in the Plan to a Committee shall
mean and refer to the Board.
4.02 AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan,
the Committee shall have sole authority, in its discretion, to determine: (a)
which Employees, Directors and Consultants shall receive Awards, (b) the time or
times when Awards shall be granted, (c) the type or types of Awards to be
granted, and (d) the number of shares of Common Stock which may be issued under
each Award. In making such determinations the Committee may take into account
the nature of the services rendered by the respective individuals, their present
and potential contribution to the success of the Company and its Affiliates, and
such other factors as the Committee in its discretion shall deem relevant. The
Committee shall also have such additional powers as are delegated to it by the
Plan. Subject to the express provisions of the Plan, the Committee is
authorized to construe the Plan and the respective agreements executed
thereunder, to prescribe such rules and regulations relating to the Plan as it
may deem advisable to carry out the Plan, and to determine the terms,
restrictions and provisions of each Award, including such terms, restrictions
and provisions as shall be requisite in the judgment of the Committee to cause
designated Options to qualify as Incentive Stock Options, and to make all other
determinations necessary or advisable for administering the Plan. The Committee
may correct any defect or supply any omission or reconcile any inconsistency in
any agreement relating to an Award in the manner and to the extent it shall deem
expedient to carry it into effect. The determinations of the Committee on the
matters referred to in this Paragraph 4.02 shall be conclusive.
<PAGE>
4.03 LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan or any Award.
4.04 COSTS OF PLAN. The costs and expenses of administering the Plan
shall be borne by the Company.
V. ELIGIBILITY
Under the Plan, Employees, Consultants and Eligible Directors shall be
eligible to receive Awards under the Plan; provided, however, that only
Employees shall be eligible to receive Incentive Stock Options and only Eligible
Directors shall be eligible to receive Eligible Director Options. Members of
the Committee shall be eligible to receive Awards only to the extent provided in
Paragraph 4.01. Any Award may be granted on more than one occasion to the same
person, and may include an Incentive Stock Option, a Non-statutory Stock Option,
a Restricted Stock Award, or any combination thereof.
VI. GRANT OF AWARDS; SHARES SUBJECT TO THE PLAN
6.01 DISCRETIONARY AWARDS. The Committee may from time to time grant
Options and Restricted Stock Awards to Employees and Consultants.
6.02 NON-DISCRETIONARY AWARDS. Immediately after the close of each
annual stockholder meeting (commencing with the 2000 annual meeting), the
Committee shall automatically grant an Eligible Director Option to purchase
2,500 shares of Common Stock to each person then serving as am Eligible
Director, including any such person who is elected at such meeting. The
exercise price and term of such options shall be the same as provided under
Article IX and such options shall become exercisable in accordance with the
schedule set forth in Paragraph 9.02.
6.03 AGGREGATE NUMBER OF SHARES. Subject to Article X, the aggregate
number of shares of Common Stock that may be issued under the Plan shall not
exceed 1,000,000 shares. Shares shall be deemed to have been issued under the
Plan : only (a) to the extent actually issued and delivered pursuant to an
Award, or (b) to the extent an Award is settled in cash. To the extent that an
Award lapses or the rights of its Holder terminate, any shares of Common Stock
subject to such Award shall again be available for the grant of Awards.
6.04 STOCK OFFERED. The stock to be offered pursuant to the grant of any
Award may be authorized but unissued Common Stock or Common Stock previously
issued and outstanding and reacquired by the Company.
VII. OPTIONS
7.01 OPTION PERIOD. The term of each Option shall be as specified by the
Committee at the date of grant, except that no Incentive Stock Option shall be
exercisable after the expiration of 10 years from the date of grant of such
Incentive Stock Option.
7.02 LIMITATIONS ON EXERCISE OF OPTION. An Option shall be exercisable
in whole or in such installments and at such times as may be determined by the
Committee.
7.03 SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the extent that
the aggregate Fair Market Value (determined at the time the respective Incentive
Stock Option is granted) of Common Stock with respect to which Incentive Stock
Options granted after 1986 are exercisable for the first time by an individual
during any calendar year under all incentive stock option plans of the Company
and its Affiliates exceeds $100,000, such Incentive Stock Options shall be
treated as options which do not constitute Incentive Stock Options. The
Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of a
Holder's Options shall not constitute Incentive Stock Options because of such
limitation and shall notify the Holder of such determination as soon as
practicable after such determination. No Incentive Stock Option shall be
granted to an individual if, at the time the Option is granted, such individual
owns stock possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of any Affiliate, unless (a) at the time
such Option is granted the exercise price is at least 110 percent of the Fair
Market Value of the Common Stock subject to the Option and (b) such Option by
its terms is not exercisable after the expiration of five years from the date of
grant.
<PAGE>
7.04 SEPARATE STOCK CERTIFICATES. Separate stock certificates shall be
issued by the Company for those shares acquired pursuant to the exercise of an
Incentive Stock Option and for those shares acquired pursuant to the exercise of
a Non-statutory Stock Option.
7.05 OPTION AGREEMENT. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify an Incentive Stock Option
under Section 422 of the Code. An Option Agreement may provide for the payment
of the exercise price, in whole or in part, by the delivery of a number of
shares of Common Stock (plus cash if necessary) having a Fair Market Value (as
of the exercise date of the Option) equal to such exercise price. Moreover, an
Option Agreement may provide for a "cashless exercise" of the Option by
establishing procedures whereby the Holder, by a properly executed written
notice, directs: (a) an immediate market sale or margin loan respecting all or
a part of the shares of Common Stock to which the Holder is entitled upon
exercise of the Option, (b) the delivery of the shares of Common Stock from the
Company directly to a brokerage firm and (c) the delivery of the exercise price
from sale or margin loan proceeds from the brokerage firm directly to the
Company. Such Option Agreement may also include, without limitation, provisions
relating to: (a) vesting of Options, (b) tax matters (including provisions
covering any applicable employee wage withholding requirements), and (c) any
other matters not inconsistent with the terms and provisions of this Plan that
the Committee shall in its sole discretion determine. The terms and conditions
of the respective Option Agreements need not be identical.
7.06 EXERCISE PRICE AND PAYMENT. The price at which a share of Common
Stock may be purchased upon exercise of an Option shall be determined by the
Committee, but such exercise price shall be: (a) not less than the Fair Market
Value of a share of Common Stock on the date such Option is granted if the
Option is an Incentive Stock Option and (b) subject to adjustment as provided in
Article X. An Option or portion thereof may be exercised by delivery of an
irrevocable notice of exercise to the Company. The exercise price of an Option
or portion thereof shall be paid in full in the manner prescribed by the
Committee.
7.07 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) In the event the employment or service of a Holder of an
Option by the Company or any Affiliate terminates for any reason other than
because of Disability or death, such Option may be exercised at any time prior
to the expiration date of the Option or the expiration of three months after the
date of such termination, whichever is the shorter period, but only if and to
the extent the Holder was entitled to exercise the Option at the date of such
termination.
(b) In the event the employment or service of a Holder of an
Option by the Company or any Affiliate terminates because of Disability, such
Option may be exercised at any time prior to the expiration date of the Option
or the expiration of one year after the date of such termination, whichever is
the shorter period, but only if and to the extent the Holder was entitled to
exercise the Option at the date of such termination.
(c) 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.
(d) The Committee, at the time of grant or at any time thereafter,
may extend the three-month and one-year expiration periods any length of time
not later than the original expiration date of the Option, and may increase the
portion of the Option that is exercisable, subject to such terms and conditions
as the Committee may determine.
(e) To the extent that the Option of any deceased Holder or of any
Holder whose employment or service terminates is not exercised within the
applicable period, all further rights to purchase Common Stock pursuant to such
Option shall cease and terminate.
7.08 RIGHTS AS A STOCKHOLDER. The Holder of an Option under the Plan
shall have no rights as a stockholder with respect to the Common Stock subject
to such Option until the date of issue to the Holder of a stock certificate for
such shares. Except as otherwise expressly provided in the Plan, no adjustment
shall be made for dividends or other rights for which the record date occurs
prior to the date such stock certificate is issued.
<PAGE>
7.09 OPTIONS IN SUBSTITUTION FOR STOCK OPTIONS GRANTED BY OTHER
CORPORATIONS. Options may be granted under the Plan from time to time in
substitution for stock options held by individuals employed by corporations who
become Employees as a result of a merger or consolidation of the employing
corporation with the Company or any Affiliate, or the acquisition by the Company
or any Affiliate of the assets of the employing corporation, or the acquisition
by the Company or any Affiliate of stock of the employing corporation with the
result that such employing corporation or entity becomes a Subsidiary.
7.10 RESTRICTION ON SALE. Unless otherwise determined by the Committee,
if an officer subject to Section 16 of the 1934 Act or a Director exercises an
Option within six months of the grant of an Option, the shares acquired upon
exercise of the Option may not be sold until six months after the date of grant
of the Option.
VIII. RESTRICTED STOCK AWARDS
8.01 RESTRICTION PERIOD. At the time a Restricted Stock Award is
granted, the Committee shall establish a period of time (the "Restriction
Period") applicable to such Award. Each Restricted Stock Award may have a
different Restriction Period, in the discretion of the Committee. The
Restriction Period applicable to a particular Restricted Stock Award shall not
be changed except as permitted by Paragraph 8.02 or Article X.
8.02 OTHER TERMS AND CONDITIONS. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock certificate registered in
the name of the Holder of such Restricted Stock Award. The Holder shall have
the right to receive dividends during the Restriction Period, to vote Common
Stock subject thereto and to enjoy all other stockholder rights, except that:
(a) the Holder shall not be entitled to delivery of the stock certificate until
the Restriction Period shall have expired, (b) the Company shall retain custody
of the stock certificate during the Restriction Period, (c) the Holder may not
sell, transfer, pledge, exchange, hypothecate or otherwise dispose of the stock
during the Restriction Period, and (d) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock Agreement shall
cause a forfeiture of the Restricted Stock Award. Stock dividends issued with
respect to Common Stock awarded pursuant to a Restricted Stock Award shall be
treated as additional Common Stock covered by the Restricted Stock Award. At
the time of such Award, the Committee may, in its sole discretion, prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including, but not limited to, rules pertaining to the termination of
employment or service (by retirement, Disability, death or otherwise) of a
Holder prior to expiration of the Restriction Period. Such additional terms,
conditions or restrictions shall be set forth in a Restricted Stock Agreement
made in conjunction with the Award. Such Restricted Stock Agreement may also
include, without limitation, provisions relating to: (a) vesting of Awards, (b)
tax matters (including provisions (i) covering any applicable employee wage
withholding requirements and (ii) prohibiting an election by the Holder under
Section 83(b) of the Code), and (c) any other matters not inconsistent with the
terms and provisions of this Plan that the Committee shall in its sole
discretion determine. Unless otherwise determined by the Committee, if an
officer subject to Section 16 of the 1934 Act or a Director receives a
Restricted Stock Award, shares issued pursuant to such Award may not be sold
until six months after the shares are issued.
8.03 EXERCISE PRICE AND PAYMENT. The Committee shall determine the
amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a determination, a
Holder shall not be required to make any payment for Common Stock received
pursuant to a Restricted Stock Award, except to the extent otherwise required by
law.
8.04 RESTRICTED STOCK AGREEMENT. At the time any Award is granted under
this Article VIII, the Company and the Holder shall enter into a Restricted
Stock Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate. The terms and
provisions of the respective Restricted Stock Agreements need not be identical.
IX. ELIGIBLE DIRECTOR OPTIONS
9.01 EXERCISE PRICE. The price at which a share of Common Stock may be
purchased upon exercise of an Eligible Director Option shall be the Fair Market
Value of a share of Common Stock on the date such Eligible Director Option is
granted.
9.02 TERM AND LIMITATIONS ON EXERCISE. Each Eligible Director Option
shall have a five-year term from the date of grant, unless earlier terminated as
provided in Paragraph 7.07 or Article X. Each Eligible Director Option shall
<PAGE>
become exercisable at the rate of one-half per year on each of the first two
anniversaries of the date of grant, subject to earlier exercise pursuant to
Article X. If a Holder ceases to be a Director for any reason, including
death or Disability, the exercise of the Option shall be subject to Paragraph
7.02.
9.03 GENERAL RULES. Eligible Director Options shall be governed by the
provisions of Article VII to the extent such provisions are not inconsistent
with this Article IX. Each Eligible Director Option shall be evidenced by an
Eligible Director Option Agreement.
X. CHANGES IN CAPITAL STRUCTURE
10.01 ADJUSTMENTS BY COMMITTEE. If the outstanding Common Stock is
hereafter increased or decreased or changed into or exchanged for a different
number or kind of shares or other securities of the Company or of another
corporation by reason of any reorganization, merger, consolidation, plan of
exchange, recapitalization, reclassification, stock split-up, combination of
shares or dividend payable in shares, appropriate adjustment shall be made by
the Committee in the number and kind of shares available for Awards. In
addition, the Committee shall make appropriate adjustment in the number and kind
of shares as to which outstanding Options, or portions thereof then unexercised,
shall be exercisable, so that the Holder's proportionate interest before and
after the occurrence of the event is maintained. Notwithstanding the foregoing,
the Committee shall have no obligation to effect any adjustment that would or
might result in the issuance of fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for in any manner
determined by the Committee. Any such adjustments made by the Committee shall
be conclusive. Any adjustment provided for in this Paragraph 10.01 shall be
subject to any required stockholder action. In the event of dissolution of the
Company or a merger, consolidation or plan of exchange affecting the Company, in
lieu of providing for Options as provided above in this Paragraph 10.01 or in
lieu of having the Options continue unchanged, the Committee may, in its sole
discretion, provide a 30-day period prior to such event during which Holders
shall have the right to exercise Options in whole or in part without any
limitation on exercisability and upon the expiration of which 30-day period all
unexercised Options shall immediately terminate.
10.02 RESERVED POWERS OF BOARD AND STOCKHOLDERS. The existence of the
Plan and the Awards granted hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of debt or equity securities ahead of or affecting Common Stock or the
rights thereof, the dissolution or liquidation of the Company, or any sale,
lease, exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.
10.03 NO ADJUSTMENT FOR CERTAIN ISSUANCES BY COMPANY. Except as
hereinbefore expressly provided, the issuance by the Company of shares of stock
of any class or securities convertible into shares of stock of any class, for
cash, property, labor or services, upon direct sale, upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, and in any case
whether or not for fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of Common Stock
subject to Awards theretofore granted or the exercise price per share, if
applicable.
10.04 ACCELERATION OF OPTIONS - CHANGE OF CONTROL PROVISIONS.
(a) In the event of a Change in Control, each outstanding Option
shall become immediately exercisable to the full extent theretofore not
exercisable. Notwithstanding the foregoing, any Holder shall be entitled to
decline the acceleration of all or any of his or her Options, if he or she
determines that such acceleration may result in adverse tax consequences to him
or her.
(b) In the event that the Board approves a proposal for: (i)
merger, exchange or consolidation in which the Company is not the resulting or
surviving corporation (or in which the Company is the resulting or surviving
corporation but becomes a subsidiary of another corporation); (ii) transfer of
all or substantially all the assets of the Company; or (iii) the dissolution or
liquidation of the Company (each, a "Transaction"), the Committee shall notify
in writing Holders of the proposed Transaction (the "Proposal Notice") at least
30 days prior to the effective date of the proposed Transaction. The Committee
shall, in its sole discretion, and to the extent possible under the structure of
the Transaction, select one of the following alternatives for treating
outstanding Options under the Plan:
<PAGE>
(i) Outstanding Options shall be converted into Options to
purchase stock in the corporation that is the surviving or acquiring
corporation in the Transaction. The amount, type of securities
subject thereto and exercise price of the converted Options shall be
determined by the Committee and based on the exchange rate, if any,
used in determining shares of the surviving corporation to be issued
to holders of shares of the Company. If there is no exchange rate
in the Transaction, the Committee shall, in making its
determination, take into account the relative values of the
companies involved in the Transaction and such other factors as it
deems relevant. Such converted Options shall be fully vested.
(ii) The Committee shall provide a 30-day period prior to the
consummation of the Transaction during which outstanding Options may
be exercised without any limitation on exercisability, and upon
consummation of such Transaction, all unexercised Options shall
immediately terminate. If the Committee elects to provide such 30-
day period for the exercise of Options, the Proposal Notice shall so
state. Holders, by written notice to the Company, may exercise
their Options and, in so exercising the Options, may condition such
exercise upon, and provide that such exercise shall become effective
immediately prior to, the consummation of the Transaction, in which
event Holders need not make payment for the Common Stock to be
purchased upon exercise of Options until five days after written
notice by the Company to the Holders that the Transaction has been
consummated (the "Transaction Notice"). If the Transaction is
consummated, each Option, to the extent not previously exercised
prior to the consummation of the Transaction, shall terminate and
cease being exercisable as of the effective date of such
consummation. If the Transaction is abandoned, (A) all outstanding
Options not exercised shall continue to be exercisable, to the
extent such Options were exercisable prior to the date of the
Proposal Notice, and (B) to the extent that any Options not
exercised prior to such abandonment shall have become exercisable
solely by operation of Sections 10.1 or 10.2 or this Section 10.4,
such exercisability shall be deemed annulled, and the exercisability
provisions otherwise in effect shall be reinstituted, as of the date
of such abandonment.
10.05 RIGHTS ISSUED BY ANOTHER CORPORATION. The Committee may also grant
Options or Restricted Stock Awards and sell shares of Common Stock under the
Plan having terms, conditions and provisions that vary from those specified in
the Plan if, but only if, such awards are granted in substitution for, or in
connection with the assumption of, existing Awards and stock granted, awarded or
issued by another corporation and assumed or otherwise agreed to be provided for
by the Company pursuant to or by reason of a Transaction.
XI. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from time to
time; provided, that no change in any Award theretofore granted may be made
which would impair the rights of the Holder without the consent of the Holder;
provided further, that the provisions of Article IX shall not be amended more
than once during any period of six calendar months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, or the
rules thereunder; and provided further, that the Board may not, without approval
of the stockholders, amend the Plan to:
11.01 Increase the maximum number of shares which may be issued on grant
or exercise of an Award, except as provided in Article X;
11.02 Change the price at which an Award may be granted or exercised;
11.03 Change the class of individuals eligible to receive Awards;
11.04 Extend the maximum period during which Awards may be granted under
the Plan; or
11.05 Decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
XII. MISCELLANEOUS
12.01 NO RIGHT TO AN AWARD. Neither the adoption of the Plan by the
Company nor any action of the Board or the Committee shall be deemed to give an
Employee, a Consultant or a Director any right to be granted an Award or any of
the rights hereunder except as may be evidenced by an Award or by an Option
Agreement or Restricted Stock
<PAGE>
Agreement duly executed on behalf of the Company, and then only to the extent
and on the terms and conditions expressly set forth therein.
12.02 NO EMPLOYMENT RIGHTS CONFERRED. Nothing in the Plan shall: (a)
confer upon any Employee any right with respect to continuation of employment
with the Company or any Affiliate or (b) interfere in any way with the right of
the Company or any Affiliate to terminate the Employee's employment (or service
as a Director, in accordance with applicable corporate law, or service as a
Consultant) at any time for any reason, with or without cause.
12.03 OTHER LAWS; WITHHOLDING. The Company shall not be obligated to
issue any Common Stock pursuant to any Award granted under the Plan at any time
when the shares covered by such Award have not been registered under the
Securities Act of 1933 and such other state and federal laws, rules or
regulations as the Company or the Committee deems applicable and, in the opinion
of legal counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance and
sale of such shares. No fractional shares of Common Stock shall be delivered,
nor shall any cash in lieu of fractional shares be paid. The Company shall have
the right to deduct in connection with all Awards any taxes required by law to
be withheld and to require any payments required to enable it to satisfy its
withholding obligations.
12.04 NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan
shall be construed to prevent the Company or any Affiliate from taking any
corporate action which is deemed by the Company or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an
adverse effect on the Plan or any Award granted under the Plan. No Employee,
Consultant, Director, beneficiary or other person shall have any claim against
the Company or any Affiliate as a result of any such action.
12.05 RESTRICTIONS ON TRANSFER. An Award shall not be transferable
otherwise than by will or the laws of descent and distribution and may be
exercisable during the lifetime of the Holder only by such Holder or the
Holder's guardian or legal representative.
12.06 RULE 16B-3. It is intended that the Plan and any grant of an Award
made to a person subject to Section 16 of the 1934 Act meet all of the
requirements of Rule 16b-3. If any provision of the Plan or any such Award
would disqualify the Plan or such Award under, or would otherwise not comply
with, Rule 16b-3, such provision or Award shall be construed or deemed amended
to conform to Rule 16b-3.
12.07 GOVERNING LAW. To the extent that federal laws (such as the Code
and the federal securities laws) do not otherwise control, the Plan shall be
construed in accordance with the laws of the State of Delaware.
12.08 HEADINGS. Headings contained in the Plan are for reference purposes
and shall not affect the meaning or interpretation of the Plan.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Selected Financial Information 22
Management's Discussion and Analysis of
Results of Operations and Financial Condition 23
Reports of Management and Independent Auditors 28
Consolidated Balance Sheets 29
Consolidated Statements of Operations 30
Consolidated Statements of Stockholders' Equity
and Comprehensive Income (Loss) 31
Consolidated Statements of Cash Flows 32
Notes to Consolidated Financial Statements 33
Quarterly Results of Operations 42
Directors & Officers 43
Investor Information 44
Locations 45
</TABLE>
[PHOTOS]
TTX EXCELLENT SUPPLIER AWARDS FOR FREIGHT CAR MANUFACTURING; TRENTONWORKS' FIRST
AWARD AND GUNDERSON'S EIGHT CONSECUTIVE AWARDS. IN ADDITION, WHEEL SERVICES HAS
RECEIVED THIS AWARD FOR SEVEN CONSECUTIVE YEARS.
The Greenbrier Companies 1999 Annual Report 21
<PAGE>
SELECTED FINANCIAL INFORMATION
YEARS ENDED AUGUST 31
<TABLE>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue:
Manufacturing $ 520,311 $ 451,706 $ 325,501 $ 421,456 $ 295,216
Leasing and services 98,225 88,655 105,419 98,484 92,510
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$ 618,536 $ 540,361 $ 430,920 $ 519,940 $ 387,726
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Earnings from continuing operations $ 20,419(1) $ 20,332(2) $ 6,021(3) $ 18,613 $ 16,665
Discontinued operations:
Loss on operations -- -- (2,512) (338) --
Estimated loss on disposal -- -- (7,680) -- --
Extraordinary charge related to
debt refinancing (938) -- -- -- --
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Net earnings (loss) $ 19,481 $ 20,332 $ (4,171) $ 18,275 $ 16,665
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Basic earnings per share:
Continuing operations $ 1.44 $ 1.43 $ 0.43 $ 1.31 $ 1.18
Net earnings (loss) $ 1.37 $ 1.43 $ (0.29) $ 1.29 $ 1.18
Diluted earnings per share:
Continuing operations $ 1.43 $ 1.42 $ 0.43 $ 1.31 $ 1.17
Net earnings (loss) $ 1.36 $ 1.42 $ (0.29) $ 1.29 $ 1.17
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Weighted average shares outstanding:
Basic 14,254 14,203 14,160 14,160 14,160
Diluted 14,294 14,346 14,160 14,170 14,230
Cash dividends paid per share $ 0.39(4) $ 0.24 $ 0.24 $ 0.24 $ 0.24
BALANCE SHEET DATA
Assets:
Cash(5) $ 77,796 $ 57,909 $ 21,744 $ 12,483 $ 14,014
Inventories 92,495 79,849 151,591 90,448 99,839
Leased equipment(6) 236,410 256,509 284,541 364,701 327,063
All other 144,015 111,222 122,642 147,856 91,473
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$ 550,716 $ 505,489 $ 580,518 $ 615,488 $ 532,389
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Debt:
Revolving $ 3,783 $ -- $ 57,709 $ 27,814 $ 27,313
Term 161,401 147,876 201,786 216,278 190,754
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$ 165,184 $ 147,876 $ 259,495 $ 244,092 $ 218,067
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Capital base:
Subordinated debt $ 37,788 $ 37,932 $ 38,089 $ 44,554 $ 37,762
Minority interest 14,034 9,783 18,183 38,154 38,040
Stockholders' equity 134,163 121,370 103,969 111,567 96,818
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$ 185,985 $ 169,085 $ 160,241 $ 194,275 $ 172,620
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</TABLE>
(1) Includes earnings of $1,119, attributable to prior years, resulting from the
resolution of certain matters on a leasing contract that began in 1990
(2) Includes a gain of $1,305 resulting from exiting the trailer and container
leasing operation more favorably than anticipated
(3) Includes $4,842 of special charges related to an adjustment to the carrying
value of vehicle transportation equipment and the divestiture of the trailer
and container lease fleet
(4) Includes regular dividend of $.27 per share and special dividend of $.12 per
share
(5) Includes restricted cash and investments
(6) Includes both operating and direct finance leases
22 1999 Annual Report The Greenbrier Companies
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Greenbrier currently operates in two primary business segments: manufacturing,
and leasing and services. The two business segments are operationally
integrated. With operations in North America and Europe, the manufacturing
segment produces double-stack intermodal railcars, conventional railcars, marine
vessels and forged steel products and performs railcar refurbishment and
maintenance activities, a portion of which is for the leasing operation. The
leasing and services segment owns or manages a fleet of approximately 33,000
railcars for railroads, institutional investors and other leasing companies.
Railcars are generally manufactured under firm orders from third parties, and
revenue is recognized when the cars are completed and accepted by the customer.
From time to time Greenbrier commits to manufacture railcars prior to receipt of
firm orders to maintain continuity of manufacturing operations and may also
build railcars for its own lease fleet. 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 related life of the asset
or upon sale of the equipment.
OVERVIEW
Total revenues for 1999 reached a record $619 million, an increase of 14% from
1998 revenues of $540 million. An acquisition completed in early 1999 added
revenues of $20 million. The remaining increase in revenues of $59 million or
11% is due primarily to a manufacturing product mix with a higher unit sales
value and the resolution of certain matters on a leasing contract that began in
1990.
Earnings from continuing operations for 1999 also reached record levels,
totaling $20.4 million, a slight increase from 1998 earnings of $20.3 million.
In 1999, an after-tax extraordinary charge of $938 thousand, or $.07 per diluted
share, resulted from refinancing of $22 million of notes payable. Net earnings
of $19.5 million, or $1.36 per diluted share, for 1999 compares to net earnings
of $20.3 million, or $1.42 per diluted share, for 1998.
EXPANSION AND ACQUISITIONS
In September 1998, Greenbrier acquired a 60% interest in a railcar manufacturer
located in Swidnica, Poland. In August 1999, the company increased its ownership
interest to 84%. The acquisition was accounted for by the purchase method, and
operating results are included in the consolidated financial statements. Net
losses from the European operations, which include the Polish facility and
related sales and marketing costs, were $4.1 million in 1999.
Also in September 1998, Greenbrier entered into a joint venture with Bombardier
Transportation to build railroad freight cars at Bombardier's existing
manufacturing facility in Mexico. Each party holds a 50% non-controlling
interest in the joint venture, and therefore Greenbrier's investment is being
accounted for using the equity method. Greenbrier's share of operating results
is included in consolidated net income as equity in unconsolidated subsidiary.
In February 1998, the unaffiliated investors' minority interest in the
automobile transportation business was acquired for $8 million through the use
of restricted cash. In 1997, 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]
BOXCARS ARE CUSTOM-BUILT TO MEET CUSTOMER REQUIREMENTS.
The Greenbrier Companies 1999 Annual Report 23
<PAGE>
TOTAL REVENUE
(IN MILLIONS)
[CHART]
RAILCAR
DELIVERIES
[CHART]
DISCONTINUED OPERATIONS AND DIVESTITURES
A plan was adopted in 1997 to discontinue the 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 were 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
adequacy of the remaining reserve will not be known until certain litigation is
resolved.
A portion of the trailer and container fleet was sold in 1997. In 1998, the
sale of the remaining trailer and container fleet was completed. The
aggregate proceeds from all of the sales amounted to approximately $86
million. Trailer and container leasing operations were included in leasing
and services continuing operations until disposition.
RESULTS OF OPERATIONS
MANUFACTURING
Manufacturing revenues result from new railcar, marine, forge, refurbishment and
maintenance activities. New railcar delivery and backlog information disclosed
herein includes all facilities, including the joint venture in Mexico that is
accounted for by the equity method.
Manufacturing revenues were $520 million, $452 million and $326 million for the
years ended 1999, 1998 and 1997. Manufacturing revenues increased $68 million or
15% in 1999 from 1998 as market demand for freight cars remained strong, and the
product mix shifted to units with a higher sales value. The Polish manufacturing
operations also contributed to this increase. Strong market demand as well as a
rebound in the intermodal transportation industry provided increased revenues in
1998 over 1997. New railcar deliveries were 8,900 in 1999, 7,800 in 1998 and
4,500 in 1997.
As of August 31, 1999, the backlog of new railcars to be manufactured for sale
and lease at all facilities was approximately 4,000 railcars with an estimated
value of $271 million compared to 6,200 railcars valued at $375 million as of
August 31, 1998. While the number of railcars in backlog has declined due to a
less robust market in the latter half of 1999, the value per railcar has
increased due to a change in product mix. In the two months subsequent to year
end, additional orders for over 1,400 new railcars valued at approximately $98
million were received.
Manufacturing gross margin of 12% in 1999 compares favorably to 9% in 1998 and
7% in 1997, reflecting overall improved operational efficiencies, a temporary
reduction in certain material costs for the North American operations and the
benefit of stronger market demand for railcars since 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.
LEASING AND SERVICES
Leasing and services revenues were $98 million, $89 million and $105 million for
the years ended 1999, 1998 and 1997. The $9 million or 11% increase in revenues
in 1999 as compared to 1998 is primarily due to the resolution of certain
matters on a leasing contract that began in 1990. A multi-year maintenance
agreement that began in December 1998 also contributed to the increase in
revenues. These increases were somewhat offset by lower gains on sales as
compared to 1998. The sale of the trailer and container fleet in October 1997
was the primary reason for a $17 million or 16% decrease in revenue in 1998 as
compared to 1997.
Pre-tax earnings realized on the disposition of leased equipment amounted to $6
million during 1999 compared to $9 million in 1998 and $7 million in 1997.
Assets from Greenbrier's lease fleet are periodically sold in the normal course
of business in order to take advantage of market conditions, manage risk and
maintain liquidity.
Leasing and services operating margin as a percentage of revenue was 50% in
1999, compared to 60% in 1998 and 56% in 1997. The lower margin in 1999 was
primarily due to a sharing arrangement related to the resolution of matters
associated with the leasing contract discussed above. Lower gains on sales of
leased equipment and the lower margin maintenance agreement that began in
December 1998 also impacted the 1999 operating margin. The
24 1999 Annual Report The Greenbrier Companies
<PAGE>
higher margin in 1998 compared to 1997 resulted primarily from the sale of
the trailer and container leasing assets that generally operated at a lower
margin than the railcar leasing assets.
OTHER COSTS
Selling and administrative expense was $51 million, $37 million and $35 million
in 1999, 1998 and 1997. As a percentage of revenue, selling and administrative
expense remained relatively consistent at 8%, 7% and 8% in 1999, 1998 and 1997.
The increase in 1999 compared to 1998 is primarily due to increased
international activity and employee-related costs.
Interest expense declined $2 million to $19 million in 1999 as compared to $21
million in 1998 due to more favorable interest rates on refinanced leasing term
debt and greater liquidity. Interest expense decreased $6 million in 1998 from
$27 million in 1997 as equipment sales and improved earnings contributed to
increased liquidity and lower debt balances.
Special charges -- leasing and services in 1997 represented a $7 million
adjustment to write down 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.
Income tax expense for all periods presented represents an effective tax rate of
42% on U.S. operations and varying effective tax rates on foreign operations.
The consolidated effective tax rate of 48% in the current period is a result of
European operating losses for which no tax benefit has been recognized. The
consolidated effective tax rate for 1998 and 1997 was 42% and 39%. In 1997, the
effective tax rate was reduced by the utilization of Canadian operating loss
carryforwards.
The increase in minority interest reflects the improved contribution from the
Canadian operation offset by the effects of European operating losses in 1999
and the acquisitions of minority investors' ownership interests since 1997.
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 strong operating results and the
sale of leasing assets. In addition, a net $13 million of new financing was
received in 1999 in conjunction with the refinancing of $22 million of term
notes payable and the addition of manufacturing debt. As a result, cash and
restricted cash increased $20 million to $78 million even as the company
invested almost $71 million in capital improvements, including additions to the
railcar lease fleet in 1999.
Credit facilities aggregated $134 million as of August 31, 1999, as compared to
$120 million as of August 31, 1998. A $60 million revolving line of credit is
available through May 2001 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 2002 for
U.S. manufacturing operations. A $20 million (at the August 31, 1999 exchange
rate) operating line of credit is available through March 2000 for working
capital for Canadian manufacturing operations. Operating lines of credit
totaling $4 million (at the August 31, 1999 exchange rate) are available through
May 2000 for working capital for Polish manufacturing operations. Advances under
the revolving and operating lines of credit bear interest at rates which vary
depending on the type of borrowing and certain defined ratios. An additional $7
million, five-year term loan facility and $3 million lease facility are
available through March 2000 for Canadian capital expenditures. At August 31,
1999, almost $4 million was outstanding under the Polish operating lines and $6
million was outstanding under the term loan facility. No borrowings were
outstanding under the revolving line, the lease facility or the U.S. or Canadian
manufacturing operating lines.
Capital expenditures totaled $71 million, $51 million, and $80 million in 1999,
1998, and 1997. Of these capital expenditures, approximately $48 million, $39
million, and $70 million in 1999, 1998, and 1997 were attributable to leasing
and services operations. Leasing and services capital expenditures for 2000 are
expected to be approximately $45 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.
CASH
(IN MILLIONS)
[CHART]
The Greenbrier Companies 1999 Annual Report 25
<PAGE>
CAPITAL EXPENDITURES
(IN MILLIONS)
[CHART]
Approximately $23 million, $12 million, and $10 million of the total capital
expenditures for 1999, 1998 and 1997 were attributable to manufacturing
operations. Capital expenditures for manufacturing additions are expected to be
approximately $15 million in 2000 and will include plant improvements and
equipment acquisitions to further increase capacity, enhance efficiencies and
allow for the production of new products.
Foreign operations give rise to market risks from changes in foreign currency
exchange rates. Greenbrier utilizes foreign currency forward exchange contracts
with established financial institutions to hedge a portion of that risk. No
provision has been made for credit loss due to counterparty non-performance.
At August 31, 1999, forward exchange contracts for the purchase of Canadian
dollars aggregated $76 million, contracts for the sale of Polish zloties
aggregated $4 million and contracts for the sale of German Deutschemarks
aggregated $2 million at the August 31, 1999 exchange rates. These contracts
mature at various dates through July 2000. At August 31, 1999, gains and losses
of approximately $115 thousand and $288 thousand on such contracts have been
deferred and will be recognized in income concurrent with the hedged
transaction.
A quarterly dividend of $.09 per share was declared in November 1999, to be paid
in December. In July 1999, the dividend rate was increased to $.09 from the $.06
per share that had been paid quarterly since 1995. In addition, a special
one-time dividend of $.12 per share was paid in August 1999. Future dividends
are dependent upon earnings, capital requirements and financial condition.
Certain loan covenants restrict the transfer of funds from subsidiaries to the
parent company in the form of cash dividends, loans, or advances. The restricted
net assets of subsidiaries amounted to $91 million as of August 31, 1999.
Consolidated retained earnings of $20 million at August 31, 1999 were restricted
as to the payment of dividends. Management expects existing funds and cash
generated from operations, together with borrowings under existing credit
facilities and long term financing, to be sufficient to fund dividends, working
capital needs, planned capital expenditures, acquisitions and expected debt
repayments.
Year 2000
The "Year 2000" issue refers to computer programs that 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
failing to perform 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 developed a Year 2000 readiness plan that assessed the impact of the
Year 2000 issue on both information systems and embedded manufacturing control
technology. An audit of the Year 2000 readiness plan was performed by an outside
consultant who has concluded that all issues identified in the preliminary audit
have been addressed. Greenbrier has developed a remediation plan for
mission-critical systems. These systems include manufacturing equipment and
internal computer systems supporting the manufacturing and railcar leasing and
services operations. Greenbrier is working with equipment manufacturers to
obtain Year 2000 certification. Systems and embedded technology not already Year
2000 compliant have been corrected or replaced. As part of ongoing equipment
replacement programs, non-compliant computers are being replaced in advance of
any key Year 2000 processing dates and non-compliant software is being corrected
or replaced. Greenbrier's internal remediation efforts and readiness are more
than 95% complete.
Greenbrier has key relationships with a number of vendors and suppliers,
including banks and other providers of goods and services. The company has
determined that not all of the vendors and suppliers are Year 2000 compliant.
Reliance on single source vendor suppliers, however, is
26 1999 Annual Report The Greenbrier Companies
<PAGE>
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.
To date, critical vendor and supplier assessment is materially complete.
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. Costs
incurred to date in assessing and remediating Year 2000 issues have aggregated
approximately $1.2 million. Internal costs incurred in responding to the Year
2000 issue are not separately tracked. Such costs are principally
payroll-related costs.
Contingency plans have been developed for continued operations without, or with
reduced functionality of, mission-critical systems and suppliers. Activation of
these plans, if necessary, may result in reduced capabilities, restricted access
to data, slower business processes and delayed product delivery.
If the elements of Greenbrier's plan to address the Year 2000 issue are not
implemented successfully or timely, at a minimum, more time will be devoted to
the process and additional costs may be incurred. In addition, significant
disruption to operations, including slowing the manufacturing process, resulting
in potential revenue loss and increased costs, could result, particularly if
critical suppliers are impacted by Year 2000 non-compliance. Any of these
eventualities could have a material adverse effect on the financial position,
results of operations or cash flows of the company.
Prospective Accounting Changes
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," requires that all derivatives be
recognized as either assets or liabilities measured at fair value. Adoption of
SFAS No. 133 is currently proposed to be effective for the company's fiscal year
beginning September 1, 2000. Greenbrier is currently evaluating the effect of
this statement.
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; labor disputes or
operating difficulties which might disrupt manufacturing operations or 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; 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]
TANK CARS FOR TRANSPORTING LIQUID PETROLEUM GAS AND LIGHT OIL PRODUCTS ARE
MANUFACTURED IN EUROPE AT WAGONYSWIDNICA.
The Greenbrier Companies 1999 Annual Report 27
<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 accounting controls and procedures,
which is designed, consistent with reasonable cost, to provide reasonable
assurance that transactions are executed as authorized, that they are properly
recorded to produce reliable financial records, and that accountability for
assets is maintained. The accounting controls and procedures are supported by
careful selection and training of personnel and a continuing management
commitment to the integrity of the system.
The financial statements have been audited, to the extent required by generally
accepted auditing standards, by Deloitte & Touche LLP, independent auditors. In
connection therewith, management has considered the recommendations made by the
independent auditors in connection with their audit and has responded in an
appropriate, cost-effective manner.
The Board of Directors has appointed an Audit Committee composed entirely of
directors who are not employees of the company. The Audit Committee meets with
representatives of management and the independent auditors, both separately and
jointly. The Committee reports to the Board on its activities and findings.
WILLIAM A. FURMAN LARRY G. BRADY
President Senior Vice President
Chief Executive Chief Financial
Officer 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, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and comprehensive
income (loss), and cash flows for each of the three years in the period ended
August 31, 1999. 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, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended August 31,
1999, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Portland, Oregon
October 25, 1999
28 1999 Annual Report The Greenbrier Companies
<PAGE>
CONSOLIDATED BALANCE SHEETS
AUGUST 31
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 77,161 $ 41,912
Restricted cash and investments 635 15,997
Accounts and notes receivable 47,514 47,537
Inventories 92,495 79,849
Investment in direct finance leases 143,185 160,940
Equipment on operating leases 93,225 95,569
Property, plant and equipment 69,316 49,452
Other 27,185 14,233
- -----------------------------------------------------------------------------------------------------------------------------------
$ 550,716 $ 505,489
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Revolving notes $ 3,783 $ --
Accounts payable and accrued liabilities 131,474 132,121
Deferred participation 50,439 45,243
Deferred income taxes 17,634 11,164
Notes payable 161,401 147,876
Subordinated debt 37,788 37,932
Minority interest 14,034 9,783
Commitments and contingencies (Notes 4, 20 & 21)
Stockholders' equity:
Preferred stock -- $0.001 par value; 25,000 shares
authorized; none outstanding -- --
Common stock-- $0.001 par value; 50,000 shares
authorized; 14,255 and 14,253 outstanding
at August 31, 1999 and 1998 14 14
Additional paid-in capital 50,495 50,416
Retained earnings 85,534 71,612
Accumulated other comprehensive loss (1,880) (672)
- -----------------------------------------------------------------------------------------------------------------------------------
134,163 121,370
- -----------------------------------------------------------------------------------------------------------------------------------
$ 550,716 $ 505,489
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
The Greenbrier Companies 1999 Annual Report 29
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Manufacturing $ 520,311 $ 451,706 $ 325,501
Leasing and services 98,225 88,655 105,419
- ----------------------------------------------------------------------------------------------------------------------------------
618,536 540,361 430,920
COST OF REVENUE
Manufacturing 456,122 411,655 302,891
Leasing and services 48,682 35,349 46,317
- ----------------------------------------------------------------------------------------------------------------------------------
504,804 447,004 349,208
MARGIN 113,732 93,357 81,712
OTHER COSTS
Selling and administrative expense 51,061 37,270 35,248
Interest expense 19,048 20,933 27,057
Special charges-- leasing and services -- (2,250) 8,348
- ----------------------------------------------------------------------------------------------------------------------------------
70,109 55,953 70,653
Earnings before income tax expense, minority
interest and equity in unconsolidated subsidiary 43,623 37,404 11,059
Income tax expense (20,979) (15,643) (4,366)
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings before minority interest and
equity in unconsolidated subsidiary 22,644 21,761 6,693
Minority interest (3,045) (1,429) (672)
Equity in unconsolidated subsidiary 820 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS 20,419 20,332 6,021
Discontinued operations:
Loss on operations (net of $1,784 tax benefit) -- -- (2,512)
Estimated loss on disposal (net of $5,120 tax benefit) -- -- (7,680)
Extraordinary charge (net of $680 tax benefit) (938) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 19,481 $ 20,332 $ (4,171)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Continuing operations $ 1.44 $ 1.43 $ 0.43
Discontinued operations -- -- (0.72)
Extraordinary charge (0.07) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1.37 $ 1.43 $ (0.29)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE:
Continuing operations $ 1.43 $ 1.42 $ 0.43
Discontinued operations -- -- (0.72)
Extraordinary charge (0.07) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 1.36 $ 1.42 $ (0.29)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 14,254 14,203 14,160
Diluted 14,294 14,346 14,160
</TABLE>
The accompanying notes are an integral part of these statements.
30 1999 Annual Report The Greenbrier Companies
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS)
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMMON STOCK ADDITIONAL ACCUMULATED OTHER TOTAL
---------------- PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS INCOME (LOSS) EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1996 14,160 $ 14 $ 49,079 $ 62,259 $ 215 $ 111,567
Net loss -- -- -- (4,171) -- (4,171)
Translation adjustment
(net of $66 tax benefit) -- -- -- -- (84) (84)
------------------
Comprehensive loss (4,255)
Compensation relating
to non-qualified stock
option plan -- -- 56 -- -- 56
Cash dividends
($.24 per share) -- -- -- (3,399) -- (3,399)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1997 14,160 14 49,135 54,689 131 103,969
Net earnings -- -- -- 20,332 -- 20,332
Translation adjustment
(net of $631 tax benefit) -- -- -- -- (803) (803)
------------------
Comprehensive income 19,529
Stock options exercised 93 -- 1,221 -- -- 1,221
Compensation relating
to non-qualified stock
option plan -- -- 60 -- -- 60
Cash dividends
($.24 per share) -- -- -- (3,409) -- (3,409)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1998 14,253 14 50,416 71,612 (672) 121,370
Net earnings -- -- -- 19,481 -- 19,481
Translation adjustment
(net of $214 tax expense) -- -- -- -- (1,208) (1,208)
------------------
Comprehensive income 18,273
Stock options exercised 2 -- 29 -- -- 29
Compensation relating
to non-qualified stock
option plan -- -- 50 -- -- 50
Cash dividends
($.39 per share) -- -- -- (5,559) -- (5,559)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, AUGUST 31, 1999 14,255 $ 14 $ 50,495 $ 85,534 $ (1,880) $ 134,163
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
The Greenbrier Companies 1999 Annual Report 31
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 19,481 $ 20,332 $ (4,171)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Extraordinary charge 938 -- --
Deferred income taxes 6,470 (2,217) (8,217)
Deferred participation 5,196 6,211 6,716
Depreciation and amortization 16,477 14,527 27,869
Discontinued operations -- -- 9,300
Special charges -- (2,250) 8,348
Gain on sales of equipment (5,887) (9,994) (9,815)
Other 5,879 1,537 (1,035)
Decrease (increase) in assets:
Accounts and notes receivable (2,713) 13,197 16,504
Inventories (3,608) 10,110 (11,244)
Prepaid expenses and other (879) 1,910 (6,074)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (2,961) 22,509 (9,619)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 38,393 75,872 18,562
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition, net of cash acquired (11,702) -- --
Principal payments received under direct
finance leases 16,729 15,102 11,226
Investment in direct finance leases (446) (856) (11,856)
Proceeds from sales of equipment 39,903 117,945 58,081
Purchase of property and equipment (70,531) (50,345) (64,381)
Use of (investment in) restricted cash and investments 15,362 (8,637) (960)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (10,685) 73,209 (7,890)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 60,029 13,157 47,479
Repayments of borrowings (46,958) (124,750) (30,118)
Dividends (5,559) (3,409) (3,399)
Purchase of minority interest -- (7,772) (16,333)
Proceeds from stock options 29 1,221 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 7,541 (121,553) (2,371)
- ----------------------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS 35,249 27,528 8,301
Cash and cash equivalents
Beginning of period 41,912 14,384 6,083
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 77,161 $ 41,912 $ 14,384
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 16,637 $ 20,526 $ 27,451
Income taxes 9,150 13,626 2,914
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 sale or refurbishment -- 96 11,574
Equipment obtained through borrowings -- -- 4,024
</TABLE>
The accompanying notes are an integral part of these statements.
32 1999 Annual Report The Greenbrier Companies
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Years Ended August 31, 1999
(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 33,000 railcars for railroads, institutional investors and other
leasing companies.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The financial statements include the accounts of
the company and its majority-owned subsidiaries. All significant intercompany
transactions and balances are eliminated upon consolidation. Investments in and
advances to a joint venture in which the company has a 50% ownership interest
are accounted for by the equity method and included in other assets.
The financial statements and transactions of the company's foreign 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 and comprehensive income (loss).
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 six months or less are considered cash equivalents.
INVENTORIES -- Inventories are valued at the lower of cost (first-in, first-out)
or market. Work-in-process includes material, labor and overhead. Assets held
for sale or refurbishment include railcars, carried at cost, that will either be
sold or refurbished and placed on lease.
EQUIPMENT ON OPERATING LEASES -- Equipment on operating leases is stated at
cost. Depreciation to estimated salvage value is provided on the straight-line
method over the estimated useful lives of up to twenty-five years.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment is stated at
cost. Depreciation is provided on the straight-line method over estimated useful
lives of three to twenty years.
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 using 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.
INCOME TAXES -- The liability method is used to account for income taxes.
Deferred income taxes are provided for the temporary effects of differences in
the recognition of revenues and expenses for financial statement and income tax
reporting purposes.
MINORITY INTEREST -- Minority interest represents unaffiliated investors'
capital investment and interest in the undistributed earnings and losses of
consolidated entities.
COMPREHENSIVE INCOME -- Effective September 1, 1998, the company adopted
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires presentation of comprehensive
income (net income plus all other changes in net assets from non-owner sources)
and its components in the financial statements; however, the adoption of this
statement had no impact on the results of operations. The company has changed
the format of the consolidated statements of stockholders' equity to present
comprehensive income.
REVENUE RECOGNITION -- Revenue from manufacturing operations is recognized at
the time products are completed and accepted by unaffiliated customers.
Direct finance lease revenue is recognized over the lease term in a manner 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]
GREENBRIER IS A LEADING MANUFACTURER OF BOXCARS IN NORTH AMERICA.
The Greenbrier Companies 1999 Annual Report 33
<PAGE>
FORWARD EXCHANGE CONTRACTS -- Foreign operations give rise to market risks from
changes in foreign currency exchange rates. Forward exchange contracts with
established financial institutions are utilized to hedge a portion of such risk.
Realized and unrealized gains and losses are deferred and recognized in earnings
concurrent with the hedged transaction. Even though forward exchange contracts
are entered into to mitigate the impact of currency fluctuations, certain
exposure remains, which may affect operating results.
INTEREST RATE INSTRUMENTS -- Interest rate swap agreements are utilized to
reduce the impact of changes in interest rates on certain debt. The net cash
amounts paid or received on the agreements are accrued and recognized as an
adjustment to interest expense. At August 31, 1999, such agreements have a
notional amount of $11,300 and mature in July 2008.
NET EARNINGS PER SHARE -- Basic earnings per share ("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.
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.
MANAGEMENT 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. This includes evaluation of the remaining
life and recoverability of long-lived assets. Actual results could differ from
those estimates.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior years'
consolidated financial statements to conform with the 1999 presentation.
PROSPECTIVE ACCOUNTING CHANGES -- SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," requires that all derivatives be recognized
as either assets or liabilities measured at fair value. Adoption of SFAS No. 133
is currently proposed to be effective for the company's fiscal year beginning
September 1, 2000. Greenbrier is currently evaluating the effect of this
statement.
NOTE 3 -- ACQUISITION AND JOINT VENTURE
On September 30, 1998, Greenbrier acquired a 60% interest in a railcar
manufacturer located in Swidnica, Poland. In August 1999, the company increased
its ownership interest to 84%. The company funded this acquisition through cash
provided by operating activities. This acquisition was accounted for by the
purchase method, and operating results are included in the consolidated
financial statements since the date of acquisition. The excess purchase price
over the fair value of net assets acquired has been included in other assets in
the Consolidated Balance Sheets and is being amortized on a straight-line basis
over 12 years.
On September 1, 1998, Greenbrier entered into a joint venture agreement with
Bombardier Transportation ("Bombardier") to build railroad freight cars at
Bombardier's existing manufacturing facility in Sahagun, Mexico. Each party
holds a 50% non-controlling interest in the joint venture, and therefore
Greenbrier's investment is being accounted for using the equity method.
Greenbrier's share of the operating results is included in equity in
unconsolidated subsidiary in the Consolidated Statements of Operations.
NOTE 4 - DISCONTINUED OPERATIONS AND DIVESTITURES
In 1997, a plan was adopted to discontinue the 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 transportation logistics segment
was 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
34 1999 Annual Report The Greenbrier Companies
<PAGE>
certain litigation is resolved. Information relating to the operating results
for the discontinued operations for the year ended August 31, 1997 is as
follows:
<TABLE>
<S> <C>
Revenue $53,249
Costs and expenses 57,545
- -------------------------------------------------------
Loss before income taxes (4,296)
Less income tax benefit 1,784
- -------------------------------------------------------
Net loss $ (2,512)
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
DIVESTITURES -- A portion of the trailer and container lease fleet was sold in
1997. In 1998 the sale of the remaining trailer and container fleet was
completed. 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 and $25,800 for the years ended
August 31, 1998 and 1997.
NOTE 5 -- INVENTORIES
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------
<S> <C> <C>
Manufacturing
supplies and
raw materials $ 10,953 $ 8,750
Work-in-process 66,255 62,267
Assets held for
sale or
refurbishment 15,287 8,832
- -------------------------------------------------------
$ 92,495 $ 79,849
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
NOTE 6 -- INVESTMENT IN DIRECT FINANCE LEASES
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------
<S> <C> <C>
Future minimum
receipts on
lease contracts $ 196,883 $ 247,842
Maintenance,
insurance and
taxes (43,940) (55,041)
- ---------------------------------------------------------
Net minimum
lease receipts 152,943 192,801
Estimated
residual values 51,901 52,323
Unearned finance
charges (61,659) (84,184)
- ---------------------------------------------------------
$ 143,185 $ 160,940
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
Minimum future receipts on the direct finance lease contracts are as follows:
<TABLE>
<CAPTION>
Year ending August 31,
- ----------------------------------------------------------
<S> <C>
2000 $ 48,827
2001 47,517
2002 38,864
2003 28,043
2004 17,516
Thereafter 16,116
- ----------------------------------------------------------
$ 196,883
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
NOTE 7 -- EQUIPMENT ON OPERATING LEASES
<TABLE>
<CAPTION>
1999 1998
- ----------------------------------------------------------
<S> <C> <C>
Railcar equipment
and other $ 142,771 $ 132,049
Marine equipment -- 7,563
- ----------------------------------------------------------
142,771 139,612
Accumulated
depreciation (49,546) (44,043)
- ----------------------------------------------------------
$ 93,225 $ 95,569
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
In addition to the above equipment, certain railcar equipment is leased by the
company and subleased to customers under non-cancelable operating leases.
Aggregate minimum future amounts receivable under all non-cancelable operating
leases and subleases are as follows:
<TABLE>
<CAPTION>
Year ending August 31,
- ---------------------------------------------------------
<S> <C>
2000 $ 13,365
2001 9,017
2002 8,129
2003 7,304
2004 5,881
Thereafter 8,332
- ---------------------------------------------------------
$ 52,028
- ---------------------------------------------------------
- ---------------------------------------------------------
</TABLE>
Certain equipment is also operated under daily, monthly or mileage arrangements.
Associated revenues amounted to $22,997, $24,472 and $33,611 for the years ended
August 31, 1999, 1998 and 1997.
[PHOTO]
GUNDERSON CONCARRIL'S RUGGED MILL GONDOLA CAR IS DESIGNED, ENGINEERED AND BUILT
TO MEET THE DEMANDS OF HAULING HEAVY LOADS.
The Greenbrier Companies 1999 Annual Report 35
<PAGE>
NOTE 8 -- PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------
<S> <C> <C>
Land and
improvements $ 9,037 $ 8,440
Machinery and
equipment 51,384 41,944
Buildings and
improvements 22,715 15,537
Other 21,788 10,747
- --------------------------------------------------------
104,924 76,668
Accumulated
depreciation (35,608) (27,216)
- --------------------------------------------------------
$ 69,316 $ 49,452
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
NOTE 9 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
Summarized financial data for the company's joint venture with Bombardier for
the year ended August 31, 1999 is as follows:
<TABLE>
<S> <C>
Current assets $ 29,717
Total assets 40,156
Current liabilities 18,822
Stockholders' equity 21,334
Revenues $ 56,524
Net earnings 1,334
</TABLE>
NOTE 10 -- REVOLVING NOTES
A $40,000 operating line of credit to be used for working capital is available
through February 2002 for U.S. manufacturing operations. A $20,000 (at the
August 31, 1999 exchange rate) operating line of credit is available through
March 2000 for working capital for the Canadian manufacturing operations.
Operating lines of credit totaling $4,000 (at the August 31, 1999 exchange rate)
are available through May 2000 for working capital for the Polish manufacturing
operations. Advances under the operating lines of credit are based upon defined
levels of receivables and inventory. Interest rates vary depending on the type
of borrowing and certain defined ratios. At August 31, 1999, $3,783 was
outstanding under the Polish operating lines. There were no borrowings
outstanding at August 31, 1998.
A $60,000 revolving line of credit is available through May 2001 to provide
working capital and interim financing of equipment for the leasing and services
operations. Borrowings under this line are based on advances against defined
leased equipment and bear interest at rates that vary depending upon the type of
borrowing and certain defined ratios. There were no borrowings outstanding at
August 31, 1999 or August 31, 1998.
NOTE 11 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------
<S> <C> <C>
Accounts payable
and accrued
liabilities $ 69,578 $ 71,880
Accrued payroll
and related
liabilities 19,518 15,412
Maintenance
reserves 14,835 21,698
Participation 8,366 494
Other 19,177 22,637
- -------------------------------------------------------
$ 131,474 $ 132,121
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
NOTE 12 -- NOTES PAYABLE
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------
<S> <C> <C>
Equipment
notes payable $ 121,816 $ 133,192
Term loans 37,616 11,579
Other notes
payable 1,969 3,105
- -------------------------------------------------------
$ 161,401 $ 147,876
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
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, 1999 and 1998 was approximately 54 and 57 months and 7.6% and 8.6% for 1999
and 1998. The notes are collateralized by certain leasing equipment.
Term loans are due in varying installments through July 2008 and are
collateralized by certain manufacturing equipment, land and a facility. As of
August 31, 1999, the effective interest rates on the term loans ranged from 7.0%
to 7.5%.
In February 1999, Greenbrier issued $30,000 of 6.48% senior term notes due 2006.
Interest is payable semi-annually commencing June 1999, and semi-annual
principal payments of $2,800 are required beginning June 2001. In conjunction
with this borrowing, $22,000 of leasing equipment notes payable were repaid. The
36 1999 Annual Report The Greenbrier Companies
<PAGE>
early retirement of this debt resulted in a $938 extraordinary charge, net of
income taxes of $680, representing prepayment penalties and the write-off of
deferred loan costs.
Principal payments on the notes payable are as follows:
<TABLE>
<CAPTION>
Year ending August 31,
- -------------------------------------------------------
<S> <C>
2000 $ 26,514
2001 30,463
2002 32,219
2003 22,281
2004 16,348
Thereafter 33,576
- -------------------------------------------------------
$ 161,401
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
The revolving and operating lines of credit, along with certain equipment notes
payable, contain covenants with respect to various subsidiaries, the most
restrictive of which limit the payment of dividends by subsidiaries and require
certain levels of tangible net worth, ratio of debt to equity and debt service
coverage.
NOTE 13 -- SUBORDINATED DEBT
Subordinated notes, amounting to $37,788 and $37,932 at August 31, 1999 and
1998, were issued for railcars purchased as part of an agreement described in
Note 21. 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 $257 becomes due in 2001,
$10,202 in 2002, $6,018 in 2003 and $6,052 in 2004 with the remaining balance
due after 2004.
NOTE 14 -- STOCKHOLDERS' EQUITY
The Chairman and the Chief Executive Officer, who are the founding and majority
stockholders, have entered into an agreement whereby they have agreed to vote
their shares together to elect each other as directors of the company and with
respect to all other matters put to a vote of the stockholders.
Certain loan covenants restrict the transfer of funds from the subsidiaries to
the parent company in the form of cash dividends, loans, or advances. Restricted
net assets of subsidiaries amounted to $91,000 as of August 31, 1999.
Consolidated retained earnings of $20,000 at August 31, 1999 were restricted as
to the payment of dividends.
A stock incentive plan was adopted July 1, 1994 (the "1994 Plan"), 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. No further grants will be awarded under this
plan.
On April 6, 1999, the company adopted the Stock Incentive Plan -- 2000 (the
"2000 Plan"), under which 1,000 shares of common stock are available for
issuance with respect to options granted to employees, non-employee directors
and consultants of the company. The 2000 Plan authorizes the grant of incentive
stock options, non-statutory stock options and restricted stock awards, or any
combination of the foregoing. Under the 2000 Plan, the exercise price for
incentive stock options may not be less than the market value of the company's
common stock at the time the option is granted. Options are exercisable not less
than six months or more than 10 years after the date the option is granted.
General awards under the 2000 Plan vest at 50% two years from the grant date,
with the balance vesting five years from grant. As of August 31, 1999, 1,000
options were available for award under the plan.
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, 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
Granted 642 11
Exercised (2) 13
Canceled (16) 14
- ------------------------------------------------------
Balance at
August 31, 1999 1,271 $ 13
- ------------------------------------------------------
- ------------------------------------------------------
</TABLE>
[PHOTO]
GREENBRIER IS AMONG THE MOST COMPETITIVE AND INNOVATIVE LESSORS IN THE INDUSTRY.
The Greenbrier Companies 1999 Annual Report 37
<PAGE>
Options outstanding at August 31, 1999 have exercise prices ranging from $9 to
$17 per share and have a remaining contractual life of 5.2 years. As of August
31, 1999, options to purchase 558 shares were exercisable and 1,000 shares were
available for grant. Options to purchase 640 and 619 shares were available for
grant at August 31, 1998 and 1997.
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, 1999,
1998 and 1997 would not have differed materially from the amounts reported.
NOTE 15 -- RELATED PARTY TRANSACTIONS
During 1999, the company purchased railcars totaling $54,190 from its
50%-owned joint venture. The cars were sold to third-party customers prior to
August 31, 1999. Also, the company has a $7,009 outstanding receivable
balance from the joint venture at August 31, 1999.
Maintenance, management and other fees received from a related entity under an
agreement were $888 for each of the three years ended August 31, 1999, 1998 and
1997.
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 16 -- 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 $849, $649 and $737 for the years ended August 31, 1999, 1998 and 1997.
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
$881, $2,393 and $845 for the years ended August 31, 1999, 1998 and 1997.
NOTE 17 -- INCOME TAXES
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 5,231 $ 13,811 $ 4,547
State 1,092 2,581 284
Foreign 8,186 1,468 715
- -------------------------------------------------------
14,509 17,860 5,546
Deferred:
Federal 6,260 (491) (1,848)
State 1,617 (2,062) 442
Foreign (1,407) 336 226
- -------------------------------------------------------
6,470 (2,217) (1,180)
- -------------------------------------------------------
$ 20,979 $ 15,643 $ 4,366
- -------------------------------------------------------
- -------------------------------------------------------
</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>
1999 1998 1997
- -------------------------------------------------------
<S> <C> <C> <C>
Statutory
rates 35.0% 35.0% 35.0%
State income
taxes, net of
federal benefit 4.0 4.5 4.8
Impact of
foreign taxes 7.4 0.6 (1.8)
Other 1.7 1.7 1.5
- -------------------------------------------------------
48.1% 41.8% 39.5%
- -------------------------------------------------------
- -------------------------------------------------------
</TABLE>
38 1999 Annual Report The Greenbrier Companies
<PAGE>
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>
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Alternative minimum tax
credit carry-forward $ (6,783) $ (9,427)
Deferred
participation (20,434) (18,579)
Maintenance and warranty reserves (7,454) (11,790)
Accrued payroll and related
liabilities (7,420) (5,352)
Deferred revenue (275) (566)
Inventories and other (4,005) (1,302)
- -------------------------------------------------------------------------------
(46,371) (47,016)
Deferred tax liabilities:
Accelerated depreciation 64,610 63,709
Other 2,269 1,789
- -------------------------------------------------------------------------------
Net deferred tax liability attributable
to continuing operations 20,508 18,482
Net deferred tax asset attributable
to discontinued operations (2,874) (7,318)
- -------------------------------------------------------------------------------
Net deferred tax liability $ 17,634 $ 11,164
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
NOTE 18 - 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 margin, which is presented on the Consolidated 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>
1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Manufacturing $ 548,038 $ 470,025 $ 408,053
Leasing and
services 127,630 107,147 113,229
Eliminate
intersegment (57,132) (36,811) (90,362)
- ----------------------------------------------------------
$ 618,536 $ 540,361 $ 430,920
- ----------------------------------------------------------
- ----------------------------------------------------------
ASSETS:
Manufacturing $ 188,147 $ 162,907 $ 168,878
Leasing and
services 284,401 298,811 393,891
Unallocated 78,168 43,771 17,749
- ----------------------------------------------------------
$ 550,716 $ 505,489 $ 580,518
- ----------------------------------------------------------
- ----------------------------------------------------------
DEPRECIATION AND
AMORTIZATION:
Manufacturing $ 7,794 $ 4,774 $ 4,671
Leasing and
services 8,683 9,753 23,198
- ----------------------------------------------------------
$ 16,477 $ 14,527 $ 27,869
- ----------------------------------------------------------
- ----------------------------------------------------------
CAPITAL
EXPENDITURES:
Manufacturing $ 23,260 $ 11,887 $ 10,173
Leasing and
services 47,717 39,314 70,088
- ----------------------------------------------------------
$ 70,977 $ 51,201 $ 80,261
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
[PHOTO]
RAILCAR REPAIR, REFURBISHMENT AND RELATED SERVICES ARE PROVIDED AT 10 LOCATIONS
THROUGHOUT NORTH AMERICA.
The Greenbrier Companies 1999 Annual Report 39
<PAGE>
The company has operations in the United States, Canada and Europe. The
following table summarizes selected geographic information. Eliminations are
sales between geographic areas.
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
United States $ 387,735 $ 386,064 $ 321,538
Canada 231,767 169,335 156,103
Europe 20,183 -- --
Eliminations (21,149) (15,038) (46,721)
- ----------------------------------------------------------
$ 618,536 $ 540,361 $ 430,920
- ----------------------------------------------------------
- ----------------------------------------------------------
EARNINGS(1):
United States $ 32,744 $29,740 $ 6,298
Canada 15,902 7,664 4,761
Europe (5,023) -- --
- ----------------------------------------------------------
$ 43,623 $ 37,404 $ 11,059
- ----------------------------------------------------------
- ----------------------------------------------------------
IDENTIFIABLE
ASSETS:
United States $ 469,133 $ 452,323 $ 531,500
Canada 64,162 53,166 49,018
Europe 17,421 -- --
- ----------------------------------------------------------
$ 550,716 $ 505,489 $ 580,518
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
(1) From continuing operations before income tax expense, minority
interest and equity in unconsolidated subsidiary
NOTE 19 -- CUSTOMER CONCENTRATION
In 1999, revenue from the two largest customers was 28% and 17% of total
revenues. Revenue from the two largest customers was 25% and 16% of total
revenues for the year ended August 31, 1998. In 1997, revenue from the two
largest customers was 20% and 11% of total revenues. No other customers
accounted for more than 10% of total revenues in 1999, 1998, or 1997. Three
customers had balances that individually exceeded 10% of accounts receivable and
in total represented 64% of the consolidated balance at August 31, 1999.
NOTE 20 -- LEASE COMMITMENTS
Lease expense for railcar equipment leased under non-cancelable leases was
$7,295, $4,966 and $3,767 for the years ended August 31, 1999, 1998 and 1997.
Aggregate minimum future amounts payable under non-cancelable railcar equipment
leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ----------------------------------------------------------
<S> <C>
2000 $ 4,820
2001 3,104
2002 2,979
2003 2,595
2004 1,120
Thereafter --
- ----------------------------------------------------------
$ 14,618
- ----------------------------------------------------------
- ----------------------------------------------------------
</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 $2,495,
$1,887 and $2,652 for the years ended August 31, 1999, 1998 and 1997.
Aggregate minimum future amounts payable under non-cancelable operating leases
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,
- ----------------------------------------------------------
<S> <C>
2000 $ 2,058
2001 1,838
2002 1,139
2003 618
2004 332
Thereafter 918
- ----------------------------------------------------------
$ 6,903
- ----------------------------------------------------------
- ----------------------------------------------------------
</TABLE>
NOTE 21 -- 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 that, under
certain conditions, provides for the seller to repurchase the railcars for the
original acquisition cost to the company at the date the underlying subordinated
notes are due. Should such option be exercised, amounts due under the
subordinated notes would be retired from the repurchase proceeds.
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 in accrued liabilities
and deferred participation in the Consolidated Balance Sheets. Participation
expense related to this and a similar, but smaller, agreement was $13,956,
$7,238 and $9,345 for the years ended August 31, 1999,
40 1999 Annual Report The Greenbrier Companies
<PAGE>
1998 and 1997. Payment of deferred participation is estimated to be $2,839
in 2001, $4,484 in 2002, $7,835 in 2003 and $21,259 in 2004 with the remaining
balance due after 2004.
At August 31, 1999, forward exchange contracts for the purchase of Canadian
dollars aggregated $76,000, contracts for the sale of Polish zloties aggregated
$4,000 and contracts for the sale of German Deutschemarks aggregated $2,000 at
the August 31, 1999 exchange rates. These contracts mature at various dates
through July 2000. At August 31, 1999, gains and losses of approximately $115
and $288 on such contracts had been deferred and will be recognized in income
concurrent with the hedged transaction.
Environmental studies have been conducted of owned and leased properties, which
indicate additional investigation and some remediation may be necessary. The
Portland, Oregon manufacturing facility is located on the Willamette River. The
U.S. Environmental Protection Agency is considering possible classification of
portions of the river bed, including the portion fronting the facility, as a
federal "superfund" site due to sediment contamination. There is no indication
that Greenbrier has contributed to contamination of the Willamette River bed,
although uses by prior owners of the property may have contributed.
Nevertheless, ultimate classification of the Willamette River may have an impact
on the value of the company's investment in the property and may require the
company to initially bear a portion of the cost of any mandated remediation.
Greenbrier may be required to perform periodic maintenance dredging in order to
continue to launch vessels from its launch ways on the river, and
classification as a superfund site could result in some limitations on future
launch activity. The outcome of such actions cannot be estimated; however,
management believes that any ultimate liability resulting from environmental
issues will not materially affect the financial position or results of
operations of the company. Management believes that its operations adhere to
sound environmental practices, applicable laws, and regulations.
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 $4,500 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 22 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments and the methods and
assumptions used to estimate such fair values, are as follows:
<TABLE>
<CAPTION>
1999
- ----------------------------------------------------------
CARRYING ESTIMATED
AMOUNT FAIR VALUE
- ----------------------------------------------------------
<S> <C> <C>
Notes payable and
subordinated debt $ 199,189 $ 179,456
Deferred
participation 50,439 33,681
</TABLE>
<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
</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 carrying value and
fair value of foreign currency forward contracts and the interest rate swap are
not material.
[PICTURE]
MANY OF THE RAILCARS IN GREENBRIER'S OWNED OR MANAGED FLEET ARE REFURBISHED AT
GREENBRIER'S OWN FACILITIES.
The Greenbrier Companies 1999 Annual Report 41
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Unaudited operating results by quarter for 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1999
Revenue
Manufacturing $ 100,074 $ 145,048 $ 152,360 $ 122,829 $ 520,311
Leasing and services 20,012 21,892 21,712 34,609 98,225
- ----------------------------------------------------------------------------------------------------------------------------------
120,086 166,940 174,072 157,438 618,536
Cost of sales
Manufacturing 90,393 127,128 133,695 104,906 456,122
Leasing and services 8,198 10,339 10,300 19,845 48,682
- ----------------------------------------------------------------------------------------------------------------------------------
98,591 137,467 143,995 124,751 504,804
Margin $ 21,495 $ 29,473 $ 30,077 $ 32,687 $ 113,732
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 2,866 $ 5,151(1) $ 6,179 $ 5,285(2) $ 19,481
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings per share:
Basic(3) $ 0.20 $ 0.36(1) $ 0.43 $ 0.37 $ 1.37
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted $ 0.20 $ 0.36(1) $ 0.43 $ 0.37 $ 1.36
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
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 106,759 96,866 116,664 91,366 411,655
Leasing and services 9,762 8,487 8,169 8,931 35,349
- ----------------------------------------------------------------------------------------------------------------------------------
116,521 105,353 124,833 100,297 447,004
Margin $ 21,689 $ 21,439 $ 25,825 $ 24,404 $ 93,357
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 4,076 $ 4,360 $ 5,508 $ 6,388(4) $ 20,332
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Net earnings per share:
Basic(3) $ 0.29 $ 0.31 $ 0.39 $ 0.45 $ 1.43
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Diluted(3) $ 0.29 $ 0.30 $ 0.38 $ 0.44 $ 1.42
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes an extraordinary charge of $938, or $0.07 per share, representing
prepayment penalties and the write-off of deferred loan costs
(2) Includes earnings of $1,119, attributable to prior years, resulting from the
resolution of certain matters on a leasing contract that began in 1990
(3) 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
(4) Includes a gain of $1,305 resulting from exiting the trailer and container
leasing operation more favorably than anticipated
42 1999 Annual Report The Greenbrier Companies
<PAGE>
DIRECTORS & OFFICERS
DIRECTORS
ALAN JAMES
Chairman of the Board
The Greenbrier Companies
WILLIAM A. FURMAN
President, Chief Executive Officer
The Greenbrier Companies
VICTOR G. ATIYEH(1)(2)
Principal
Victor Atiyeh &Co.
PETER K. NEVITT(1)(2)
Former President, Chief Executive Officer
Mitsui Nevitt Capital Corporation
A. DANIEL O'NEAL, JR.
Chairman
Autostack Corporation
C. BRUCE WARD
Chairman
Gunderson, Inc.
BENJAMIN R. WHITELEY(1)(2)
Retired Chairman and Chief Executive Officer
Standard Insurance Company
(1) Member of Compensation Committee
(2) Member of Audit Committee
OFFICERS
ALAN JAMES
Chairman of the Board
WILLIAM A. FURMAN
President, Chief Executive Officer
ROBIN D. BISSON
Senior Vice President, Marketing and Sales
WILLIAM L. BOURQUE
Vice President, International Marketing
LARRY G. BRADY
Senior Vice President, Chief Financial Officer
MAREN C. MALIK
Vice President, Administration
RICHARD G. MCKAY
President, TrentonWorks Limited
JUDY A. MILLER
Corporate Controller
THOMAS P. PECZERSKI
President, WagonySwidnica
MARK J. RITTENBAUM
Vice President, Treasurer
THOMAS J. SASS
Senior Vice President, General Manager,
Gunderson, Inc.
TIMOTHY A. STUCKEY
President, Gunderson Rail Services
NORRISS M. WEBB
Executive Vice President, General Counsel
L. CLARK WOOD
President, Manufacturing Operations
The Greenbrier Companies 1999 Annual Report 43
<PAGE>
INVESTOR INFORMATION
Corporate Offices:
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035
(503) 684-7000
Company website: www.gbrx.com
ANNUAL STOCKHOLDERS' MEETING:
January 11, 2000, 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
E-mail: [email protected]
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
E-mail: [email protected]
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 204
holders of record of common stock as of October 31, 1999. 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>
1999
Fourth quarter $ 12.50 $ 9.44
Third quarter $ 10.63 $ 8.19
Second quarter $ 15.00 $ 9.94
First quarter $ 17.13 $ 12.63
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
</TABLE>
Cash dividends have been paid quarterly on the common stock since December 1994.
In July 1999, the dividend rate was increased to $.09 from $.06 per share. In
addition, a special one-time dividend of $.12 per share was paid in August 1999.
There is no assurance as to future dividends as they are dependent upon future
earnings, capital requirements and financial condition
44 1999 Annual Report The Greenbrier Companies
<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-Concarril LLC DE N/A
Greenbrier de Mexico, S.R.L. de C.V. Mexico N/A
Greenbrier Europe B.V. Netherlands N/A
Greenbrier
Greenbrier Leasing Corporation DE Intermodal
Greenbrier Leasing Sp z.o.o. Poland N/A
Greenbrier Leasing Limited Nova Scotia, N/A
Canada
Greenbrier Leasing Limited Partner, LLC DE N/A
Greenbrier Leasing, LLC DE N/A
Greenbrier Leasing, L.P. DE N/A
Greenbrier Logistics, Inc. OR N/A
Greenbrier Partners, Inc. CA N/A
Greenbrier Railcar, Inc. DE N/A
Greenbrier Rental Services, Inc. CA N/A
Greenbrier U.K. Limited United Kingdom N/A
Gunderson-Concarril LLC Mexico N/A
Gunderson, Inc. OR N/A
Gunderson Marine, Inc. OR N/A
Gunderson Rail Services, Inc. OR Gunderson
Southwest,
Gunderson
Northwest,
Gunderson
Midwest,
TrentonWorks Limited Nova Scotia, N/A
Canada
WagonySwidnica S.A. Poland N/A
</TABLE>
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-08035, 33-3392, and 33-80869 of The Greenbrier Companies, Inc. on Forms
S-8 of our reports dated October 25, 1999, 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, 1999.
DELOITTE & TOUCHE LLP
Portland, Oregon
November 22, 1999
<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, 1999 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-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 77,796<F1>
<SECURITIES> 0
<RECEIVABLES> 47,514
<ALLOWANCES> 0
<INVENTORY> 92,495
<CURRENT-ASSETS> 0
<PP&E> 69,316
<DEPRECIATION> 0
<TOTAL-ASSETS> 550,716
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 134,149
<TOTAL-LIABILITY-AND-EQUITY> 550,716
<SALES> 0
<TOTAL-REVENUES> 618,536
<CGS> 504,804
<TOTAL-COSTS> 574,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,048
<INCOME-PRETAX> 43,623
<INCOME-TAX> 20,979
<INCOME-CONTINUING> 20,419
<DISCONTINUED> 0
<EXTRAORDINARY> (938)
<CHANGES> 0
<NET-INCOME> 19,481
<EPS-BASIC> 1.37
<EPS-DILUTED> 1.36
<FN>
<F1>OF THIS AMOUNT, $635 IS RESTRICTED
</FN>
</TABLE>
