Executive Summary
We operate in three reportable segments: Manufacturing; Maintenance Services;
and Leasing & Management Services. Our segments are operationally integrated.
The Manufacturing segment, which currently operates from facilities in the U.S.,
Mexico, Poland, Romania and Turkey, produces double-stack intermodal railcars,
tank cars, conventional railcars, automotive railcar products and marine
vessels. The Maintenance Services segment performs wheel and axle servicing,
railcar maintenance and produces a variety of parts for the rail industry in
North America. The Leasing & Management Services segment, owns approximately
14,100 railcars as of November 30, 2022. We also provide management services for
approximately 408,000 railcars for railroads, shippers, carriers, institutional
investors and other leasing and transportation companies in North America as of
November 30, 2022. Through unconsolidated affiliates we produce rail and
industrial components and have an ownership stake in a railcar manufacturer in
Brazil.
During the first quarter, a few key trends continued to impact our business
which we believe are reflected in our results for the three months ended
November 30, 2022. We have continued to see strong demand in the marketplace,
however inflation, rising interest rates, supply chain challenges, and
congestion persisted and continue to demand concerted management focus for
successful execution across the business. Manufacturing was impacted by supply
chain issues, negatively impacting gross margin in the quarter. We believe that
despite these challenges and growing concerns of a recession and economic
slowdown in the near future, we continue to be optimistic about 2023 and are
proud of the following accomplishments during the quarter ended November 30,
2022:
•
Revenue increased by $215.8 million and 39.2% compared to the same period last
year driven by a 21.6% increase in railcar deliveries.
•
Obtained new railcar orders of 5,600 units valued at approximately $0.7 billion
during the three months ended November 30, 2022.
•
Increased our lease fleet during the three months ended November 30, 2022 by
1,900 units to 14,100 units.
•
Subsequent to quarter end, we acquired the minority interest in GBX Leasing, and
now wholly own our lease fleet.
Our backlog remains strong with railcar deliveries and marine deliveries into
2024. Our railcar backlog was 28,300 units with an estimated value of $3.4
billion as of November 30, 2022. Backlog units for lease may be syndicated to
third parties or held in our lease fleet depending on a variety of factors.
Multi-year supply agreements are a part of rail industry practice. A portion of
the orders included in backlog reflects an assumed product mix. Under terms of
the orders, the exact mix and pricing will be determined in the future, which
may impact backlog. Approximately 5% of backlog units and estimated backlog
value as of November 30, 2022 was associated with our Brazilian manufacturing
operations which is accounted for under the equity method. Marine backlog as of
November 30, 2022 was approximately $56 million.
Our backlog of railcar units and marine vessels is not necessarily indicative of
future results of operations. Certain orders in backlog are subject to customary
documentation and completion of terms. Customers may attempt to cancel or modify
orders in backlog. Historically, little variation has been experienced between
the quantity ordered and the quantity actually delivered, though the timing of
deliveries may be modified from time to time.
On November 17, 2022, as part of the our strategic review of the global business
capacity footprint, we decided to permanently cease rail production at our
Gunderson facility during 2023 and to explore alternatives to exit marine barge
production in the first part of calendar 2024. Due to the change in future use
of the facility, management assessed recoverability of Gunderson assets in
accordance with our policy on impairment of long-lived assets. Based on an
analysis of future undiscounted cash flows associated with these assets, we
determined that the carrying value was not recoverable. On January 5, 2023,
management concluded that an impairment charge was necessary and $24.2 million
was recorded in the Manufacturing segment as Impairment of long-lived assets
within the Condensed Consolidated Statements of Operations for the quarter ended
November 30, 2022. Although it is possible that costs and charges related to the
cessation of production at the facility, such as exit costs, accelerated
depreciation, and termination benefits may be incurred in future periods, the
amount of any such costs and charges is not estimable at this time and we do not
yet know if the amount of any such costs and charges will be material.
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As described in Part I Item 1A "Risk Factors" in our Annual Report on Form 10-K
for the year ended August 31, 2022, the items described above may have a
material negative impact on our business, liquidity, results of operations and
stock price. Beyond these general observations, we are unable to predict when,
how, or with what magnitude these items will impact our business.
Three Months Ended November 30, 2022 Compared to the Three Months Ended November
30, 2021
Overview
Revenue, Cost of revenue, Margin and Earnings (loss) from operations (operating
profit or loss) presented below, include amounts from external parties and
exclude intersegment activity that is eliminated in consolidation.
Three Months Ended
November 30,
(in millions, except per share amounts) 2022 2021
Revenue:
Manufacturing $ 646.5 $ 452.5
Maintenance Services 85.5 72.4
Leasing & Management Services 34.5 25.8
766.5 550.7
Cost of revenue:
Manufacturing 604.5 421.6
Maintenance Services 79.6 71.2
Leasing & Management Services 12.9 10.3
697.0 503.1
Margin:
Manufacturing 42.0 30.9
Maintenance Services 5.9 1.2
Leasing & Management Services 21.6 15.5
69.5 47.6
Selling and administrative 53.4 44.3
Net gain on disposition of equipment (3.3 ) (8.5 )
Impairment of long-lived assets 24.2 -
Earnings (loss) from operations (4.8 ) 11.8
Interest and foreign exchange 19.6 12.6
Loss before income tax and earnings from
unconsolidated affiliates (24.4 ) (0.8 )
Income tax benefit 3.8 1.4
Earnings (loss) before earnings from unconsolidated
affiliates
(20.6 ) 0.6
Earnings from unconsolidated affiliates 3.3 5.0
Net earnings (loss) (17.3 ) 5.6
Net loss attributable to noncontrolling interest 0.6 5.2
Net earnings (loss) attributable to Greenbrier $ (16.7 ) $ 10.8
Diluted earnings (loss) per common share
$ (0.51 ) $ 0.32
Performance for our segments is evaluated based on operating profit or loss.
Corporate includes selling and administrative costs not directly related to
goods and services and certain costs that are intertwined among segments
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due to our integrated business model. Management does not allocate Interest and
foreign exchange or Income tax (expense) benefit for either external or internal
reporting purposes.
Three Months Ended
November 30,
(in millions) 2022 2021
Operating profit (loss):
Manufacturing $ (3.4 ) $ 12.3
Maintenance Services 5.5 (1.1 )
Leasing & Management Services 15.6 17.2
Corporate (22.5 ) (16.6 )
$ (4.8 ) $ 11.8
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