The Greenbrier panies(GBX) - 2024 Q4 - Annual Report

Forward-Looking Statements This report contains forward-looking statements involving risks and uncertainties that may cause actual results to differ materially - This report contains forward-looking statements that involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[3][4][5] PART I Item 1. BUSINESS The Greenbrier Companies, Inc, is a leading global provider of railroad freight car equipment and services with an integrated business model across three reportable segments Introduction Greenbrier is a leading global provider of railroad freight car equipment and services, operating an integrated business model across three reportable segments - The Company is a leading designer, manufacturer, and marketer of railroad freight car equipment and services in North America, Europe, and South America[7] - Greenbrier operates an integrated business model in North America, combining freight car manufacturing, wheel services, railcar maintenance, component parts, leasing, and fleet management services[8] - The Company operates in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management Services[8] Products and Services The company's segments produce a wide array of freight railcars, offer comprehensive maintenance and component services, and provide leasing and fleet management solutions - The Manufacturing segment produces various freight railcar types for the North American market, including covered hoppers, gondolas, open top hoppers, boxcars, flat cars, tank cars, and intermodal railcars (Maxi-Stack® I and IV)[10][11] - The Company offers Sustainable Conversions™ to repurpose existing railcars, providing an efficient and cost-saving option for fleet diversification and optimization[12] - The Maintenance Services segment operates a North American network providing wheel services (reconditioning, new axle machining), railcar maintenance, and component parts manufacturing (cushioning units, couplers, yokes, side frames, bolsters)[14] - The Leasing & Management Services segment operates a North American railcar leasing business with an owned fleet of approximately 15,500 railcars (98.5% on lease, average remaining term 4.0 years, average age 6.5 years as of August 31, 2024)[15] - Management Services offers software and services including railcar maintenance management, accounting, total fleet management, logistics, administration, re-marketing, and regulatory support[16] Unconsolidated Affiliates The company holds significant ownership interests in several unconsolidated affiliates for component and railcar manufacturing in the U.S and Brazil - The Company has a 41.9% interest in Axis, LLC, a U.S. joint venture that manufactures and sells axles[17] - The Company holds a 60% ownership interest in Greenbrier Maxion-Equipamentos e Serviços Ferroviários S.A., a leading railcar manufacturer in South America, accounted for under the equity method[17] - The Company has a 29.5% ownership interest in Amsted-Maxion Fundição e Equipamentos Ferroviários S.A., a Brazilian manufacturer of various castings and wheel components[18] Backlog As of August 31, 2024, the company's railcar backlog stood at 26,700 units with an estimated future revenue value of $3.38 billion Railcar Backlog Units and Estimated Future Revenue Value | Metric | August 31, 2024 | August 31, 2023 | August 31, 2022 | |:---|:---|:---|:---| | New railcar backlog units | 26,700 | 30,900 | 29,500 | | Estimated future revenue value (in millions) | $3,380 | $3,810 | $3,480 | - Approximately 18,600 units in the August 31, 2024 backlog are scheduled for delivery in 2025, with the remaining balance for 2026 and beyond[20] - The backlog includes approximately $590 million of railcars intended for syndication, supported by lease agreements with external customers[20] Customers The company serves a diverse customer base including railroads, leasing companies, and shippers, with one customer accounting for 10% of 2024 revenue - Customers across all segments include railroads, leasing companies, financial institutions, shippers, carriers, and transportation companies[22] - In 2024, revenue from one customer accounted for approximately 10% of Consolidated Revenue, comprising 11% of Manufacturing Revenue, 6% of Leasing & Management Services Revenue, and 1% of Maintenance Services Revenue[23] Raw Materials and Components The company relies on steel and specialty components, mitigating supply chain risks through strategic alliances and advance purchases - Products require a supply of materials including steel and specialty components (brakes, wheels, axles), which represent a significant portion of freight car costs[24] - To mitigate shortages and reduce supply chain costs, the Company has entered into strategic alliances and multi-year arrangements for global sourcing[25] - In 2024, the top ten suppliers for all inventory purchases accounted for approximately 44% of total purchases, with the top supplier accounting for 17%[25] Competition Greenbrier is a top-tier railcar manufacturer in North America, Europe, and South America, competing on quality, price, and innovative design - The Company is one of the two largest railcar manufacturers in North America and a top-tier manufacturer in Europe, and a leading manufacturer in South America through Greenbrier-Maxion[26] - Competition in railcar manufacturing, maintenance services, and leasing is based on quality, price, timeliness of delivery, innovative product design, reputation, and customer service[26][27] - The Company's strong servicing capability and ability to syndicate railcars with leases, integrated with manufacturing and maintenance, provide a strong competitive advantage[27] Marketing and Product Development The company employs an integrated marketing strategy in North America and market-specific approaches elsewhere, investing in R&D to create new products - In North America, the Company leverages an integrated marketing and sales effort to provide diverse equipment, services, and financing alternatives, including custom programs and proprietary software solutions[28] - In Europe and South America, customer relationships are maintained through market-specific sales personnel, with engineering and technical staff collaborating on railcar design and certification[29] Research and Development Costs | Year Ended August 31, | R&D Costs (in millions) | |:---|:---| | 2024 | $5.2 | | 2023 | $4.0 | | 2022 | $5.4 | Human Capital Greenbrier's strategy focuses on its global workforce of 14,200, prioritizing safety, engagement, development, and competitive compensation - The Company depends on a highly skilled workforce of approximately 14,200 employees, with about half residing in Mexico and approximately 7,800 employees represented by unions[30] - Employee safety is a top priority, with continuous improvement efforts including refreshed onboarding, training, and focus on leading indicators[31] - The Company fosters employee engagement through a culture of feedback, expanded employee engagement surveys (including Mexico and Europe), and eight Employee Resource Groups (ERGs)[32] - Greenbrier enhanced its communication platform, GBX RailDepot, by adding GBXcellence, a recognition and rewards program, and focuses on customized learning and training programs for employee development[33] - The Company regularly evaluates compensation programs and provides competitive health and wellness benefits to attract and retain talent[34][35] Patents and Trademarks Greenbrier proactively protects its intellectual property through patents and trademarks while also emphasizing manufacturing expertise for competitive advantage - The Company has a proactive program to protect its intellectual property, including U.S. and non-U.S. patents, pending patent applications, registered trademarks, copyrights, and trade names[36] - Manufacturing expertise, improvement of existing technology, and new product development are considered important for competitive advantage in addition to patent protection[36] Environmental Matters The company is subject to extensive environmental regulations and is involved in the Portland Harbor Superfund Site, retaining potential liability - The Company is subject to national, state, and local environmental laws and regulations concerning air emissions, wastewater discharge, waste disposal, and employee health and safety[37] - The Company is a potentially responsible party for the Portland Harbor Superfund Site, participated in the RI/FS, and is assisting in funding a portion of the RM9W remedial design, with an estimated undiscounted cleanup cost of $1.7 billion[38][39] - The Company believes it did not materially contribute to contaminants in the Portland Harbor Site and that damage in the adjacent area precedes its ownership[40] - The Company entered a Voluntary Cleanup Agreement with the Oregon DEQ for its former Portland Property, which was sold in May 2023, but remains potentially liable for related matters[41][42] Regulation Greenbrier's operations are subject to a complex regulatory environment governing railroad safety, hazardous materials, and health standards across its global operations - The Company must comply with rules from DHS, USDOT (FRA, PHMSA), and Transport Canada (TC) in North America, and AAR standards for products sold and leased[43] - New regulations are expected regarding the geographic origin of components for new railcars accessing the U.S. rail interchange system[43] - Operations are subject to health and safety regulations by OSHA in the U.S. and STPS in Mexico[44] - The regulatory environment in Europe includes EU and country-specific regulations, while Brazil is overseen by its Ministry of Transportation and National Agency of Ground Transportation[45] Additional Information Greenbrier files regular reports with the SEC, which are publicly available on the SEC's website and the company's investor relations site - The Company files annual, quarterly, current, and special reports, and proxy statements with the SEC, available on http://www.sec.gov and its investor relations website http://www.gbrx.com[46](index=46&type=chunk) Item 1A. RISK FACTORS The company faces a broad range of risks including economic downturns, supply chain disruptions, cybersecurity threats, and geopolitical instability Risks Related to Our Business The company's business is exposed to risks from economic downturns, labor shortages, material costs, supply chain disruptions, and cybersecurity threats - Economic downturns and uncertainty may adversely affect demand for products and services, leading to lower sales volumes, prices, lease utilization rates, and decreased revenues and profits[49] - Shortages of skilled labor, increased labor costs, or failure to maintain good relations with the workforce could restrict production, increase costs, and disrupt operations[50] - Increases in the price of materials (especially steel) and components, or disruptions in their supply, could negatively impact profit margins and production capabilities[51][52] - Cybersecurity threats and incidents could disrupt business operations, damage reputation, and result in material liabilities due to unauthorized access, data theft, or system failures[57][58][59] - The company's backlog is not necessarily indicative of future revenues, as orders are subject to documentation, completion of terms, and potential cancellations or modifications[70] - Dependence on a few major customers (one customer accounted for 10% of Consolidated Revenue in 2024) means loss or reduction of business from them could have an adverse effect[78][79] - High debt levels and debt service obligations pose risks, including potential inability to satisfy financial obligations, breach of covenants, and limited access to future financing[83] Risks Related to Market and Economic Factors The company is vulnerable to inflation, interest rates, cyclical industry downturns, international political risks, and global capital market volatility - Inflation and monetary policy interventions, including interest rate increases, can negatively impact business by decreasing customer capital for purchases and increasing borrowing costs[92][93] - The demand for specific types of railcars and services is dependent on broad economic trends and the future of rail transportation, making the industry subject to periodic economic cycles and decreased demand during downturns[94][95][96] - Operations outside the U.S. (Mexico, Brazil, Europe) expose the company to macroeconomic, political, military, legal, regulatory, trade, financial, labor, and market instabilities, as well as foreign currency exchange rate fluctuations[97][98][99][100] - Deterioration of global capital markets, weakening macroeconomic conditions, and changes in credit markets could negatively impact liquidity, increase borrowing costs, and limit access to capital for operations and customer financing[101][102] - The profitability of the railcar leasing business depends on the ability to lease at satisfactory rates, remarket leased railcars, and realize expected residual values, which are subject to market and industry conditions[104][105] - Fires, natural disasters, pandemics, terrorism, or severe weather conditions could disrupt business, leading to loss of revenue, higher expenses, or decreased demand, and insurance may not adequately cover all losses[107][109] Risks Related to Legal, Compliance and Regulatory Matters The company faces legal claims from accidents, potential liabilities from product misuse, and risks from non-compliance with evolving regulations - Train derailments or other accidents, especially involving hazardous materials, could subject the company to legal claims (negligence, personal injury, product liability) and environmental penalties, potentially exceeding insurance coverage[110][111] - Employee misconduct, fraud, or noncompliance with policies could lead to regulatory sanctions, reputational damage, and material harm to the business[113] - Changes in, or failure to comply with, applicable regulations (railroad safety, environmental, climate change) could increase operating costs, limit operations, or negatively affect demand for products[114][115][116][117][118] - Changes in accounting standards, new implementations, or inaccurate estimates/assumptions in applying policies could adversely affect financial results[119][120][121] - Discontinuation of tax benefits or credits relied upon by customers could reduce demand for products, materially affecting financial condition or results of operations[122] Risks Related to our Common Stock The company's common stock price may be volatile, and shareholders face risks from potential dilution, shareholder activism, and anti-takeover provisions - The company's common stock price has been volatile and may continue to experience large fluctuations, potentially leading to securities class action litigation[123] - Shareholder activism could result in substantial costs, create uncertainties, adversely affect relationships with stakeholders, and impact the stock price[124] - Issuance of additional equity or convertible securities could dilute current shareholders' ownership interests[125] - Provisions in charter documents, Oregon law, and debt instruments could delay or prevent an acquisition, limit shareholder attempts to replace directors, and adversely affect the common stock's market price[126][127] - Payments of cash dividends are at the discretion of the Board of Directors and may be restricted by Oregon law, with no assurance of continued payments[128] General Risk Factors The company faces risks from unanticipated tax changes and the dissemination of false information through social media - Unanticipated changes in tax provisions or exposure to additional income tax liabilities could affect financial condition and profitability, and tax positions taken may be contested by tax authorities[130][131] - The use of social and other digital media to disseminate false, misleading, or inaccurate information could create unwarranted volatility in stock price, losses to shareholders, and adversely affect reputation, products, business, and operating results[132][133] Item 1B. UNRESOLVED STAFF COMMENTS There are no unresolved staff comments from the Securities and Exchange Commission - None[134] Item 1C. CYBERSECURITY Cybersecurity is a critical component of enterprise risk management, with no material incidents affecting the company to date Risk Management and Strategy The company's cybersecurity program, aligned with NIST frameworks, focuses on proactively identifying, preventing, and mitigating threats - The cybersecurity program follows industry trends, aligning with National Institute of Standards and Technology (NIST) frameworks[135] - Key areas of focus include vigilance (proactive identification, prevention, mitigation of threats), layered system safeguards (network security, vulnerability management, threat detection), and collaboration with public and private entities[136] - The Company actively manages cybersecurity risks posed by third parties, monitors their security posture, and requires aligned cybersecurity practices[137] - A comprehensive cybersecurity training program educates personnel on evolving threats, including monthly phishing awareness campaigns and annual security training[137] - An established cybersecurity incident response procedure plan is maintained, tested, and evaluated periodically[138] Governance The Board of Directors and Audit Committee oversee cybersecurity risk management, led by the Chief Information Security Officer - The Board of Directors, in coordination with the Audit Committee, oversees cybersecurity risk management, receiving regular presentations and reports[141] - The Chief Information Security Officer (CISO), with decades of experience, is principally responsible for overseeing the cybersecurity risk management program[142] - To date, the Company has not experienced any cybersecurity threats or incidents that have materially affected its business strategy, results of operations, or financial condition[143] Item 2. PROPERTIES The company operates numerous manufacturing, maintenance, and corporate facilities across the U.S, Mexico, and Europe, which are adequate for its needs - Manufacturing segment operates facilities in 4 U.S. locations (owned), 3 Mexico locations (2 owned, 1 leased), 3 Poland locations (owned), and 3 Romania locations (owned)[145] - Maintenance Services segment operates 15 facilities in the U.S. (8 leased, 7 owned)[145] - Leasing & Management Services segment's corporate offices, railcar marketing, and fleet management are leased in Lake Oswego, Oregon[145] Item 3. LEGAL PROCEEDINGS Information regarding legal proceedings is incorporated by reference from the Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 21 - Commitments and Contingencies to the Consolidated Financial Statements[146] Item 4. MINE SAFETY DISCLOSURES This item is not applicable to the company's operations - Not applicable[146] PART II Information About Our Executive Officers This section provides biographical information for the company's key executive officers, including the CEO, CFO, and heads of major divisions - Lorie L. Tekorius serves as Chief Executive Officer and President, having been with the Company since 1995[147] - Key executive officers include Martin R. Baker (Senior Vice President), Brian J. Comstock (Executive Vice President and President, The Americas), Michael J. Donfris (Senior Vice President, Chief Financial Officer), Laurie Dornan (Senior Vice President, Chief Human Resources Officer), Rick Galvan (Senior Vice President, Operations, Maintenance Services), William Glenn (Senior Vice President and President, Europe), William Krueger (Senior Vice President and Chief Operations Officer, The Americas), and Christian M. Lucky (Senior Vice President, Chief Legal & Compliance Officer and Corporate Secretary)[147] Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The company's common stock trades on the NYSE under the symbol GBX, with a share repurchase program authorized by the Board Common Stock Information The Greenbrier Companies, Inc common stock is traded on the New York Stock Exchange under the symbol GBX - The Company's common stock has been traded on the New York Stock Exchange under the symbol GBX since July 14, 1994[149] - There were approximately 191 holders of record of common stock as of October 18, 2024[149] Issuer Purchases of Equity Securities The Board of Directors has authorized a share repurchase program with $45.1 million remaining for purchase as of August 31, 2024 - The Board of Directors has authorized a share repurchase program with an expiration date of January 31, 2025[150] - The amount remaining for purchase under the share repurchase program was $45.1 million as of August 31, 2024[150] - There were no share repurchases under this program during the three months ended August 31, 2024[150] Performance Graph A performance graph illustrates the cumulative total returns of the company's Common Stock compared to key market indices over a five-year period - The performance graph compares the cumulative total returns of the Company's Common Stock against the S&P 500 Index, the S&P SmallCap 600 Index, and the Dow Jones U.S. Industrial Transportation Index[151] - The comparison assumes an investment of $100 on August 31, 2019, with all dividends reinvested, through August 31, 2024[151] Item 6. RESERVED This item is reserved and contains no information - This item is reserved[154] Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The company achieved strong financial performance in 2024, reporting its second-highest annual revenue, expanded margins, and significantly increased net earnings Executive Summary Greenbrier's 2024 financial results reflect successful execution of its multi-year strategy, achieving its second-highest annual revenue and expanded margins - The Company's multi-year strategy focuses on maintaining manufacturing leadership, optimizing its industrial footprint for efficiency and margin enhancement, and increasing recurring revenue to reduce manufacturing cyclicality[155] - In 2024, the Company achieved its second highest annual revenue, expanded Margin as a percentage of Revenue from 11.2% to 15.8%, received new railcar orders for 21,700 units valued at approximately $2.8 billion, increased its owned lease fleet by 15.7% (2,100 units), and generated $330 million of Net cash provided by operating activities[156] - The Company remains focused on increasing recurring revenue (Leasing & Management Services revenue excluding syndication), expanding aggregate gross margin, and raising return on invested capital[157] Financial Highlights In 2024, Greenbrier significantly improved its financial performance, with earnings from operations surging by 84.0% and Diluted EPS rising by 162% Key Financial Highlights (Year Ended August 31) | Metric | 2024 | 2023 | Change (YoY) | |:---|:---|:---|:---| | Margin as a percentage of Revenue | 15.8% | 11.2% | +4.6% | | Earnings from operations | $324.5M | $176.4M | +84.0% | | Diluted Earnings per common share (EPS) | $4.96 | $1.89 | +162% | | Net cash provided by operating activities | $330M | $71.2M | +$258.4M | - The increase in Margin as a percentage of Revenue was driven by operating efficiencies and favorable product mix in the Manufacturing segment[159] - The increase in Earnings from operations was primarily attributed to an increase in Margin in Manufacturing and Leasing & Management Services segments, and the prior year included $46.7 million in Asset impairment, disposal, and exit costs, net[159] Manufacturing Backlog As of August 31, 2024, the manufacturing backlog was strong at 26,700 units, valued at approximately $3.4 billion Railcar Manufacturing Backlog (as of August 31) | Metric | 2024 | 2023 | 2022 | |:---|:---|:---|:---| | Backlog Units | 26,700 | 30,900 | 29,500 | | Backlog Value (in billions) | $3.4 | $3.8 | $3.5 | - During 2024, the Company generated new railcar orders for 21,700 units valued at approximately $2.8 billion[161] - The backlog includes approximately $590 million of railcars intended for syndication, which may be sold to third parties or held in the lease fleet[161] Financial Overview The consolidated financial overview for 2024 shows total revenue of $3,544.7 million and earnings from operations of $324.5 million Consolidated Financial Overview (Year Ended August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Revenue: ||| | Manufacturing | $3,013.6 | $3,357.7 | | Maintenance Services | $298.8 | $406.4 | | Leasing & Management Services | $232.3 | $179.9 | | Total Revenue | $3,544.7 | $3,944.0 | | Cost of Revenue: ||| | Manufacturing | $2,648.9 | $3,083.4 | | Maintenance Services | $264.1 | $364.0 | | Leasing & Management Services | $73.2 | $55.5 | | Total Cost of Revenue | $2,986.2 | $3,502.9 | | Margin | $558.5 | $441.1 | | Selling and administrative | $247.1 | $235.3 | | Net gain on disposition of equipment | $(13.1) | $(17.3) | | Asset impairment, disposal, and exit costs, net | — | $46.7 | | Earnings from operations | $324.5 | $176.4 | | Interest and foreign exchange | $100.8 | $85.4 | | Earnings before income tax and earnings from unconsolidated affiliates | $223.7 | $91.0 | | Income tax expense | $(62.0) | $(24.6) | | Earnings before earnings from unconsolidated affiliates | $161.7 | $66.4 | | Earnings from unconsolidated affiliates | $11.0 | $9.2 | | Net earnings | $172.7 | $75.6 | | Net earnings attributable to noncontrolling interest | $(12.6) | $(13.1) | | Net earnings attributable to Greenbrier | $160.1 | $62.5 | | Diluted Earnings per common share | $4.96 | $1.89 | Operating Profit (Loss) by Segment (Year Ended August 31, in millions) | Segment | 2024 | 2023 | |:---|:---|:---| | Manufacturing | $281.6 | $140.9 | | Maintenance Services | $27.1 | $36.9 | | Leasing & Management Services | $139.0 | $103.3 | | Corporate | $(123.2) | $(104.7) | | Total Operating Profit | $324.5 | $176.4 | Consolidated Results Consolidated Revenue decreased by 10.1% in 2024, but net earnings attributable to Greenbrier surged by 156.2% due to improved margins Consolidated Financial Performance (Year Ended August 31, in millions) | Metric | 2024 | 2023 | Increase (Decrease) | % Change | |:---|:---|:---|:---|:---| | Revenue | $3,544.7 | $3,944.0 | $(399.3) | (10.1)% | | Cost of revenue | $2,986.2 | $3,502.9 | $(516.7) | (14.8)% | | Margin (%) | 15.8% | 11.2% | 4.6% | * | | Net earnings attributable to Greenbrier | $160.1 | $62.5 | $97.6 | 156.2% | - The 10.1% decrease in Revenue was primarily due to a 10.2% decrease in Manufacturing Revenue, attributed to a 10.4% decrease in deliveries[168] - Margin as a percentage of Revenue increased by 4.6% to 15.8% in 2024, positively impacted by operating efficiencies and a favorable product mix within the Manufacturing segment[168] - The $97.6 million increase in Net earnings attributable to Greenbrier was primarily driven by a $117.4 million increase in Margin and the absence of $46.7 million in Asset impairment, disposal and exit costs from the prior year, partially offset by higher income tax, interest, and selling and administrative expenses[169] Manufacturing Segment The Manufacturing segment's revenue decreased by 10.2%, but operating profit nearly doubled due to improved margins and operating efficiencies Manufacturing Segment Performance (Year Ended August 31) | Metric | 2024 | 2023 | Increase (Decrease) | % Change | |:---|:---|:---|:---|:---| | Revenue (in millions) | $3,013.6 | $3,357.7 | $(344.1) | (10.2)% | | Cost of revenue (in millions) | $2,648.9 | $3,083.4 | $(434.5) | (14.1)% | | Margin (%) | 12.1% | 8.2% | 3.9% | * | | Operating profit ($ in millions) | $281.6 | $140.9 | $140.7 | 99.9% | | Deliveries (units) | 22,300 | 24,900 | (2,600) | (10.4)% | - The decrease in Manufacturing Revenue was primarily attributed to a 10.4% decrease in deliveries[172] - Manufacturing Margin as a percentage of Revenue increased by 3.9% due to operating efficiencies and a favorable product mix[172] - Manufacturing Operating profit increased by 99.9%, driven by increased Margin and the prior year's inclusion of $46.7 million in charges related to the sale and closure of the Gunderson Facility[173] Maintenance Services Segment The Maintenance Services segment experienced a 26.5% decrease in revenue due to lower volumes, though margin percentage slightly increased Maintenance Services Segment Performance (Year Ended August 31) | Metric | 2024 | 2023 | Increase (Decrease) | % Change | |:---|:---|:---|:---|:---| | Revenue (in millions) | $298.8 | $406.4 | $(107.6) | (26.5)% | | Cost of revenue (in millions) | $264.1 | $364.0 | $(99.9) | (27.4)% | | Margin (%) | 11.6% | 10.4% | 1.2% | * | | Operating profit ($ in millions) | $27.1 | $36.9 | $(9.8) | (26.6)% | - Maintenance Services Revenue decreased primarily due to 11.6% lower volumes in the wheels business, a change in product mix, and a $9.1 million decrease from lower scrap metal volume and pricing[175] - Margin as a percentage of Revenue increased by 1.2% due to a favorable change in product mix, partially offset by a decrease in scrap metal pricing[175] - Operating profit decreased due to lower operating volumes and a decrease in scrap metal pricing and volume[176] Leasing & Management Services Segment The Leasing & Management Services segment's revenue increased by 29.1%, driven by a larger lease fleet and higher lease rates Leasing & Management Services Segment Performance (Year Ended August 31) | Metric | 2024 | 2023 | Increase (Decrease) | % Change | |:---|:---|:---|:---|:---| | Revenue (in millions) | $232.3 | $179.9 | $52.4 | 29.1% | | Cost of revenue (in millions) | $73.2 | $55.5 | $17.7 | 31.9% | | Margin (%) | 68.5% | 69.1% | (0.6)% | * | | Operating profit ($ in millions) | $139.0 | $103.3 | $35.7 | 34.6% | - Revenue increased due to higher rents from a larger lease fleet and improved lease rates ($19.7 million), increased sales of third-party purchased railcars ($8.9 million), and higher interim rent on leased railcars for syndication ($9.7 million)[179] - Margin as a percentage of Revenue decreased slightly due to higher sales of railcars purchased from third parties, which typically have lower margin percentages[180] - Operating profit increased primarily due to higher rents from a larger lease fleet and improved lease rates[180] Selling and Administrative Selling and administrative expenses increased by 5.0% in 2024, primarily driven by higher employee-related costs Selling and Administrative Expenses (Year Ended August 31, in millions) | Metric | 2024 | 2023 | Increase (Decrease) | % Change | |:---|:---|:---|:---|:---| | Selling and administrative | $247.1 | $235.3 | $11.8 | 5.0% | - The increase in selling and administrative expense was primarily attributed to an increase in employee-related costs, including higher long-term incentive compensation[181] Net Gain on Disposition of Equipment Net gain on disposition of equipment decreased in 2024 due to fewer sales of assets from the lease fleet Net Gain on Disposition of Equipment (Year Ended August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Net gain on disposition of equipment | $13.1 | $17.3 | - The decrease in Net gain on disposition of equipment was primarily attributed to fewer sales of assets from the lease fleet during the year ended August 31, 2024[182] Asset Impairment, Disposal and Exit Costs, Net In 2023, the company recorded $46.7 million in asset impairment, disposal, and exit costs, with no such costs incurred in 2024 - Asset impairment, disposal, and exit costs, net, totaled $46.7 million for the year ended August 31, 2023[183] - These costs were primarily related to the sale and closure of the Gunderson Facility and the divestiture of Southwest Steel, partially offset by a gain on disposal of a majority interest in the Rayvag joint venture[183] Interest and Foreign Exchange Interest and foreign exchange expense increased by $15.4 million in 2024 due to higher borrowings and interest rates Interest and Foreign Exchange Expense (Year Ended August 31, in millions) | Metric | 2024 | 2023 | Increase (Decrease) | |:---|:---|:---|:---| | Interest and other expense | $93.8 | $79.2 | $14.6 | | Foreign exchange loss, net | $7.0 | $6.2 | $0.8 | | Total Interest and foreign exchange | $100.8 | $85.4 | $15.4 | - The $15.4 million increase in Interest and foreign exchange expense was primarily attributed to an increase in interest expense from higher borrowings and interest rates[184] Income Tax Income tax expense in 2024 was $62.0 million, resulting in an effective tax rate of 27.7% Income Tax Expense and Effective Tax Rate (Year Ended August 31) | Metric | 2024 | 2023 | |:---|:---|:---| | Income tax expense (in millions) | $62.0 | $24.6 | | Pre-tax earnings (in millions) | $223.7 | $91.0 | | Effective tax rate | 27.7% | 27.0% | - The 2024 effective tax rate was higher than the U.S. statutory rate primarily due to the geographic mix of earnings, nondeductible expenses, increased valuation allowance, and U.S. taxes on profits in foreign jurisdictions, offset by a benefit for additional U.S. foreign tax credits[186] - The OECD Pillar Two Directive, providing for a minimum effective tax rate of 15%, is effective for the Company beginning September 1, 2024, but no material change to the effective tax rate is expected[188] Earnings From Unconsolidated Affiliates Earnings from unconsolidated affiliates increased to $11.0 million in 2024, driven by higher earnings from Brazilian operations Earnings From Unconsolidated Affiliates (Year Ended August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Earnings from unconsolidated affiliates | $11.0 | $9.2 | - The increase was primarily related to $5.2 million in higher earnings at Brazilian operations, partially offset by $4.5 million in lower earnings due to a temporarily idle facility[189] Net Earnings Attributable to Noncontrolling Interest Net earnings attributable to noncontrolling interest slightly decreased to $12.6 million in 2024 Net Earnings Attributable to Noncontrolling Interest (Year Ended August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Net earnings attributable to noncontrolling interest | $12.6 | $13.1 | - This primarily represents the joint venture partner's share in the results of operations of Mexican railcar manufacturing joint ventures and the European partner's share of European operations[190] Liquidity and Capital Resources Greenbrier's liquidity is strong, with cash increasing to $368.6 million and net cash from operating activities rising significantly to $329.6 million Cash Flow Summary (Year Ended August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Net cash provided by operating activities | $329.6 | $71.2 | | Net cash used in investing activities | $(320.4) | $(280.0) | | Net cash provided by (used in) financing activities | $86.2 | $(76.2) | | Effect of exchange rate changes | $(29.5) | $28.6 | | Net increase (decrease) in cash and cash equivalents and restricted cash | $65.9 | $(256.4) | - Cash and cash equivalents and Restricted cash increased by $65.9 million to $368.6 million at August 31, 2024[191] - The $258.4 million increase in cash from operating activities was primarily due to a change in Leased railcars for syndication and a $97.1 million increase in Net earnings[192] - Cash used in investing activities increased by $40.4 million, primarily due to a $36.2 million increase in capital expenditures[193] Capital Expenditures (Gross) by Segment (Year Ended August 31, in millions) | Segment | 2024 | 2023 | |:---|:---|:---| | Leasing & Management Services | $(277.0) | $(272.9) | | Manufacturing | $(102.8) | $(71.9) | | Maintenance Services | $(18.5) | $(17.3) | | Total capital expenditures (gross) | $(398.3) | $(362.1) | - Gross capital expenditures for 2025 are expected to be approximately $360 million for Leasing & Management Services, $110 million for Manufacturing, and $10 million for Maintenance Services[195] - The $162.4 million increase in cash flow from financing activities was primarily attributed to a $57.4 million increase in net proceeds from revolving notes, $52.8 million higher proceeds from notes payable, and a $55.6 million reduction in stock repurchases[196] - As of August 31, 2024, the Company had $351.8 million in Cash and cash equivalents and $345.9 million in available borrowings under committed credit facilities[199] - The Company's senior secured credit facilities aggregated to $1.4 billion as of August 31, 2024, including a $550.0 million nonrecourse warehouse credit facility for GBX Leasing (amended to $450.0 million in Sept 2024), a $600.0 million North American revolving line of credit, and European and Mexican lines of credit totaling $78.2 million and $166.0 million, respectively[199][200][201][202] Revolving Notes Balances (as of August 31, in millions) | Type | 2024 | 2023 | |:---|:---|:---| | GBX Leasing (Nonrecourse) | $194.9 | $139.9 | | Europe | $46.7 | $47.2 | | Mexico | $110.0 | $110.0 | | Total Revolving notes | $351.6 | $297.1 | - The Company was in compliance with all restrictive covenants under its revolving and operating lines of credit and notes payable as of August 31, 2024[204] Estimated Future Contractual Cash Obligations (as of August 31, 2024, in millions) | Year | Notes payable | Interest | Railcar & operating leases | Revolving notes | Total | |:---|:---|:---|:---|:---|:---| | 2025 | $42.8 | $70.9 | $14.6 | $154.4 | $282.7 | | 2026 | $265.5 | $65.2 | $13.5 | $2.3 | $346.5 | | 2027 | $312.4 | $50.6 | $10.7 | $194.9 | $568.6 | | 2028 | $389.2 | $29.2 | $9.8 | — | $428.2 | | 2029 | $14.6 | $17.9 | $8.0 | — | $40.5 | | Thereafter | $396.4 | $203.3 | $16.3 | — | $616.0 | | Total | $1,420.9 | $437.1 | $72.9 | $351.6 | $2,282.5 | Off-Balance Sheet Arrangements The company does not currently have off-balance sheet arrangements likely to have a material effect on its financial statements - The Company does not currently have off-balance sheet arrangements that have or are likely to have a material current or future effect on its Consolidated Financial Statements[209] Critical Accounting Estimates The preparation of financial statements requires significant management judgment, particularly for impairment of assets, goodwill, income taxes, and environmental costs - The preparation of financial statements requires judgment and estimates on matters that are inherently uncertain, including impairment of long-lived assets, goodwill, income taxes, and environmental costs[210] - Long-lived assets are reviewed for impairment when circumstances indicate the carrying amount may not be recoverable, based on estimated undiscounted cash flows and fair value[211][212] - Goodwill is evaluated for impairment annually using qualitative or quantitative assessments; in 2024, a qualitative assessment determined no impairment[213][215] - Income taxes are accounted for using the asset and liability method, requiring estimates for deferred tax assets and liabilities, valuation allowances, and uncertain tax positions[217][218] - Environmental costs are estimated and accrued when a liability is probable and costs can be reasonably estimated, with adjustments made as new information becomes available[219][220] Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Greenbrier is exposed to market risks from foreign currency fluctuations and interest rate changes, which it manages through hedging instruments Foreign Currency Exchange Risk The company mitigates foreign currency exchange risk using forward exchange contracts, with notional amounts totaling $143.9 million - The Company uses foreign currency forward exchange contracts to mitigate exposure to transactions denominated in currencies other than the U.S. Dollar[221] - At August 31, 2024, notional amounts of forward exchange contracts for Polish Zlotys and Euros aggregated to $143.9 million[221] - A 10% strengthening of the U.S. Dollar relative to foreign currencies would result in a $16.5 million decrease in equity, or 1.2% of Total equity - Greenbrier[222] Interest Rate Risk Greenbrier manages interest rate risk through swap agreements, effectively converting 84% of its outstanding debt to fixed rates - The Company has managed a portion of its variable rate debt with interest rate swap agreements, effectively converting $653.1 million of variable rate debt to fixed rate debt[223] - As of August 31, 2024, 84% of the Company's outstanding debt had fixed rates and 16% had variable rates[223] - A uniform 10% increase in variable interest rates would result in approximately $1.4 million of additional annual interest expense[223] Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA This section presents the audited consolidated financial statements and the Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on the financial statements and internal control over financial reporting, noting the remediation of a prior material weakness - KPMG LLP issued an unqualified opinion on the consolidated financial statements for the three-year period ended August 31, 2024[225] - An unqualified opinion was also expressed on the effectiveness of the Company's internal control over financial reporting as of August 31, 2024[226] - The evaluation of the sufficiency of audit evidence over the Company's primary North American manufacturing businesses was identified as a critical audit matter due to a pervasive material weakness in IT general controls identified in 2023, which was remediated in fiscal year 2024[229][230][231] Consolidated Balance Sheets As of August 31, 2024, total assets were $4,254.5 million and total equity attributable to Greenbrier was $1,376.1 million Consolidated Balance Sheet Highlights (as of August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Cash and cash equivalents | $351.8 | $281.7 | | Total Assets | $4,254.5 | $3,978.4 | | Revolving notes | $351.6 | $297.1 | | Notes payable, net | $1,404.2 | $1,311.7 | | Total Liabilities | $2,717.9 | $2,571.1 | | Total Equity - Greenbrier | $1,376.1 | $1,254.6 | | Total Equity | $1,536.6 | $1,410.2 | Consolidated Statements of Income For 2024, total revenue was $3,544.7 million, and net earnings attributable to Greenbrier significantly increased to $160.1 million Consolidated Statements of Income Highlights (Year Ended August 31, in millions, except EPS) | Metric | 2024 | 2023 | 2022 | |:---|:---|:---|:---| | Revenue | $3,544.7 | $3,944.0 | $2,977.7 | | Margin | $558.5 | $441.1 | $306.0 | | Earnings from operations | $324.5 | $176.4 | $118.0 | | Net earnings attributable to Greenbrier | $160.1 | $62.5 | $46.9 | | Diluted earnings per common share | $4.96 | $1.89 | $1.40 | Consolidated Statements of Comprehensive Income Total comprehensive income attributable to Greenbrier was $133.4 million for 2024, including a net other comprehensive loss of $(26.7) million Consolidated Statements of Comprehensive Income Highlights (Year Ended August 31, in millions) | Metric | 2024 | 2023 | 2022 | |:---|:---|:---|:---| | Net earnings | $172.7 | $75.6 | $53.8 | | Other comprehensive income (loss) | $(26.7) | $38.3 | $(1.9) | | Comprehensive income attributable to Greenbrier | $133.4 | $100.8 | $45.0 | - Other comprehensive loss in 2024 was primarily driven by translation adjustment of $(14.9) million and reclassification of derivative financial instruments of $(14.7) million[237] Consolidated Statements of Equity Total equity attributable to Greenbrier increased to $1,376.1 million as of August 31, 2024, driven by net earnings Consolidated Statements of Equity Highlights (as of August 31, in millions) | Metric | 2024 | 2023 | |:---|:---|:---| | Additional Paid-in Capital | $375.1 | $364.4 | | Retained Earnings | $1,035.0 | $897.5 | | Accumulated Other Comprehensive Loss | $(34.0) | $(7.3) | | Total Equity - Greenbrier | $1,376.1 | $1,254.6 | | Noncontrolling Interest | $160.5 | $155.6 | | Total Equity | $1,536.6 | $1,410.2 | - Key changes in equity for 2024 include Net earnings of $160.1 million, Other comprehensive loss of $(26.7) million, and Cash dividends of $(38.8) million[240] Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $329.6 million in 2024, resulting in a $65.9 million net increase in cash Consolidated Statements of Cash Flows Highlights (Year Ended August 31, in millions) | Metric | 2024 | 2023 | 2022 | |:---|:---|:---|:---| | Net cash provided by operating activities | $329.6 | $71.2 | $(150.4) | | Net cash used in investing activities | $(320.4) | $(280.0) | $(224.0) | | Net cash provided by (used in) financing activities | $86.2 | $(76.2) | $244.9 | | Increase (decrease) in cash and cash equivalents and restricted cash | $65.9 | $(256.4) | $(112.3) | | Cash and cash equivalents and restricted cash, End of period | $368.6 | $302.7 | $559.1 | - The $258.4 million increase in cash from operating activities for 2024 was primarily due to a change in Leased railcars for syndication and a $97.1 million increase in Net earnings[192][242] - Cash used in investing activities increased by $40.4 million, primarily attributable to a $36.2 million increase in capital expenditures[193][242] - The $162.4 million increase in cash flow from financing activities was primarily attributed to increased net proceeds from revolving notes and notes payable, and a reduction in stock repurchases[196][242] Notes to Consolidated Financial Statements The notes provide detailed explanations of the company's financial reporting, accounting policies, and specific financial components Note 1 — Nature of Operations The company operates in three reportable segments: Manufacturing, Maintenance Services, and Leasing & Management Services - The Company operates in three reportable segments: Manufacturing (railcar production in U.S., Mexico, Poland, Romania), Maintenance Services (wheel/axle servicing, railcar maintenance, component parts in North America), and Leasing & Management Services (railcar leasing and management services)[244] - The Leasing & Management Services segment owns approximately 15,500 railcars as of August 31, 2024[244] - Through unconsolidated affiliates, the Company produces rail and industrial components and has an ownership stake in a railcar manufacturer in Brazil[244] Note 2 — Summary of Significant Accounting Policies This note outlines the company's key accounting policies, including consolidation, inventory valuation, goodwill impairment, and revenue recognition - The financial statements are consolidated, presented in an unclassified format due to intertwined segment activities, and foreign currency translation adjustments are accumulated in other comprehensive income (loss)[245][246] - Inventories are valued at the lower of cost or net realizable value using FIFO, and leased railcars for syndication are generally not depreciated for the first six months[247][249] - Investments in unconsolidated affiliates (e.g., Greenbrier-Maxion, Amsted-Maxion, Axis) are accounted for under the equity method, as the Company exercises significant influence but not control[251][252] - Goodwill is tested for impairment annually using qualitative or quantitative assessments, with no impairment recorded in 2024, 2023, or 2022[254][255] - Revenue is recognized when control of goods/services is transferred, with specific methods for Manufacturing (point in time), Maintenance Services (over time), and Leasing & Management Services (over lease-term, syndication model)[262][263][264][265] - The Company adopted ASU 2020-06 (Convertible Instruments) effective September 1, 2021, and is evaluating the impact of ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures)[270][271][272] Note 3 – Revenue Recognition This note details the company's contract balances and performance obligations, with most railcar sales expected in 2025 Contract Balances (as of August 31, in millions) | Metric | 2024 | 2023 | Change | |:---|:---|:---|:---| | Contract assets (Accounts receivable, net) | $6.7 | $0.1 | $6.6 | | Contract assets (Inventories) | $10.8 | $7.0 | $3.8 | | Contract liabilities (Deferred revenue) | $54.6 | $43.3 | $11.3 | - For the year ended August 31, 2024, the Company recognized $22.9 million of revenue that was included in Contract liabilities as of August 31, 2023[275] Performance Obligations (as of August 31, 2024, in millions) | Revenue Type | Amount | |:---|:---| | Manufacturing – Railcar sales | $2,678.7 | | Manufacturing – Sustainable conversions | $50.4 | | Services | $133.7 | - Approximately $1.9 billion of Railcar sales are expected to be recognized in 2025, with the remaining in 2026 and beyond[276][277] Note 4 – Divestitures In 2023, Greenbrier undertook several divestitures and closures, resulting in total asset impairment, disposal, and exit costs of $46.7 million - In November 2022, the Company decided to permanently cease rail production at the Gunderson Facility, resulting in a $24.2 million impairment charge in 2023[278] - In May 2023, the Company sold Gunderson Marine and the Gunderson Facility assets, recognizing a $14.4 million loss on sale and $2.1 million severance[279] - In August 2023, the Company sold its interest in Southwest Steel Castings Company, recording a $9.7 million loss on sale[280] - Greenbrier-Astra Rail sold its 68% ownership in Rayvag in August 2023, recognizing a $3.7 million gain on sale[281] - Total Asset impairment, disposal, and exit costs, net, were $46.7 million for the year ended August 31, 2023[281] Note 5 – Inventories As of August 31, 2024, total inventories were $770.9 million, primarily comprising supplies and raw materials Inventories (as of August 31, in millions) | Component | 2024 | 2023 | |:---|:---|:---| | Supplies and raw materials | $532.6 | $638.2 | | Work-in-process | $152.0 | $138.2 | | Finished goods | $92.6 | $64.4 | | Excess and obsolete adjustment | $(6.3) | $(17.2) | | Total Inventories | $770.9 | $823.6 | Excess and Obsolete Adjustment (Year Ended August 31, in millions) | Metric | 2024 | 2023 | 2022 | |:---|:---|:---|:---| | Balance at beginning of period | $17.2 | $14.1 | $19.9 | | Charge to cost of revenue | $1.2 | $5.4 | $1.5 | | Disposition of inventory | $(12.2) | $(2.7) | $(6.9) | | Balance at end of period | $6.3 | $17.2 | $14.1 | Note 6 — Property, Plant and Equipment, net As of August 31, 2024, Property, plant and equipment, net, totaled $711.7 million, with depreciation expense of $72.4 million for the year Property, Plant and Equipment, net (as of August 31, in millions) | Component | 2024 | 2023 | |:---|:---|:---| | Land and improvements | $69.9 | $70.9 | | Machinery and equipment | $626.5 | $574.0 | | Buildings and improvements | $366.6 | $352.0 | | Construction in progress | $155.4 | $81.3 | | Other | $131.7 | $118.3 | | Total Gross | $1,350.1 | $1,196.5 | | Accumulated depreciation | $(638.4) | $(577.3) | | Total Property, plant and equipment, net | $711.7 | $619.2 | - Depreciation expense was $72.4 million for the year ended August 31, 2024, compared to $71.5 million in 2023 and $70.7 million in 2022[283] Note 7 — Goodwill As of August 31, 2024, the total goodwill balance was $128.5 million, with no impairment identified during the annual test Goodwill Carrying Value by Segment (as of August 31, in millions) | Segment | 2024 | 2023 | |:---|:---|:---| | Manufacturing | $85.9 | $85.9 | | Maintenance Services | $42.6 | $43.0 | | Leasing & Management Services | — | — | | Total Goodwill | $128.5 | $128.9 | - The Company performed a qualitative assessment for its annual goodwill impairment test during the third quarter of 2024 and determined that goodwill was not impaired[285] - As of August 31, 2024, the Manufacturing segment includes $56.3 million for North America Manufacturing and $29.6 million for Europe Manufacturing[286] Note 8 — Intangibles and Other Assets, net As of August 31, 2024, Intangibles and other assets, net, totaled $244.4 million, with amortization expense of $7.2 million for the year Intangibles and Other Assets, net (as of August 31, in millions) | Component | 2024 | 2023 | |:---|:---|:---| | Customer and supplier relationships (net) | $15.4 | $18.4 | | Other intangible assets (net) | $16.1 | $20.7 | | Intangible assets not subject to amortization | $2.3 | $2.3 | | Prepaid and other assets | $51.7 | $56.4 | | Operating lease ROU assets | $65.1 | $70.6 | | Nonqualified savings plan investments | $54.5 | $47.7 | | Debt issuance costs, net | $4.8 | $6.3 | | Assets held for sale | $0.3 | $0.3 | | Deferred tax assets | $34.2 | $33.1 | | Total Intangibles and other assets, net | $244.4 | $255.8 | - Amortization expense for the years ended August 31, 2024, 2023, and 2022 was $7.2 million, $8.0 million, and $9.3 million, respectively[287] - As of August 31, 2024, amortizable intangible assets had a weighted-average remaining useful life of 6.6 years[287] Note 9 — Revolving Notes As of August 31, 2024, Greenbrier's senior secured credit facilities totaled $1.4 billion, with $345.9 million available for drawdown - Senior secured credit facilities aggregated to $1.4 billion as of August 31, 2024, with $345.9 million available to draw down[288][289] - The GBX Leasing nonrecourse warehouse credit facility was $550.0 million (reduced to $450.0 million in September 2024) and the North America revolving line of credit was $600.0 million[290][291] - European lines of credit totaled $78.2 million and Mexican railcar manufacturing operations had lines of credit totaling $166.0 million[292][293] Revolving Notes Balances (as of August 31, in millions) | Type | 2024 | 202