Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-13146

THE GREENBRIER COMPANIES, INC.

(503) 684-7000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
     Yes [X] No [   ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [   ] No [X]

     The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding on December 31, 2002 was 14,121,132 shares.

Table of Contents

THE GREENBRIER COMPANIES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
(In thousands, except per share amounts, unaudited)

The accompanying notes are an integral part of these statements.

2

Table of Contents

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)

The accompanying notes are an integral part of these statements.

3

Table of Contents

THE GREENBRIER COMPANIES, INC.

Consolidated Statements of Cash Flows
(In thousands, unaudited)

The accompanying notes are an integral part of these statements.

4

Table of Contents

THE GREENBRIER COMPANIES, INC.

Notes to Consolidated Financial Statements

Note 1 – Interim Financial Statements

     The Consolidated Financial Statements of The Greenbrier Companies, Inc. and Subsidiaries (“Greenbrier” or the “Company”) as of November 30, 2002 and for the three months ended November 30, 2002 and 2001 have been prepared without audit and reflect all adjustments (consisting of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of the financial position and operating results for the periods indicated. The results of operations for the three months ended November 30, 2002 are not necessarily indicative of the results to be expected for the entire year ending August 31, 2003. Certain reclassifications have been made to the prior year’s consolidated financial statements to conform to the 2003 presentation.

     Certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s 2002 Annual Report on Form 10-K.

     Management estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. This includes, among other things, evaluation of the remaining life and recoverability of long-lived assets. Actual results could differ from those estimates.

     Initial Adoption of Accounting Policies – The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” as of September 1, 2002. The statement requires discontinuing the amortization of goodwill and other intangible assets with indefinite useful lives. Instead, these assets are to be tested periodically for impairment and written down to their fair market value as necessary. Other than the cessation of amortization of goodwill, which was not significant, the adoption of SFAS No. 142 had no effect on the Company’s results of operations or cash flows for the quarter ended November 30, 2002.

     SFAS No. 142 prescribes a two-phase process for testing the impairment of goodwill. The first phase, required to be completed by February 28, 2003, screens for impairment. If impairment exists, the second phase, required to be completed by August 31, 2003, measures the impairment. The Company has not yet completed such impairment test.

     Prospective Accounting Changes — In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. This statement addresses the financial accounting and reporting issues associated with exit and disposal activities and generally requires that costs associated with such exit or disposal activities are recognized as incurred rather than at the date a company commits to an exit or disposal activity. SFAS No. 146 will be effective for exit or disposal activities, if any, initiated after December 31, 2002.

5

Table of Contents

THE GREENBRIER COMPANIES, INC.

Note 2 – Inventories

(In thousands)

Note 3 — Discontinued Operations

     In August 2002, the Company’s Board of Directors committed to a plan to recapitalize European operations. As a result, the European operations are accounted for as discontinued operations, and accordingly, the financial results have been removed from the Company’s results of continuing operations for all periods presented.

     The Company is currently pursuing several options for recapitalization of European operations which include discussions with strategic investors, financial investors, and members of European management and will proceed with the option that the Board of Directors believes will be most beneficial to Greenbrier’s shareholders.

Summarized results of operations of the discontinued operations are:

6

Table of Contents

THE GREENBRIER COMPANIES, INC.

The following assets and liabilities of the European operation are classified as discontinued operations:

Note 4 — Special Charges

     In February 2002, the Company implemented a restructuring plan to reduce the scale of its operations and decrease operating expenses in North America. The plan resulted in terminations of 464 employees at manufacturing facilities. All affected employees were notified of the planned terminations and related severance benefits. As of November 30, 2002, $0.2 million in employee termination costs remain to be paid which is reflected in accounts payable and accrued liabilities.

7

Table of Contents

THE GREENBRIER COMPANIES, INC.

Note 5 – Comprehensive Loss

The following is a reconciliation of net loss to comprehensive loss:

(In thousands)

Note 6 – Earnings Per Share

     The shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows:

(In thousands)

     Weighted average diluted common shares outstanding includes the incremental shares that would be issued upon the assumed exercise of stock options. Stock options for 0.5 million shares for the three months ended November 30, 2002 and 0.9 million shares for the three months ended November 30, 2001 were excluded from the calculation of diluted earnings per share as these options were anti-dilutive; however, they may become dilutive in the future.

Note 7 – Derivative Instruments

     Foreign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with established financial institutions are utilized to hedge a portion of that risk. Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, and therefore the unrealized gains and losses are recorded in other comprehensive loss.

     At November 30, 2002 exchange rates, forward exchange contracts for the sale of United States dollars aggregated $39.5 million, Pound Sterling aggregated $4.5 million and Euro aggregated $12.4 million. The Pound Sterling and Euro transactions relate to the discontinued operations. Adjusting these contracts to the fair value of these cash flow hedges at November 30, 2002 resulted in an unrealized pre-tax gain of $0.6 million that was recorded, net of tax, in other comprehensive loss ($0.4 million gain relates to continuing operations and $0.2 million gain relates to discontinued operations). As these contracts mature at various dates through July 2003, any such gain remaining will

8

Table of Contents

THE GREENBRIER COMPANIES, INC.

be recognized in manufacturing revenue along with the related transactions. In the event that the underlying sales transaction does not occur, the amount classified in other comprehensive loss would be reclassified to the current year’s results of operations.

     At November 30, 2002 exchange rates, interest rate swap agreements had a notional amount of $92.3 million and mature between August 2006 and March 2013. The discontinued operations accounted for $7.1 million of the notional amount and $85.2 million relates to continuing operations. The fair value of these cash flow hedges at November 30, 2002 resulted in an unrealized pre-tax loss of $8.5 million, of which $0.5 million relates to the discontinued operations. The loss, net of tax, is included in other comprehensive loss and the fair value of the contracts is included in accounts payable and accrued liabilities. As interest expense on the underlying debt is recognized, amounts corresponding to the interest rate swaps are reclassified from other comprehensive loss and charged or credited to interest expense. At November 30, 2002 interest rates, approximately $3.5 million would be reclassified to interest expense in the next 12 months, of which $0.1 million relates to discontinued operations.

Note 8 – Segment Information

     Greenbrier has two reportable segments: manufacturing and leasing & services. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in the Consolidated Financial Statements contained in the Company’s 2002 Annual Report on Form 10-K. Performance is evaluated based on margin, which is presented in the Consolidated Statements of Operations. Intersegment sales and transfers are accounted for as if the sales or transfers were to third parties.

     The information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes.

(In thousands)