The Greenbrier Companies
Annual Report 2012

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KGREENBRIER COMPANIES INC - GBXFiled: October 31, 2013 (period: August 31, 2013)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549-1004FORM 10-Kx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended August 31, 2013or¨ Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934for the transition period from to Commission File No. 1-13146THE GREENBRIER COMPANIES, INC.(Exact name of Registrant as specified in its charter) Oregon 93-0816972(State of Incorporation) (I.R.S. Employer Identification No.)One Centerpointe Drive, Suite 200, Lake Oswego, OR 97035(Address of principal executive offices)(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 on Which Registered)Common Stock without par value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes No X 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 theRegistrant 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 has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 informationstatements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer”, “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one)Large accelerated filer Accelerated filer X Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X Aggregate market value of the Registrant’s Common Stock held by non-affiliates as of February 28, 2013 (based on the closing price of such shares on such date) was $495,035,003.The number of shares outstanding of the Registrant’s Common Stock on October 24, 2013 was 28,073,550, without par value.DOCUMENTS INCORPORATED BY REFERENCECertain portions of the Registrant’s definitive Proxy Statement prepared in connection with the Annual Meeting of Stockholders to be held on January 8, 2014 are incorporated by reference into Parts II and III of thisReport.Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsTHE GREENBRIER COMPANIES, INC.FORM 10-KTABLE OF CONTENTS PAGE FORWARD-LOOKING STATEMENTS 1 PART I Item 1. BUSINESS 3 Item 1A. RISK FACTORS 10 Item 1B. UNRESOLVED STAFF COMMENTS 22 Item 2. PROPERTIES 22 Item 3. LEGAL PROCEEDINGS 22 Item 4. MINE SAFETY DISCLOSURES 22 PART II Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERPURCHASES OF EQUITY SECURITIES 23 Item 6. SELECTED FINANCIAL DATA 25 Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS 26 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 37 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 39 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE 83 Item 9A. CONTROLS AND PROCEDURES 83 Item 9B. OTHER INFORMATION 86 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 86 Item 11. EXECUTIVE COMPENSATION 86 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS 86 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 86 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 86 PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 87 SIGNATURES 92 CERTIFICATIONS 93 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsForward-Looking StatementsFrom time to time, The Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) or their representatives have made or may make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, asamended, including, without limitation, statements as to expectations, beliefs and strategies regarding the future. Such forward-looking statements may beincluded in, but not limited to, press releases, oral statements made with the approval of an authorized executive officer or in various filings made by us withthe Securities and Exchange Commission, including this filing on Form 10-K and in the Company’s President’s letter to stockholders that is typicallydistributed to the stockholders in conjunction with this Form 10-K and the Company’s Proxy Statement. These statements involve known and unknownrisks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any futureresults, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements rely on a number ofassumptions concerning future events and include statements relating to:• availability of financing sources and borrowing base for working capital, other business development activities, capital spending and leased railcars forsyndication (sale of railcars with lease attached);• ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms;• ability to utilize beneficial tax strategies;• ability to grow our businesses;• ability to obtain lease and sales contracts which provide adequate protection against changes in interest rates and increased costs of materials andcomponents;• ability to obtain adequate insurance coverage at acceptable rates;• ability to obtain adequate certification and licensing of products; and• short-term and long-term revenue and earnings effects of the above items.The following factors, among others, could cause actual results or outcomes to differ materially from the forward-looking statements:• fluctuations in demand for newly manufactured railcars or marine barges;• fluctuations in demand for wheels, repair & parts;• delays in receipt of orders, risks that contracts may be canceled during their term or not renewed and that customers may not purchase the amount ofproducts or services under the contracts as anticipated;• ability to maintain sufficient availability of credit facilities and to maintain compliance with or to obtain appropriate amendments to covenants undervarious credit agreements;• domestic and global economic conditions including such matters as embargoes or quotas;• U.S., Mexican and other global political or security conditions including such matters as terrorism, war, civil disruption and crime;• growth or reduction in the surface transportation industry;• ability to maintain good relationships with our labor force, third party labor providers and collective bargaining units representing our direct and indirectlabor force;• steel and specialty component price fluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations andavailability and their impact on product demand and margin;• delay or failure of acquired businesses, assets, start-up operations, or new products or services to compete successfully;• changes in product mix and the mix of revenue levels among reporting segments;• labor disputes, energy shortages or operating difficulties that might disrupt operations or the flow of cargo;• production difficulties and product delivery delays as a result of, among other matters, inefficiencies associated with the start-up of production lines orincreased production rates, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors orsuppliers;• ability to renew or replace expiring customer contracts on satisfactory terms;• ability to obtain and execute suitable contracts for leased railcars for syndication;• lower than anticipated lease renewal rates, earnings on utilization based leases or residual values for leased equipment;• discovery of defects in railcars resulting in increased warranty costs or litigation;• resolution or outcome of pending or future litigation and investigations;• natural disasters or severe weather patterns that may affect either us, our suppliers or our customers; The Greenbrier Companies 2013 Annual Report 1 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents• loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues;• competitive factors, including introduction of competitive products, new entrants into certain of our markets, price pressures, limited customer base, andcompetitiveness of our manufacturing facilities and products;• industry overcapacity and our manufacturing capacity utilization;• decreases or write-downs in carrying value of inventory, goodwill, intangibles or other assets due to impairment;• severance or other costs or charges associated with lay-offs, shutdowns, or reducing the size and scope of operations;• changes in future maintenance or warranty requirements;• ability to adjust to the cyclical nature of the industries in which we operate;• changes in interest rates and financial impacts from interest rates;• ability and cost to maintain and renew operating permits;• actions by various regulatory agencies including potential environmental remediation obligations;• changes in fuel and/or energy prices;• risks associated with our intellectual property rights or those of third parties, including infringement, maintenance, protection, validity, enforcement andcontinued use of such rights;• expansion of warranty and product support terms beyond those which have traditionally prevailed in the rail supply industry;• availability of a trained work force at a reasonable cost and with reasonable terms of employment;• availability and/or price of essential raw materials, specialties or components, including steel castings, to permit manufacture of units on order;• failure to successfully integrate acquired businesses;• discovery of previously unknown liabilities associated with acquired businesses;• failure of or delay in implementing and using new software or other technologies;• the impact of cybersecurity risks and the costs of mitigating and responding to a data security breach;• ability to replace maturing lease and management services revenue and earnings with revenue and earnings from new commercial transactions, includingnew railcar leases, additions to the lease fleet and new management services contracts;• credit limitations upon our ability to maintain effective hedging programs; and• financial impacts from currency fluctuations and currency hedging activities in our worldwide operations; and• changes in legislation and increased costs related to health care.Any forward-looking statements should be considered in light of these factors. Words such as “anticipates,” “believes,” “forecast,” “potential,” “goal,”“contemplates,” “expects,” “intends,” “plans,” “projects,” “hopes,” “seeks,” “estimates,” “could,” “would,” “will,” “may,” “can,” “designed to,”“foreseeable future” and similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performanceand are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements.Many of the important factors that will determine these results and values are beyond our ability to control or predict. You are cautioned not to put unduereliance on any forward-looking statements. Except as otherwise required by law, we do not assume any obligation to update any forward-looking statements.In assessing forward-looking statements contained herein, readers are urged to read carefully all cautionary statements contained in this Form 10-K, including,without limitation, those contained under the heading, “Risk Factors,” contained in Part I, Item 1A of this Form 10-K.All references to years refer to the fiscal years ended August 31 unless otherwise noted.The Greenbrier Companies is a registered trademark of The Greenbrier Companies, Inc. Gunderson, Maxi-Stack, Auto-Max and YSD are registered trademarks of Gunderson LLC. 2 The Greenbrier Companies 2013 Annual Report stSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART I Item 1.BUSINESSIntroductionWe are one of the leading designers, manufacturers and marketers of railroad freight car equipment in North America and Europe, a manufacturer andmarketer of marine barges in North America and a leading provider of wheel services, railcar refurbishment and parts, leasing and other services to therailroad and related transportation industries in North America.We operate an integrated business model in North America that combines freight car manufacturing, wheel services, repair and refurbishment, componentparts reconditioning, leasing and fleet management services. Our model is designed to provide customers with a comprehensive set of freight car solutionsutilizing our substantial engineering, mechanical and technical capabilities as well as our experienced commercial personnel. This model allows us to developcross-selling opportunities and synergies among our various business segments and to enhance our margins. We believe our integrated model is difficult toduplicate and provides greater value for our customers.We operate in three primary business segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services. Financial information about our businesssegments for the years ended August 31, 2013, 2012 and 2011 is located in Note 20 Segment Information to our Consolidated Financial Statements.The Greenbrier Companies, Inc., which was incorporated in Delaware in 1981, consummated a merger on February 28, 2006 with its affiliate, GreenbrierOregon, Inc., an Oregon corporation, for the sole purpose of changing its state of incorporation from Delaware to Oregon. Greenbrier Oregon survived themerger and assumed the name, The Greenbrier Companies, Inc. Our principal executive offices are located at One Centerpointe Drive, Suite 200, LakeOswego, Oregon 97035, our telephone number is (503) 684-7000 and our Internet web site is located at http://www.gbrx.com.Products and ServicesManufacturingNorth American Railcar Manufacturing - We manufacture a broad array of railcar types in North America, which includes most railcar types other thancoal cars. We have demonstrated an ability to capture high market shares in many of the car types we produce. The primary products we produce for theNorth American market are:Intermodal Railcars - We manufacture a comprehensive range of intermodal railcars. Our most important intermodal product is our articulated double-stackrailcar. The double-stack railcar is designed to transport containers stacked two-high on a single platform. An articulated double-stack railcar is composed ofup to five platforms each of which is linked by a common set of wheels and axles. Our comprehensive line of articulated and non-articulated double-stackintermodal railcars offers varying load capacities and configurations. The double-stack railcar provides significant operating and capital savings over othertypes of intermodal railcars.Tank Cars - We produce a variety of tank cars that are designed for the transportation of products such as caustic soda, urea ammonium nitrate, vegetableoils, bio-diesel, crude oil, ethanol and various other products for the North American market. We continue to expand our product lines and production rates.Automotive - We manufacture a full line of railcar equipment specifically designed for the transportation of automotive products. Our automotive offeringsinclude our proprietary Auto-Max railcar, Multi-Max auto rack and flat cars for automotive transportation. The Greenbrier Companies 2013 Annual Report 3 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConventional Railcars - We produce a wide range of boxcars, which are used in the transport of forest products, automotive, perishables, generalmerchandise and commodities. We also produce a variety of covered hopper cars for the grain, energy, sand and cement industries as well as gondolas for thesteel and metals markets and various other conventional railcar types. Our flat car products include center partition cars for the forest products industry,bulkhead flat cars and solid waste service flat cars.European Railcar Manufacturing - Our European manufacturing operation produces a variety of railcar (wagon) types, including a comprehensive line ofpressurized tank cars for liquid petroleum gas and ammonia and non-pressurized tank cars for light oil, chemicals and other products. In addition, weproduce flat cars, coil cars for the steel and metals market, coal cars for both the continental European and United Kingdom markets, gondolas, sliding wallcars and automobile transporter cars. Although no formal statistics are available for the European market, we believe we are one of the leading new freight carmanufacturers.Marine Vessel Fabrication - Our Portland, Oregon manufacturing facility, located on a deep-water port on the Willamette River, includes marine vesselfabrication capabilities. The marine facilities also increase utilization of steel plate burning and fabrication capacity providing flexibility for railcar production.United States (U.S.) coastwise law, commonly referred to as the Jones Act, requires all commercial vessels transporting merchandise between ports in the U.S.to be built, owned, operated and manned by U.S. citizens and to be registered under the U.S. flag. We manufacture a broad range of Jones Act ocean-going andriver barges for transporting merchandise between ports within the U.S. including conventional deck barges, double-hull tank barges, railcar/deck barges,barges for aggregates and other heavy industrial products and dump barges. Our primary focus is on the larger ocean-going vessels and coal carrying riverbarges although the facility has the capability to compete in other marine related products.Wheels, Repair & PartsWheel Services, Railcar Repair, Refurbishment and Component Parts Manufacturing - We believe we operate the largest independent wheel services,repair, refurbishment and component parts networks in North America, operating in 36 locations. Our wheel shops, operating in 10 locations, providecomplete wheel services including reconditioning of wheels and axles in addition to new axle machining and finishing and axle downsizing. Our network ofrailcar repair and refurbishment shops, operating in 22 locations, performs heavy railcar repair and refurbishment, as well as routine railcar maintenance. Weare actively engaged in the repair and refurbishment of railcars for third parties, as well as of our own leased and managed fleet. Our component partsfacilities, operating in 4 locations, recondition railcar cushioning units, couplers, yokes, side frames, bolsters and various other parts. We also produce roofs,doors and associated parts for boxcars.Leasing & ServicesLeasing - Our relationships with financial institutions, combined with our ownership of a lease fleet of approximately 8,600 railcars, enables us to offerflexible financing programs including operating leases and “by the mile” leases to our customers. As an equipment owner, we participate principally in theoperating lease segment of the market. The majority of our leases are “full service” leases whereby we are responsible for maintenance and administration.Maintenance of the fleet is provided, in part, through our own facilities and engineering and technical staff. Assets from our owned lease fleet are periodicallysold to take advantage of market conditions, manage risk and maintain liquidity. 4 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsManagement Services - Our management services business offers a broad array of software and services that include railcar maintenance management,railcar accounting services (such as billing and revenue collection, car hire receivable and payable administration), total fleet management (including railcartracking using proprietary software), administration and railcar remarketing. Frequently, we originate leases of railcars, which are either newly built orrefurbished by us, with railroads or shippers, and sell the railcars and attached leases to financial institutions and subsequently provide management servicesunder multi-year agreements. We currently own or provide management services for a fleet of approximately 232,000 railcars for railroads, shippers, carriers,institutional investors and other leasing and transportation companies in North America. Fleet ProfileAs of August 31, 2013 OwnedUnits ManagedUnits TotalUnits Customer Profile: Leasing Companies 423 100,111 100,534 Class I Railroads 2,643 90,006 92,649 Shipping Companies 3,626 18,413 22,039 Non-Class I Railroads 1,199 15,381 16,580 En route to Customer Location 469 – 469 Off-lease 221 – 221 Total Units 8,581 223,911 232,492 Each platform of a railcar is treated as a separate unit. Percent of owned units on lease is 97.4% with an average remaining lease term of 1.3 years. The average age of owned units is 16 years.BacklogMulti-year supply agreements are a part of rail industry practice. The following table depicts our reported third party railcar backlog in number of railcars andestimated future revenue value attributable to such backlog, at the dates shown: August 31, 2013 2012 2011 New railcar backlog units 14,400 10,700 15,400 Estimated future revenue value (in millions) $1,520 $1,200 $1,230 Each platform of a railcar is treated as a separate unit. Subject to change based on finalization of product mix.Based on current production plans, approximately 10,000 units in the August 31, 2013 backlog are scheduled for delivery in 2014. The balance of theproduction is scheduled for delivery through 2015. A portion of the orders included in backlog reflects an assumed product mix. Under terms of the orders,the exact mix will be determined in the future which may impact the dollar amount of backlog. Subsequent to year end we received new railcar orders for 1,700units valued at approximately $140 million. The new orders referenced are subject to customary documentation and completion of terms.Marine backlog as of August 31, 2013 was approximately $10 million compared to $25 million as of August 31, 2012. In addition, we were awarded a letterof intent during the fourth quarter of 2012 for 15 barges valued at $60 million subject to significant permitting and other conditions.Customer orders may be subject to cancellations or modifications and contain terms and conditions customary in the industry. In most cases, little variationhas been experienced between the quantity ordered and the quantity actually delivered. Our railcar and marine backlogs are not necessarily indicative of futureresults of operations. The Greenbrier Companies 2013 Annual Report 5 (1)(2)(1)(2)(1)(2)(1)(2)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCustomersOur customers include railroads, leasing companies, financial institutions, shippers, carriers and transportation companies. We have strong, long-termrelationships with many of our customers. We believe that our customers’ preference for high quality products, our technological leadership in developinginnovative products and competitive pricing of our railcars have helped us maintain our long-standing relationships with our customers.In 2013, revenue from two customers, TTX Company (TTX) and Union Pacific Railroad (UP), accounted for approximately 27% of total revenue, 39% ofWheels, Repair & Parts revenue and 25% of Manufacturing revenue. No other customers accounted for greater than 10% of total revenue.Raw Materials and ComponentsOur products require a supply of materials including steel and specialty components such as brakes, wheels and axles. Specialty components purchased fromthird parties represent a significant amount of the cost of most freight cars. Our customers often specify particular components and suppliers of suchcomponents. Although the number of alternative suppliers of certain specialty components has declined in recent years, there are at least two suppliers for mostsuch components.Certain materials and components are periodically in short supply which could potentially impact production at our new railcar and refurbishment facilities.In an effort to mitigate shortages and reduce supply chain costs, we have entered into strategic alliances and multi-year arrangements for the global sourcing ofcertain components, we operate a replacement parts business and we continue to pursue strategic opportunities to protect and enhance our supply chain.We periodically make advance purchases to avoid possible shortages of material due to capacity limitations of component suppliers and possible priceincreases. We do not typically enter into binding long-term contracts with suppliers because we rely on established relationships with major suppliers to ensurethe availability of raw materials. We have long-term agreements for certain specialty items to help ensure their availability.In 2013, the top ten suppliers for all inventory purchases accounted for approximately 41% of total purchases. Amsted Rail Company, Inc. accounted for 16%of total inventory purchases in 2013. No other suppliers accounted for more than 10% of total inventory purchases. The Company believes it maintains goodrelationships with its suppliers.CompetitionThere are currently six major railcar manufacturers competing in North America. We compete on the basis of quality, price, reliability of delivery, productdesign and innovation, reputation and customer service and support.Competition in the marine industry is dependent on the type of product produced. There are two principal competitors, located in the Gulf States, which buildproduct types similar to ours. We compete on the basis of experienced labor, launch ways capacity, quality, price and reliability of delivery.We believe that we are among the top five European railcar manufacturers, which maintain a combined market share of approximately 80%. European freightcar manufacturers are largely located in central and eastern Europe where labor rates are lower and work rules are more flexible.Competition in the wheels, repair and parts business is dependent on the type of product or service provided. There are many competitors in the railcar repairand refurbishment business and an increasing number of competitors in the wheel services and other parts businesses. We believe we are one of the largestnon-railroad providers of wheel services and refurbishment services. We compete primarily on the basis of quality, timeliness of delivery, customer service,location of shops, price and engineering expertise. 6 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThere are at least twenty institutions that provide railcar leasing and services similar to ours. Many of them are also customers that buy new railcars from ourmanufacturing facilities and used railcars from our lease fleet, as well as utilize our management services. More than half of these institutions have greaterresources than we do. We compete primarily on the basis of quality, price, delivery, reputation, service offerings and deal structuring ability. We believe ourstrong servicing capability and our ability to sell railcars with a lease attached (syndicate railcars), integrated with our manufacturing, repair shops, railcarspecialization and expertise in particular lease structures provide a strong competitive position.Marketing and Product DevelopmentIn North America, we utilize an integrated marketing and sales effort to coordinate relationships in our various segments. We provide our customers with adiverse range of equipment and financing alternatives designed to satisfy each customer’s unique needs, whether the customer is buying new equipment,refurbishing existing equipment or seeking to outsource the maintenance or management of equipment. These custom programs may involve a combination ofrailcar products, leasing, refurbishing and remarketing services. In addition, we provide customized maintenance management, equipment management,accounting services and proprietary software solutions.In Europe, we maintain relationships with customers through a network of country-specific sales representatives. Our engineering and technical staff worksclosely with their customer counterparts on the design and certification of railcars. Many European railroads are state-owned and are subject to EuropeanUnion regulations covering the tender of government contracts.Through our customer relationships, insights are derived into the potential need for new products and services. Marketing and engineering personnelcollaborate to evaluate opportunities and identify and develop new products. For example, we continue to expand our tank car, automotive and covered hopperproduct offerings in North America. Research and development costs incurred during the years ended August 31, 2013, 2012 and 2011 were $2.0 million,$2.0 million and $3.0 million.Patents and TrademarksWe have a number of U.S. and non-U.S. patents of varying duration, and pending patent applications, registered trademarks, copyrights and trade namesthat are important to our products and product development efforts. The protection of our intellectual property is important to our business and we have aproactive program aimed at protecting our intellectual property and the results from our research and development.Environmental MattersWe are subject to national, state and local environmental laws and regulations concerning, among other matters, air emissions, wastewater discharge, solid andhazardous waste disposal and employee health and safety. Prior to acquiring facilities, we usually conduct investigations to evaluate the environmentalcondition of subject properties and may negotiate contractual terms for allocation of environmental exposure arising from prior uses. We operate our facilities ina manner designed to maintain compliance with applicable environmental laws and regulations. Environmental studies have been conducted on certain of ourowned and leased properties that indicate additional investigation and some remediation on certain properties may be necessary.Our Portland, Oregon manufacturing facility is located adjacent to the Willamette River. We have entered into a Voluntary Cleanup Agreement with the OregonDepartment of Environmental Quality (“DEQ”) in which we agreed to conduct an investigation of whether, and to what extent, past or present operations at thePortland property may have released hazardous substances to the environment. We are also conducting groundwater remediation relating to a historical spill onthe property that preceded our ownership. The Greenbrier Companies 2013 Annual Report 7 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPortland Harbor SiteThe U.S. Environmental Protection Agency (EPA) has classified portions of the river bed of the Portland Harbor, including the portion fronting ourmanufacturing facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the “Portland Harbor Site”). We, along withmore than 140 other parties, have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letter advised us thatwe may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsible parties) as well as fornatural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and public entities, including us (the “LowerWillamette Group” or “LWG”), have signed an Administrative Order on Consent (“AOC”) to perform a remedial investigation/feasibility study (“RI/FS”) ofthe Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but are nevertheless contributing money to theeffort. The EPA-mandated RI/FS is being conducted by the LWG and has cost over $100 million during a 13-year period. We have agreed to initially bear apercentage of the total costs incurred by the LWG in connection with the investigation. Our aggregate expenditure has not been material during the 13-yearperiod. Some or all of any such outlay may be recoverable from other responsible parties. The investigation is expected to continue for at least one more year.Eighty-three parties, including the State of Oregon and the federal government, have entered into a non-judicial mediation process to try to allocate costsassociated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On April 23, 2009,the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A& C Foundry Products, Inc.et al, US District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreementsand be dismissed without prejudice, and the case has now been stayed by the court, pending completion of the RI/FS. Although, as described below, the draftfeasibility study has been submitted, the RI/FS will not be complete until the EPA approves it, which is not likely to occur until at least 2015.A draft of the remedial investigation study was submitted to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30,2012. The draft feasibility study evaluates several alternative cleanup approaches. The approaches submitted would take from 2 to 28 years with costsranging from $169 million to $1.8 billion for cleanup of the entire Portland Harbor Site, depending primarily on the selected remedial action levels. The draftfeasibility study suggests costs ranging from $9 million to $163 million for cleanup of the area of the Willamette River adjacent to our Portland, Oregonmanufacturing facility, depending primarily on the selected remedial action level.The draft feasibility study does not address responsibility for the costs of clean-up or allocate such costs among the potentially responsible parties, or defineprecise boundaries for the cleanup. Responsibility for funding and implementing the EPA’s selected cleanup will be determined after the issuance of the Recordof Decision. Based on the investigation to date, we believe that we did not contribute in any material way to the damage of natural resources in the PortlandHarbor Site and that the damage in the area of the Portland Harbor Site adjacent to our property precedes our ownership of the Portland, Oregon manufacturingfacility. Because these environmental investigations are still underway, sufficient information is currently not available to determine our liability, if any, for thecost of any required remediation of the Portland Harbor Site or to estimate a range of potential loss. Based on the results of the pending investigations andfuture assessments of natural resource damages, we may be required to incur costs associated with additional phases of investigation or remedial action, andmay be liable for damages to natural resources. In addition, we may be required to perform periodic maintenance dredging in order to continue to launchvessels from our launch ways in Portland, Oregon, on the Willamette River, and the river’s classification as a Superfund site could result in some limitationson future dredging and launch activities. Any of these matters could adversely affect our business and Consolidated Financial Statements, or the value of ourPortland property.We have also signed an Order on Consent with DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathwayto the Willamette River. Interim precautionary measures are also required in the order and those are in the process of being completed. Our aggregate expenditurehas not been material during the 13-year period. Some or all of any such outlay may be recoverable from other responsible parties. 8 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRegulationThe Federal Railroad Administration in the U.S. 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 ofAmerican Railroads (AAR) promulgates a wide variety of rules and regulations governing the safety and design of equipment, relationships among railroadsand other railcar owners with respect to railcars in interchange, and other matters. The AAR also certifies railcar builders and component manufacturers thatprovide equipment for use on North American railroads. These regulations require us to maintain our certifications with the AAR as a railcar builder andcomponent manufacturer, and products sold and leased by us in North America must meet AAR, Transport Canada, and Federal Railroad Administrationstandards.The primary regulatory and industry authorities involved in the regulation of the ocean-going barge industry are the U.S. Coast Guard, the MaritimeAdministration of the U.S. Department of Transportation, and private industry organizations such as the American Bureau of Shipping.The regulatory environment in Europe consists of a combination of European Union (EU) regulations and country specific regulations, including aharmonized set of Technical Standards for Interoperability of freight wagons throughout the EU.EmployeesAs of August 31, 2013, we had 7,959 full-time employees, consisting of 6,104 employees in Manufacturing, 1,687 in Wheels, Repair & Parts and 168employees in Leasing & Services and corporate. In Poland, 324 employees are represented by unions. At our Frontera, Mexico joint venture manufacturingfacility, 1,721 employees are represented by a union. At our Sahagun, Mexico facility, 1,393 employees are represented by a union. In addition to our ownemployees, 666 union employees work at our Sahagun, Mexico railcar manufacturing facility under our services agreement with Bombardier Transportation,Inc. At our Wheels, Repair & Parts locations, 42 employees, in Mexico, are represented by unions. We believe that our relations with our employees aregenerally good.Additional InformationWe are a reporting company and file annual, quarterly, current and special reports, proxy statements and other information with the Securities and ExchangeCommittee (SEC). Through a link on the Investor Relations section of our website, http://www.gbrx.com, we make available the following filings as soon asreasonably practicable after they are electronically filed with or furnished to the SEC. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of1934, as amended. All such filings are available free of charge. Copies of our Audit Committee Charter, Compensation Committee Charter, Nominating andCorporate Governance Committee Charter and the Company’s Corporate Governance Guidelines are also available on our web site at http://www.gbrx.com. Inaddition, each of the reports and documents listed above are available free of charge by contacting our Investor Relations Department at The GreenbrierCompanies, Inc., One Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035. The Greenbrier Companies 2013 Annual Report 9 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 1A.RISK FACTORSIn addition to the risks outlined in this annual report under the heading “Forward-Looking Statements,” as well as other comments included herein regardingrisks and uncertainties, the following risk factors should be carefully considered when evaluating our company. Our business, financial condition orfinancial results could be materially and adversely affected by any of these risks.Weak economic conditions, financial market volatility and other factors may decrease customer demand for our products and services andnegatively impact our business and results of operations.We rely upon continued demand from our customers for our products and services. Demand is dependent upon the markets for the products and servicesoffered by our customers and the strength and growth of their businesses. A number of our customers operate in cyclical markets which are susceptible tomacroeconomic downturns in the U.S. and abroad and may experience significant changes in demand over time.Weak economic conditions in the U.S. and other parts of the world in recent years have reduced demand from some of our customers for certain products andservices we provide. In Europe, the ongoing uncertainty has contributed to growing instability in the European currency and credit markets. Furtherdeterioration of European economic conditions or significant loss of value by the Euro could reduce demand for our products and services.Discord, conflict, and lack of compromise within and between the executive and legislative branches of the U.S. government relative to federalgovernment budgeting, taxation policies, government expenditures, and U.S. borrowing/debt ceiling limits could adversely affect our business andoperating results.The inability of the legislative and executive branches of the U.S. government to pass in a timely manner a federal government budget, control deficitspending, address tax revenue requirements and effectively manage short and long term U.S. government borrowing, debt ratings, and debt ceilingadjustments could negatively impact U.S. domestic and global financial markets thereby reducing demand by our customers for our products and servicesthereby reducing our revenues. Similarly, if our suppliers face challenges in obtaining credit, in selling their products, or otherwise in operating theirbusinesses, they may become unable to continue to offer the materials we purchase from them to manufacture our products. These actions could result inreductions in our revenues, increased price competition, or increased operating costs, which could adversely affect our results of operations and financialcondition.During economic downturns or a rising interest rate environment, the cyclical nature of our business results in lower demand for our productsand services and reduced revenue.Our business is cyclical. Overall economic conditions and the purchasing practices of buyers have a significant effect upon our business due to the impact ondemand for our products and services. As a result, during downturns, we could operate with a lower level of backlog and may temporarily slow down or haltproduction at some or all of our facilities. Economic conditions that result in higher interest rates increase the cost of new leasing arrangements, which couldcause some of our leasing customers to lease fewer of our railcars or demand shorter lease terms. An economic downturn or increase in interest rates mayreduce demand for our products and services, resulting in lower sales volumes, lower prices, lower lease utilization rates and decreased profits.Some of our employees belong to labor unions and strikes or work stoppages could adversely affect our operations. Union organizing efforts arein process at several of our sites, and those sites could experience disruptions in operations as a result of such activities, or if unionrepresentation is implemented at such sites and we are unable to agree with the union on reasonable employment terms, including wages, benefits,and work rules.We are a party to collective bargaining agreements with various labor unions at some of our operations. Disputes with regard to the terms of these agreements orour potential inability to negotiate acceptable contracts with these 10 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsunions in the future could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. We cannot be assured that ourrelations with our workforce will remain positive. Union organizers are actively working to organize at some of our other facilities. If our workers were toengage in a strike, work stoppage or other slowdown, or other employees were to become unionized or the terms and conditions in future labor agreements wererenegotiated, we could experience a significant disruption of our operations and higher ongoing labor costs. In addition, we could face higher labor costs in thefuture as a result of severance or other charges associated with lay-offs, shutdowns or reductions in the size and scope of our operations or due to thedifficulties of restarting our operations that have been temporarily shuttered.One of our two manufacturing facilities in Sahagun, Mexico is dependent on certain factors outside of our control. If we experience aninterruption of our manufacturing operations in Sahagun, Mexico, our results of operations may be adversely affected.We operate two manufacturing facilities in Sahagun, Mexico, one of which we own and one which is leased. In the leased facility, we depend on the third partylandlord to provide us with labor services for our operations under a services agreement. All of the labor provided by the third party is subject to collectivebargaining agreements, over which we have no control. If the third party fails to provide us with the services required by our agreement for any reason,including labor stoppages or strikes or a sale of facilities owned by the third party, our operations could be adversely affected. Additionally, we do not have anagreement to renew the lease on our leased Sahagun, Mexico, manufacturing facility, which expires in November 2014. While we continue to discuss thepotential extension of the lease, we are also planning for alternatives to replace the manufacturing capacity of such facility, including potentially throughexpanding production capacity at our owned facility in Sahagun, Mexico or at other manufacturing sites. If we are unable to obtain sufficient alternativemanufacturing capacity, and to transfer production in an efficient manner and without disrupting other operations, we could incur substantial expense andinterruption of our manufacturing activities. Any interruption of our manufacturing operations in Mexico could adversely affect our results of operations.We face aggressive competition by a concentrated group of competitors and a number of factors may influence our performance and if we areunable to compete successfully, our market share, margin and results of operations may be adversely affected.We face aggressive competition by a concentrated group of competitors in all geographic markets and in each area of our business. The railcar manufacturingand repair industry is intensely competitive and we expect it to remain so in the foreseeable future. Competitive factors, including introduction of competitiveproducts, new entrants into certain of our markets, price pressures, limited customer base and the relative competitiveness of our manufacturing facilities andproducts affect our ability to compete effectively. In addition, new technologies or the introduction of new railcars or other product offerings by our competitorscould render our products obsolete or less competitive. If we do not compete successfully, our market share, margin and results of operation may be adverselyaffected.A number of factors may influence our performance, including without limitation: fluctuations in the demand for newly manufactured railcars or marinebarges; fluctuations in demand for wheels, repair and parts; our ability to adjust to the cyclical nature of the industries in which we operate; delays in receiptof orders, risks that contracts may be canceled during their term or not renewed and that customers may not purchase the amount of products or servicesunder the contracts as anticipated; our customers may be financially unable to pay for products and services already provided; domestic and global economicconditions including such matters as embargoes or quotas; growth or reduction in the surface transportation industry; steel and specialty component pricefluctuations and availability, scrap surcharges, steel scrap prices and other commodity price fluctuations and their impact on product demand and margin;loss of business from, or a decline in the financial condition of, any of the principal customers that represent a significant portion of our total revenues;industry overcapacity and our manufacturing capacity utilization; and other risks, uncertainties and factors. If we are unfavorably affected by any of thesefactors, our market share, margin and results of operation may be adversely affected. The Greenbrier Companies 2013 Annual Report 11 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur actual results may differ significantly from our previously announced strategic initiatives.From time to time, we have released, and may continue to release information in our quarterly earnings releases, quarterly earnings conference calls, orotherwise, regarding our anticipated future performance and goals including our previously announced strategic initiative to enhance margins and improvecapital efficiency. Our actual results may differ significantly and we may not be successful in achieving the objectives outlined in our previously announcedstrategic initiatives. Failure to meet these goals could have a material adverse effect on our trading price or volume of our stock.A recent train derailment accident in Quebec, Canada could subject us to legal claims and/or result in regulatory changes that adversely impactour business, financial condition and our results of operations.On July 6, 2013, a train carrying crude oil and operated by Montreal, Main & Atlantic Railway, Inc. derailed in the town of Lac-Mégantic, Quebec, causingsevere damage and resulting in a number of human fatalities. We manufacture and lease tank cars for the transport of crude oil and other petroleum productsof the type involved in the accident (DOT 111 tank cars). Some of our competitors have been named as defendants in a class action lawsuit alleging wrongfuldeath and negligence claims, and we also could be subject to physical damage and product liability claims, as well as potential penalties and liability under theenvironmental laws and regulations of Canada and/or Quebec relating to land contamination. If we are subject to such claims and are unsuccessful inresolving them, our business and results of operations could be adversely affected. In addition, U.S., Canadian and railroad industry regulatory authoritiesare considering various proposals that would restrict or even eliminate the use of DOT 111 cars for the transportation of certain hazardous materials. We areunable to predict what regulatory changes may be made in this regard or even what time period such regulatory changes may become effective. While certainregulatory changes could result in increased levels of refurbishment and/or new tank car manufacturing activity, if we are unable to manage successfully toadapt our business to changing regulations, our business and results of operations could be adversely affected.Risks related to our operations outside of the U.S. could adversely affect our operating results.Our operations outside of the U.S. are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade, financialmarket or economic changes or instability could limit or curtail our foreign business activities and operations. Some foreign countries in which we operate haveregulatory authorities that regulate railroad safety, railcar design and railcar component part design, performance and manufacturing. If we fail to obtain andmaintain certifications of our railcars and railcar parts within the various foreign countries where we operate, we may be unable to market and sell our railcarsin those countries. In addition, unexpected changes in regulatory requirements, tariffs and other trade barriers, more stringent rules relating to labor or theenvironment, adverse tax consequences, currency and price exchange controls could limit operations and make the manufacture and distribution of ourproducts difficult. The uncertainty of the legal environment or geo-political risks in these and other areas could limit our ability to enforce our rights effectively.Because we have operations outside the U.S., we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwideanti-corruption laws. We operate in parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strictcompliance with anti-corruption laws may conflict with local customs and practices. The failure to comply with laws governing international businesspractices may result in substantial penalties and fines. Any international expansion or acquisition that we undertake could amplify these risks related tooperating outside of the U.S.Our financial performance and market value could cause future write-downs of goodwill or intangibles in future periods.We are required to perform an annual impairment review of goodwill and indefinite lived assets which could result in an impairment charge if it is determinedthat the carrying value of the asset is in excess of the fair value. We perform a goodwill impairment test annually during our third fiscal quarter. Goodwill isalso tested more frequently 12 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsif changes in circumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in themarket price of our common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made inassessing the appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be recoverable, the assets are evaluatedfor impairment. Among other things, our assumptions used in the valuation of goodwill, which relate to our Wheels, Repair & Parts segment, include growthof revenue and margins and increased cash flows over time. If actual operating results were to differ from these assumptions, it may result in an impairment ofour goodwill. A non-cash impairment charge of $76.9 million ($71.8 million, net of tax) was recorded for the year ended August 31, 2013 which relates to ourWheels, Repair & Parts segment. As of August 31, 2013, we had $57.4 million of goodwill in our Wheels, Repair & Parts segment. Future write-downs ofgoodwill and intangibles could affect certain of the financial covenants under debt instruments and could restrict our financial flexibility. In the event ofgoodwill impairment, we may have to test other intangible assets for impairment. Impairment charges to our goodwill or our indefinite lived assets wouldimpact our results of operations.A change in our product mix due to shifts in demand could have an adverse effect on our profitability.We manufacture and repair a variety of railcars. The demand for specific types of these railcars and mix of refurbishment work varies from time to time.These shifts in demand could affect our margins and could have an adverse effect on our profitability. Currently a portion of our backlog and railcar demandincludes a concentrated product mix of automotive carrying railcars and covered hoppers and tank cars used in energy related transportation. A sudden changein these markets could have an adverse effect on our profitability. For example, a change in environmental regulations, competitive pricing, pipeline capacityand other factors could reduce demand for railcars in the energy transportation industry.A failure to design or manufacture products or technologies or to achieve timely certification or market acceptance of new products ortechnologies could have an adverse effect on our profitability.We continue to introduce new railcar products and technologies, and we periodically accept orders prior to receipt of railcar certification or proof of ability tomanufacture a quality product that meets customer standards. We could be unable to successfully design or manufacture these new railcar products andtechnologies. Our inability to develop and manufacture such new products and technologies in a timely fashion and profitable manner, obtain timelycertification, or achieve market acceptance, or the existence of quality problems in our new products, could have a material adverse effect on our revenue andresults of operations and subject us to penalties, cancellation of orders and/or other damages.A prolonged decline in performance of the rail freight industry would have an adverse effect on our financial condition and results of operations.Our future success depends in part upon the performance of the rail freight industry, which in turn depends on the health of the economy. If railcar loadings,railcar and railcar components replacement rates or refurbishment rates or industry demand for our railcar products weaken or otherwise do not materialize,our financial condition and results of operations would be adversely affected.Our backlog is not necessarily indicative of the level of our future revenues.Our manufacturing backlog represents future production for which we have written orders from our customers in various periods, and estimated potentialrevenue attributable to those orders. Some of this backlog is subject to our fulfillment of certain competitive conditions. Our reported backlog may not beconverted to revenue in any particular period and some of our contracts permit cancellations without financial penalties or with limited compensation thatwould not replace lost revenue or margins. Actual revenue from such contracts may not equal our anticipated revenues based on our backlog, and therefore,our backlog is not necessarily indicative of the level of our future revenues. The Greenbrier Companies 2013 Annual Report 13 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe derive a significant amount of our revenue from a limited number of customers, the loss of or reduction of business from one or more ofwhich could have an adverse effect on our business.A significant portion of our revenue is generated from a few major customers. Although we have some long-term contractual relationships with our majorcustomers, we cannot be assured that our customers will continue to use our products or services or that they will continue to do so at historical levels. Areduction in the purchase or leasing of our products or a termination of our services by one or more of our major customers could have an adverse effect on ourbusiness and operating results.We rely on limited suppliers for certain components needed in our production. If we are not able to procure specialty components on commerciallyreasonable terms or on a timely basis, our business, financial condition and results of operations would be adversely affected.Our manufacturing operations depend in part on our ability to obtain timely deliveries of materials and components in acceptable quantities and quality fromour suppliers. In 2013, the top ten suppliers for all inventory purchases accounted for approximately 41% of total purchases. Amsted Rail Company, Inc.accounted for 16% of total inventory purchases in 2013. No other suppliers accounted for more than 10% of total inventory purchases. Certain components ofour products, particularly specialized components like castings, bolsters and trucks, are currently available from only a limited number of suppliers.Increases in the number of railcars manufactured have increased the demand for such components and strong demand may cause industry-wide shortages ifsuppliers are in the process of ramping up production or reach capacity production. Our dependence on a limited number of suppliers involves risks,including limited control over pricing, availability and delivery schedules. If any one or more of our suppliers cease to provide us with sufficient quantities ofour components in a timely manner or on terms acceptable to us, or cease to manufacture components of acceptable quality, we could incur disruptions or belimited in our production of our products and we could have to seek alternative sources for these components. We could also incur delays while we attempt tolocate and engage alternative qualified suppliers and we might be unable to engage acceptable alternative suppliers on favorable terms, if at all. Any suchdisruption in our supply of specialized components or increased costs of those components could harm our business and adversely affect our results ofoperations.Changes in the credit markets and the financial services industry could negatively impact our business, results of operations, financial conditionor liquidity.The credit markets and the financial services industry continue to experience volatility which may result in tighter availability of credit on more restrictiveterms and limit our ability to sell railcar assets to other lessors. Our liquidity, financial condition and results of operations could be negatively impacted if ourability to borrow money to finance operations, obtain credit from trade creditors, offer leasing products to our customers or sell railcar assets to other lessorswere to be impaired. In addition, it could also adversely affect our customers’ ability to purchase or pay for products from us or our suppliers’ ability toprovide us with product, either of which could negatively affect our business and results of operations.Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our financial condition and profitability.We are subject to income taxes in both the United States and foreign jurisdictions. Significant judgment is required in determining our worldwide provision forincome taxes. Changes in estimates of projected future operating results, loss of deductibility of items, recapture of prior deductions (including related tointerest on convertible notes), or changes in assumptions regarding our ability to generate future taxable income could result in significant increases to our taxexpense and liabilities that could adversely affect our financial condition and profitability. 14 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIf we or our joint ventures fail to complete capital expenditure projects on time and within budget, or if these projects, once completed, fail tooperate as anticipated, such failure could adversely affect our business, financial condition and results of operations.From time-to-time, we, or our joint ventures, undertake strategic capital projects in order to enhance, expand and/or upgrade facilities and operationalcapabilities. We are currently enhancing our manufacturing facilities in Mexico to increase our production capacity. Our ability, and our joint ventures’ ability,to complete these projects on time and within budget, and for us to realize the anticipated increased revenues or otherwise realize acceptable returns on theseinvestments or other strategic capital projects that may be undertaken is subject to a number of risks. Many of these risks are beyond our control, including avariety of market, operational, permitting, and labor related factors. In addition, the cost to implement any given strategic capital project ultimately may proveto be greater than originally anticipated. If we, or our joint ventures, are not able to achieve the anticipated results from the implementation of any of thesestrategic capital projects, or if unanticipated implementation costs are incurred, our business, financial condition and results of operations may be adverselyaffected.The timing of our asset sales and related revenue recognition could cause significant differences in our quarterly results and liquidity.We may build railcars or marine barges in anticipation of a customer order, or that are leased to a customer and ultimately planned to be sold to a third party.The difference in timing of production and the ultimate sale is subject to risk. In addition, we periodically sell railcars from our own lease fleet and the timingand volume of such sales is difficult to predict. As a result, comparisons of our manufacturing revenue, deliveries, quarterly net gain on disposition ofequipment, income and liquidity between quarterly periods within one year and between comparable periods in different years may not be meaningful andshould not be relied upon as indicators of our future performance.We could be unable to remarket leased railcars on favorable terms upon lease termination or realize the expected residual values, which couldreduce our revenue and decrease our overall return.We re-lease or sell railcars we own upon the expiration of existing lease terms. The total rental payments we receive under our operating leases do not fullyamortize the acquisition costs of the leased equipment, which exposes us to risks associated with remarketing the railcars. Our ability to remarket leasedrailcars profitably is dependent upon several factors, including, but not limited to, market and industry conditions, cost of and demand for newer models,costs associated with the refurbishment of the railcars and interest rates. Our inability to re-lease or sell leased railcars on favorable terms could result inreduced revenues and margins or net gain on disposition of equipment and decrease our overall returns.We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessfulsuccession planning could adversely affect our business.Our success depends in part on our ability to attract, retain and motivate senior management and other key employees. Achieving this objective may bedifficult due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, andthe effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retain and motivatesenior management and other key employees sufficient to maintain our current business and support our future projects. We are vulnerable to attrition amongour current senior management team and other key employees. A loss of any such personnel, or the inability to recruit and retain qualified personnel in thefuture, could have an adverse effect on our business, financial condition and results of operations. In addition, certain key members of our senior managementteam are at or nearing retirement age. If we are unsuccessful in our succession planning efforts, the continuity of our business and results of operations couldbe adversely affected. The Greenbrier Companies 2013 Annual Report 15 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsShortages of skilled labor could adversely affect our operations.We depend on skilled labor in the manufacture of railcars and marine barges, repair and refurbishment of railcars and provision of wheel services and supplyof parts. Some of our facilities are located in areas where demand for skilled laborers often exceeds supply. Shortages of some types of skilled laborers such aswelders and machine operators could restrict our ability to maintain or increase production rates, lead to production inefficiencies and increase our labor costs.Our relationships with our joint venture and alliance partners could be unsuccessful, which could adversely affect our business.We have entered into several joint venture agreements and other alliances with other companies to increase our sourcing alternatives, reduce costs, and toproduce new railcars for the North American marketplace. We may seek to expand our relationships or enter into new agreements with other companies. If ourjoint venture alliance partners are unable to fulfill their contractual obligations or if these relationships are otherwise not successful in the future, ourmanufacturing costs could increase, we could encounter production disruptions, growth opportunities could fail to materialize, or we could be required to fundsuch joint venture alliances in amounts significantly greater than initially anticipated, any of which could adversely affect our business.Our product and repair service warranties could expose us to potentially significant claims.We offer our customers limited warranties for many of our products and services. Accordingly, we may be subject to significant warranty claims in the future,such as multiple claims based on one defect repeated throughout our production or servicing process or claims for which the cost of repairing the defective partis highly disproportionate to the original cost of the part. These types of warranty claims could result in costly product recalls, customers seeking monetarydamages, significant repair costs and damage to our reputation.If warranty claims attributable to actions of third party component manufacturers are not recoverable from such parties due to their poor financial condition orother reasons, we could be liable for warranty claims and other risks for using these materials on our products.We have a significant amount of indebtedness, which could have negative consequences to us.We are significantly leveraged. As of August 31, 2013, our total debt was approximately $422.1 million, consisting of borrowings under our credit facilities,term loans, notes and capital lease obligations. Our significant indebtedness could have negative consequences to us, and could place us at a competitivedisadvantage compared to our less leveraged competitors. It may be difficult for us to satisfy our repayment and other obligations with respect to suchindebtedness, and we may not be able to refinance our existing indebtedness as it matures. Our borrowings maturing within the next year include a senior termnote with a balloon payment of $81.8 million due in March 2014 and our Mexican joint venture has a $20.0 million line of credit expiring in December 2013.Significant indebtedness may also increase our vulnerability to adverse general economic, industry or competitive developments or conditions and limit ourflexibility in planning for, or reacting to, changes in our business and the industry in which we operate. We may be limited in our ability to raise additionalcapital or obtain additional financing to fund our operations, capital expenditures or other growth initiatives, and other general corporate requirements and maybe required to dedicate a significant portion of our cash flow from operations to interest and principal payments on our indebtedness. We are more exposed tothe risk of increased interest rates as certain of our borrowings are at variable rates of interest. As a consequence of our level of indebtedness, a significantportion of our cash flow from operations may be dedicated to debt service requirements. In addition, the terms of our revolving credit facility limit our abilityto incur additional indebtedness. If we fail to comply with these covenants, a default may occur, in which case the lender could accelerate the debt. We cannotassure you that we would be able to renegotiate, refinance, restructure or otherwise obtain the necessary funds to satisfy the indebtedness or these obligations 16 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsA prolonged decline in the demand for two principal products produced at one of our North American manufacturing facilities may continue toadversely affect our results of operations.Current demand for our marine barge and intermodal railcar products, which are two of the primary products produced at one of our North Americanmanufacturing facilities, is below historic levels causing this facility to operate at low production rates. This reduced demand may limit our ability to grow,increase pricing pressure on our products, and otherwise adversely affect our financial results. We signed a letter of intent during the fourth quarter of 2012 forcertain marine manufacturing business subject to significant permitting and other conditions, but cannot be certain whether such conditions will be met.Fluctuations in the availability and price of energy, steel and other raw materials, and our fixed price contracts could have an adverse effect onour ability to manufacture and sell our products on a cost-effective basis and could adversely affect our margins and revenue of ourManufacturing and Wheels, Repair and Parts businesses.A significant portion of our business depends upon the adequate supply of steel, components and other raw materials at competitive prices and a smallnumber of suppliers provide a substantial amount of our requirements. The cost of steel and all other materials used in the production of our railcarsrepresents more than half of our direct manufacturing costs per railcar and in the production of our marine barges represents more than 30% of our directmanufacturing costs per marine barge.Our businesses also depend upon the adequate supply of energy at competitive prices. When the price of energy increases, it adversely impacts our operatingcosts and could have an adverse effect upon our ability to conduct our businesses on a cost-effective basis. We cannot be assured that we will continue to haveaccess to supplies of energy or necessary components for manufacturing railcars and marine barges. Our ability to meet demand for our products could beadversely affected by the loss of access to any of these supplies, the inability to arrange alternative access to any materials, or suppliers limiting allocation ofmaterials to us.In some instances, we have fixed price contracts which anticipate material price increases and surcharges, or contracts that contain actual or formulaic pass-through of material price increases and surcharges. However, if the price of steel or other raw materials were to fluctuate in excess of anticipated increases onwhich we have based our fixed price contracts, or if we were unable to adjust our selling prices or have adequate protection in our contracts against changes inmaterial prices, or if we are unable to reduce operating costs to offset any price increases, our margins would be adversely affected. The loss of suppliers ortheir inability to meet our price, quality, quantity and delivery requirements could have an adverse effect on our ability to manufacture and sell our productson a cost-effective basis.Decreases in the price of scrap adversely impact our Wheels, Repair & Parts margin and revenue. A portion of our Wheels, Repair & Parts business involvesscrapping steel parts and the resulting revenue from such scrap steel increases our margins and revenues. When the price of scrap steel declines, our marginsand revenues in such business therefore decrease.Fluctuations in foreign currency exchange rates could lead to increased costs and lower profitability.Outside of the U.S., we operate in Mexico, Germany and Poland, and our non-U.S. businesses conduct their operations in local currencies and other regionalcurrencies. We also source materials worldwide. Fluctuations in exchange rates may affect demand for our products in foreign markets or our costcompetitiveness and may adversely affect our profitability. Although we attempt to mitigate a portion of our exposure to changes in currency rates throughcurrency rate hedge contracts and other activities, these efforts cannot fully eliminate the risks associated with the foreign currencies. In addition, some of ourborrowings are in foreign currency, giving rise to risk from fluctuations in exchange rates. A material or adverse change in exchange rates could result insignificant deterioration of profits or in losses for us. The Greenbrier Companies 2013 Annual Report 17 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe have potential exposure to environmental liabilities, which could increase costs or have an adverse effect on results of operations.We are subject to extensive national, state, provincial and local environmental laws and regulations concerning, among other things, air emissions, waterdischarge, solid waste and hazardous substances handling and disposal and employee health and safety. These laws and regulations are complex andfrequently change. We could incur unexpected costs, penalties and other civil and criminal liability if we fail to comply with environmental laws or permitsissued to us pursuant to those laws. We also could incur costs or liabilities related to off-site waste disposal or remediating soil or groundwater contaminationat our properties, including these set forth below and in the “Environmental Matters” section of this Report. In addition, future environmental laws andregulations may require significant capital expenditures or changes to our operations.In addition to environmental, health and safety laws, the transportation of commodities by railcar raises potential risks in the event of a derailment or otheraccident. Generally, liability under existing law in the U.S. and Canada for accidents such as derailments depends on the negligence of the party. However, forcertain hazardous commodities being shipped, strict liability concepts may apply.Our Portland, Oregon manufacturing facility is located adjacent to the Willamette River. We have entered into a Voluntary Cleanup Agreement with the DEQ inwhich we agreed to conduct an investigation of whether, and to what extent, past or present operations at the Portland property may have released hazardoussubstances to the environment. We are also conducting groundwater remediation relating to a historical spill on the property which preceded our ownership.The U.S. Environmental Protection Agency (EPA) has classified portions of the river bed of the Portland Harbor, including the portion fronting theCompany’s manufacturing facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the “Portland Harbor Site”). We,along with more than 140 other parties, have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letteradvised us that we may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentially responsibleparties) as well as for natural resource damages resulting from releases of hazardous substances to the site. We are part of a group that signed anAdministrative Order on Consent (“AOC”) to perform a remedial investigation/feasibility study (“RI/FS”) of the Portland Harbor Site under EPA oversight,and several additional entities have not signed such consent, but are nevertheless contributing money to the effort. We have agreed to initially bear a percentageof the total costs incurred in connection with the investigation. The investigation is expected to continue for at least one more year. We cannot assure that anysuch costs will be recoverable from third parties.A draft of the remedial investigation study was submitted to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30,2012. The draft feasibility study evaluates several alternative cleanup approaches. The approaches submitted would take from 2 to 28 years with costsranging from $9 million to $163 million for cleanup of the area of the Willamette River adjacent to our Portland, Oregon manufacturing facility, dependingprimarily on the selected remedial action level. The draft feasibility study does not address responsibility for the costs of clean-up or allocate such costs amongpotentially responsible parties, or define precise boundaries for the cleanup. Responsibility for funding and implementing the EPA’s selected cleanup will bedetermined after the issuance of the Record of Decision.We have also signed an Order on Consent with DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathwayto the Willamette River. Interim precautionary measures are also required in the order and those are in the process of being completed. Our aggregate expenditurehas not been material during the 13-year period. Some or all of any such outlay may be recoverable from other responsible parties. However, we cannot assurethat any such costs will be recoverable from third parties.Because these environmental investigations are still underway, sufficient information is currently not available to determine our liability, if any, for the cost ofany required remediation of the Portland Harbor Site on our adjacent land or to estimate a range of potential loss. Based on the results of the pendinginvestigations and future assessments of natural resource damages, we may be required to incur costs associated with additional phases of investigation orremedial action, and may be liable for damages to natural resources. In addition, we may be 18 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrequired to perform periodic maintenance dredging in order to continue to launch vessels from our launch ways in Portland, Oregon, on the Willamette River,and the river’s classification as a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters couldadversely affect our business and Consolidated Financial Statements, or the value of our Portland property.Updates or changes to our information technology systems may result in problems that could negatively impact our business.We have information technology systems, comprising hardware, network, software, people, processes and other infrastructure that are important to theoperation of our businesses. We continue to evaluate and implement upgrades and changes to information technology systems that support substantially all ofour operating and financial functions. We could experience problems in connection with such implementations, including compatibility issues, trainingrequirements, higher than expected implementation costs and other integration challenges and delays. A significant problem with an implementation, integrationwith other systems or ongoing management and operation of our systems could negatively impact our business by disrupting operations. Such a problemcould also have an adverse effect on our ability to generate and interpret accurate management and financial reports and other information on a timely basis,which could have a material adverse effect on our financial reporting system and internal controls and adversely affect our ability to manage our business.We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks.Our business employs systems and websites that allow for the storage and transmission of proprietary or confidential information regarding our customers,employees, job applicants and other parties, including financial information, intellectual property and personal identification information. Security breachesand other disruptions could compromise our information, expose us to liability and harm our reputation and business. The steps we take to deter and mitigatethese risks may not be successful. We may not have the resources or technical sophistication to anticipate or prevent current or rapidly evolving types ofcyber-attacks. Attacks may be targeted at us, our customers, or others who have entrusted us with information. Actual or anticipated attacks may cause us toincur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts orconsultants. Advances in computer capabilities, or other technological developments may result in the technology and security measures used by us to protecttransaction or other data being breached or compromised. In addition, data and security breaches can also occur as a result of non-technical issues, includingintentional or inadvertent breach by our employees or by persons with whom we have commercial relationships. Any compromise or breach of our securitycould result in a violation of applicable privacy and other laws, legal and financial exposure, negative impacts on our customers’ willingness to transactbusiness with us and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.We could have difficulty integrating the operations of any companies that we acquire or joint ventures we enter into, which could adversely affectour results of operations.The success of our acquisition and joint venture strategy depends upon our ability to successfully complete acquisitions, to enter into joint ventures andintegrate any businesses that we acquire into our existing business. The integration of acquired business operations could disrupt our business by causingunforeseen operating difficulties, diverting management’s attention from day-to-day operations and requiring significant financial resources that wouldotherwise be used for the ongoing development of our business. The difficulties of integration could be increased by the necessity of coordinatinggeographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. In addition, wecould be unable to retain key employees or customers of the combined businesses. We could face integration issues pertaining to the internal controls andoperational functions of the acquired companies and we also could fail to realize cost efficiencies or synergies that we anticipated when selecting our acquisitioncandidates and joint ventures. Any of these items could adversely affect our results of operations. The Greenbrier Companies 2013 Annual Report 19 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAn adverse outcome in any pending or future litigation could negatively impact our business and results of operations.We are a defendant in several pending cases in various jurisdictions. If we are unsuccessful in resolving these claims, our business and results of operationscould be adversely affected. In addition, future claims that may arise relating to any pending or new matters, whether brought against us or initiated by usagainst third parties, could distract management’s attention from business operations and increase our legal and related costs, which could also negativelyimpact our business and results of operations.We could be liable for physical damage or product liability claims that exceed our insurance coverage.The nature of our business subjects us to physical damage and product liability claims, especially in connection with the repair and manufacture of productsthat carry hazardous or volatile materials. Although we maintain liability insurance coverage at commercially reasonable levels compared to similarly-sizedheavy equipment manufacturers, an unusually large physical damage or product liability claim or a series of claims based on a failure repeated throughout ourproduction process could exceed our insurance coverage or result in damage to our reputation.We could be unable to procure adequate insurance on a cost-effective basis in the future.The ability to insure our businesses, facilities and rail assets is an important aspect of our ability to manage risk. As there are only limited providers of thisinsurance to the railcar industry, there is no guarantee that such insurance will be available on a cost-effective basis in the future. In addition, we cannot assurethat our insurance carriers will be able to pay current or future claims.Any failure by us to comply with regulations imposed by federal and foreign agencies could negatively affect our financial results.Our operations and the industry we serve, including our customers, are subject to extensive regulation by governmental, regulatory and industry authoritiesand by federal and foreign agencies. These organizations establish rules and regulations for the railcar industry, including construction specifications andstandards for the design and manufacture of railcars; mechanical, maintenance and related standards; and railroad safety. New regulatory rulings andregulations from these entities could impact our financial results, demand for our products and the economic value of our assets. In addition, if we fail tocomply with the requirements and regulations of these entities, we could face sanctions and penalties that could negatively affect our financial results.Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies, could adversely affect ourfinancial results.Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Some of these policiesrequire use of estimates and assumptions that may affect the reported value of our assets or liabilities and financial results and are critical because they requiremanagement to make difficult, subjective, and complex judgments about matters that are inherently uncertain. Accounting standard setters and those whointerpret the accounting standards (such as the Financial Accounting Standards Board, the SEC, and our independent registered public accounting firm) mayamend or even reverse their previous interpretations or positions on how these standards should be applied. In some cases, we could be required to apply a newor revised standard retrospectively, resulting in the revision of prior period financial statements. Changes in accounting standards can be hard to predict andcan materially impact how we record and report our financial condition and results of operations.From time to time we may take tax positions that the Internal Revenue Service may contest.We have in the past and may in the future take tax positions that the Internal Revenue Service (IRS) may contest. We are required by an IRS regulation todisclose particular tax positions, to the IRS as part of our tax returns for that year and future years. If the IRS successfully contests a tax position that we take,we may be required to pay additional taxes, interest or fines that may adversely affect our results of operation and financial position. 20 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNatural disasters or severe weather conditions could disrupt our business and result in loss of revenue or higher expenses. Any serious disruption at any of our facilities due to hurricane, earthquake, flood, or any other natural disaster could impair our ability to use our facilitiesand have a material adverse impact on our revenues and increase our costs and expenses. If there is a natural disaster or other serious disruption at any of ourfacilities, particularly any of our Mexican facilities, it could impair our ability to adequately supply our customers, cause a significant disruption to ouroperations, cause us to incur significant costs to relocate or reestablish these functions and negatively impact our operating results. While we insure againstcertain business interruption risks, such insurance may not adequately compensate us for any losses incurred as a result of natural or other disasters.Repercussions from terrorist activities or armed conflict could harm our business.Terrorist activities, anti-terrorist efforts, and other armed conflict involving the U.S. or its interests abroad may adversely affect the U.S. and globaleconomies, potentially preventing us from meeting our financial and other obligations. In particular, the negative impacts of these events may affect theindustries in which we operate. This could result in delays in or cancellations of the purchase of our products or shortages in raw materials, parts, orcomponents. Any of these occurrences could have a material adverse impact on our financial results.Compliance with recently passed health care legislation and increases in the cost of providing health care plans to our employees may adverselyaffect our business.In March 2010, Congress passed the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act(collectively, the “Acts”). Among other things, the Acts contain provisions that will affect employer-sponsored health care plans, impose excise taxes on certainplans, and reduce the tax benefits available to employers that receive the Medicare Part D subsidy. Nationally, the cost of providing health care plans to acompany’s employees has increased at annual rates in excess of inflation. There continues to be uncertainty whether the Acts will increase the cost of employeehealth plan coverage. Continued significant annual increases in the cost of providing employee health coverage may adversely affect our business and resultsof operations.If we are unable to protect our intellectual property and prevent its improper use by third parties or if third parties assert that our products orservices infringe their intellectual property rights, our ability to compete in the market may be harmed, and our business and financial conditionmay be adversely affected.The protection of our intellectual property is important to our business. We rely on a combination of trademarks, copyrights, patents and trade secrets toprotect our intellectual property. However, these protections might be inadequate. Our pending or future trademark, copyright and patent applications might notbe approved or, if allowed, might not be sufficiently broad. If our intellectual property rights are not adequately protected we may not be able to commercializeour technologies, products or services and our competitors could commercialize our technologies, which could result in a decrease in our sales and marketshare and could materially adversely affect our business, financial condition and results of operations. Conversely, third parties might assert that ourproducts, services, or other business activities infringe their patents or other intellectual property rights. Infringement and other intellectual property claims andproceedings brought against us, whether successful or not, could result in substantial costs and harm our reputation. Such claims and proceedings can alsodistract and divert our management and key personnel from other tasks important to the success of our business. In addition, intellectual property litigation orclaims could force us to cease selling or using products that incorporate the asserted intellectual property, which would adversely affect our revenues, paysubstantial damages for past use of the asserted intellectual property or pay substantial fees to obtain a license from the holder of the asserted intellectualproperty, which license may not be available on reasonable terms, if at all. In the event of an adverse determination in an intellectual property suit orproceeding, or our failure to license essential technology or redesign our products so as not to infringe third party intellectual property rights, our sales could beharmed and our costs could increase, which could materially adversely affect our business, financial condition and results of operations. The Greenbrier Companies 2013 Annual Report 21 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 1B.UNRESOLVED STAFF COMMENTSNone. Item 2.PROPERTIESWe operate at the following primary facilities as of August 31, 2013: Description Location StatusManufacturing Segment Manufacturing facilities: Portland, Oregon Owned 2 locations in Sahagun, Mexico Leased — 1 locationOwned — 1 location Frontera, Mexico Leased 3 locations in Poland OwnedWheels, Repair & Parts SegmentWheel, Repair & Parts facilities: 33 locations in the U.S. Leased — 15 locationsOwned — 12 locationsCustomer premises — 6 locations 2 locations in Mexico Leased 1 location in Canada Customer premisesAdministrative offices: 1 location in the U.S. LeasedLeasing & Services Segment Corporate offices, railcar marketing and leasingactivities: Lake Oswego, Oregon LeasedWe believe that our facilities are in good condition and that the facilities, together with anticipated capital improvements and additions, are adequate to meet ouroperating needs for the foreseeable future. We continually evaluate our Manufacturing and Wheels, Repair & Parts facilities in order to remain competitive andto take advantage of market opportunities. Item 3.LEGAL PROCEEDINGSThere is hereby incorporated by reference the information disclosed in Note 23 to Consolidated Financial Statements, Part II, Item 8 of this Form 10-K. Item 4.MINE SAFETY DISCLOSURESNot applicable. 22 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART II Item 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OF EQUITY SECURITIESOur common stock has been traded on the New York Stock Exchange under the symbol GBX since July 14, 1994. There were approximately 437 holders ofrecord of common stock as of October 24, 2013. The following table shows the reported high and low sales prices of our common stock on the New YorkStock Exchange for the fiscal periods indicated. High Low 2013 Fourth quarter $25.33 $21.10 Third quarter $25.24 $19.85 Second quarter $22.51 $15.41 First quarter $19.19 $13.25 2012 Fourth quarter $17.60 $13.15 Third quarter $26.04 $13.10 Second quarter $26.66 $20.11 First quarter $23.79 $10.38 Payment of future dividends is at the discretion of the Board of Directors and is reviewed on a regular basis along with other programs to return capital tostockholders. Factors that may be considered in determining whether to declare a dividend may include, but are not limited to, our results of operations andfinancial condition and our expected future capital expenditures and investments.In October 2013, the Board of Directors authorized our company to repurchase up to $50 million of our company’s common stock. Under the share buybackprogram, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing andamount of purchases will be based upon market conditions, securities law limitations and other factors. The share buyback program does not obligate ourcompany to acquire any specific number of shares in any period. The share buyback program expires April 30, 2015, but may be modified, suspended ordiscontinued at any time without prior notice. The Greenbrier Companies 2013 Annual Report 23 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPerformance GraphThe following graph demonstrates a comparison of cumulative total returns for the Company’s Common Stock, the Dow Jones US Industrial TransportationIndex and the Standard & Poor’s (S&P) 500 Index. The graph assumes an investment of $100 on August 31, 2008 in each of the Company’s Common Stockand the stocks comprising the indices. Each of the indices assumes that all dividends were reinvested and that the investment was maintained to and includingAugust 31, 2013, the end of the Company’s 2013 fiscal year.The comparisons in this table are required by the SEC, and therefore, are not intended to forecast or be indicative of possible future performance of ourCommon Stock. Equity Compensation Plan InformationEquity Compensation Plan Information is hereby incorporated by reference to the “Equity Compensation Plan Information” table in Registrant’s definitiveProxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within120 days after the end of the Registrant’s year ended August 31, 2013. 24 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 6.SELECTED FINANCIAL DATAYEARS ENDED AUGUST 31, (In thousands, except unit and per share data) 2013 2012 2011 2010 2009 Statement of Operations Data Revenue: Manufacturing $1,215,734 $1,253,964 $721,102 $295,566 $462,496 Wheels, Repair & Parts 469,222 481,865 452,865 388,434 475,397 Leasing & Services 71,462 71,887 69,323 72,280 78,298 $1,756,418 $1,807,716 $1,243,290 $756,280 $1,016,191 Earnings (loss) from operations $41,651 $118,788 $67,574 $52,107 $(28,303) Net earnings (loss) attributable to Greenbrier $(11,048) $58,708 $6,466 $4,277 $(56,391) Basic earnings (loss) per common share attributable toGreenbrier: $(0.41) $2.21 $0.27 $0.23 $(3.35) Diluted earnings (loss) per common share attributableto Greenbrier: $(0.41) $1.91 $0.24 $0.21 $(3.35) Weighted average common shares outstanding: Basic 26,678 26,572 24,100 18,585 16,815 Diluted 26,678 33,718 26,501 20,213 16,815 Cash dividends paid per share $.00 $.00 $.00 $.00 $.12 Balance Sheet Data Total assets $1,289,741 $1,384,544 $1,301,655 $1,072,888 $1,048,291 Revolving notes and notes payable $422,098 $488,834 $519,479 $501,330 $541,190 Total equity $456,827 $453,645 $375,901 $297,407 $232,450 Other Operating Data New railcar units delivered 11,600 15,000 9,400 2,500 3,700 New railcar backlog (units) 14,400 10,700 15,400 5,300 13,400 New railcar backlog (value in millions) $1,520 $1,200 $1,230 $420 $1,160 Lease fleet: Units managed 223,911 219,020 215,843 225,223 217,403 Units owned 8,581 10,841 8,684 8,156 8,713 Cash Flow Data Capital expenditures: Manufacturing $37,017 $33,313 $20,016 $8,715 $9,109 Wheels, Repair & Parts 7,492 11,248 20,087 12,215 6,599 Leasing & Services 16,318 73,324 44,199 18,059 23,139 $60,827 $117,885 $84,302 $38,989 $38,847 Proceeds from sale of assets $75,338 $33,560 $18,730 $22,978 $15,555 Depreciation and amortization: Manufacturing $13,469 $11,754 $9,853 $11,061 $11,471 Wheels, Repair & Parts 12,843 13,265 11,853 11,435 11,885 Leasing & Services 15,135 17,352 16,587 15,015 14,313 $41,447 $42,371 $38,293 $37,511 $37,669 Historically, the Company has reported Net gain on disposition of leased equipment as a net amount in Revenue. The Company has changed its financialstatement presentation to now report these amounts as a separate line item captioned “Net gain on disposition of equipment”, which is a component ofoperating income below margin. This change in presentation resulted in a decrease in Revenue and corresponding increase in Net gain on disposition ofequipment of $8.2 million and $1.9 million for 2010 and 2009. Such change in presentation did not result in any change to Net earnings (loss)attributable to Greenbrier. 2013 includes a non-cash goodwill impairment charge of $71.8 million net of tax and a restructuring charge of $1.8 million net of tax. 2010 includesincome of $11.9 million net of tax for a special item related to the release of the liability associated with the 2008 de-consolidation of our former Canadiansubsidiary. 2009 includes a non-cash goodwill impairment charge of $51.0 million net of tax. 2011 includes a loss on extinguishment of debt of $9.4 million net of tax for the write-off of unamortized debt issuance costs, prepayment premiums,debt discount and other costs associated with the repayment of senior unsecured notes and certain term loans. 2010 includes a gain on extinguishment ofdebt of $1.3 million net of tax for the gain associated with the early retirement of a portion of the convertible senior notes, partially offset by the write-off ofloan fees and debt discount. 2009 includes a loss on extinguishment of debt of $0.8 million net of tax for the interest rate swap breakage fees associatedwith the voluntary prepayment of certain term loans and the acceleration of loan fees associated with the reduction in size of the North American creditfacility. 2009 backlog includes 8,500 units subject to fulfillment of certain competitive and contractual conditions and 400 units subject to certain cancellationprovisions. The Greenbrier Companies 2013 Annual Report 25 (1)(1)(2)(3)(2)(3)(2)(3)(4)(1)(2)(3)(4)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONSExecutive SummaryWe operate in three primary business segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services. These three business segments areoperationally integrated. The Manufacturing segment, operating from facilities in the United States, Mexico and Poland, produces double-stack intermodalrailcars, conventional railcars, tank cars, marine vessels and automotive railcar products. The Wheels, Repair & Parts segment performs wheel and axleservicing; railcar repair, refurbishment and maintenance activities; as well as production and reconditioning of a variety of parts for the railroad industry inNorth America. The Leasing & Services segment owns approximately 8,600 railcars and provides management services for approximately 224,000 railcarsfor railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America. We also produce rail castingsthrough an unconsolidated joint venture. Management evaluates segment performance based on margin.Multi-year supply agreements are a part of rail industry practice. Customer orders may be subject to cancellations or modifications and contain terms andconditions customary in the industry. In most cases, little variation has been experienced between the quantity ordered and the quantity actually delivered.Our total manufacturing backlog of railcar units as of August 31, 2013 was approximately 14,400 units with an estimated value of $1.52 billion compared to10,700 units with an estimated value of $1.20 billion as of August 31, 2012. Currently, the entire backlog is expected to be sold to third parties, therefore noorders in our backlog are expected to be placed into our owned lease fleet. A portion of the orders included in backlog reflects an assumed product mix. Underterms of the orders, the exact mix will be determined in the future which may impact the dollar amount of backlog. Our backlog of railcar units and marinevessels is not necessarily indicative of future results of operations. Subsequent to year end we received new railcar orders for 1,700 units valued atapproximately $140 million. The new orders referenced are subject to customary documentation and completion of terms.Marine backlog as of August 31, 2013 was approximately $10 million compared to $25 million as of August 31, 2012. In addition, during the fourth quarterof 2012 we became party to a letter of intent for 15 barges valued at $60 million subject to significant permitting and other conditions.During 2013, we implemented a restructuring plan to sell or close certain Wheels, Repair & Parts facilities to enhance margins and improve capital efficiency.Restructuring charges related to this plan were $2.7 million ($1.8 million, net of tax) for the year ended August 31, 2013. We anticipate we will incuradditional pre-tax cash restructuring charges of about $2.0 - $3.0 million over the next 2 quarters. This range does not include future non-cash gains or lossesfrom facilities reductions, as these are amounts are not presently determinable.The results of our annual goodwill impairment test during the third quarter of 2013 indicated that the carrying amount related to Wheels, Repair & Parts wasin excess of fair value. As a result, a non-cash impairment loss was recorded to the extent that the carrying amount of the reporting unit’s goodwill exceeded theimplied fair value of that goodwill. A non-cash impairment charge of $76.9 million ($71.8 million, net of tax) was recorded for the year ended August 31,2013. After the goodwill impairment charge, a balance of $57.4 million remained in goodwill related to Wheels, Repair & Parts as of August 31, 2013.In October 2013, the Board of Directors authorized our company to repurchase up to $50 million of our company’s common stock. Under the share buybackprogram, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing andamount of purchases will be based upon market conditions, securities law limitations and other factors. The share buyback program does not obligate ourcompany to acquire any specific number of shares in any period. The share buyback program expires April 30, 2015, but may be modified, suspended ordiscontinued at any time without prior notice. 26 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe operate two manufacturing facilities in Sahagun, Mexico, one of which we own and one which is leased. In September 2013, we were notified by thelandlord of our leased facility that the landlord does not intend to renew the lease following the expiration of the lease term in November 2014. While wecontinue to discuss the potential extension of the lease, we are also planning for alternatives to replace the manufacturing capacity of such facility, includingpotentially through expanding production capacity at our owned facility in Sahagun, Mexico or at other manufacturing sites.Results of OperationsThe accounting policies of the three segments in which we operate are the same as those described in the summary of significant accounting policies. Segmentperformance is evaluated based on margin. The Company’s integrated business model results in selling and administrative costs being intertwined among thesegments. Currently, Greenbrier’s management does not allocate these costs for either external or internal reporting purposes.Overview (In thousands) 2013 2012 2011 Revenue: Manufacturing $1,215,734 $1,253,964 $721,102 Wheels, Repair & Parts 469,222 481,865 452,865 Leasing & Services 71,462 71,887 69,323 1,756,418 1,807,716 1,243,290 Margin: Manufacturing 132,845 131,580 59,975 Wheels, Repair & Parts 37,721 48,324 47,416 Leasing & Services 35,807 34,516 32,140 Segment margin total 206,373 214,420 139,531 Less unallocated items: Selling and administrative 103,175 104,596 80,326 Net gain on disposition of equipment (18,072) (8,964) (8,369) Goodwill impairment 76,900 – – Restructuring charges 2,719 – – Interest and foreign exchange 22,158 24,809 36,992 Loss on extinguishment of debt – – 15,657 Earnings before income tax and earnings (loss) from unconsolidated affiliates 19,493 93,979 14,925 Income tax expense (25,060) (32,393) (3,564) Earnings (loss) before earnings (loss) from unconsolidated affiliates (5,567) 61,586 11,361 Earnings (loss) from unconsolidated affiliates 186 (416) (2,974) Net earnings (loss) (5,381) 61,170 8,387 Net earnings attributable to noncontrolling interest (5,667) (2,462) (1,921) Net earnings (loss) attributable to Greenbrier $(11,048) $58,708 $6,466 Diluted earnings (loss) per common share $(0.41) $1.91 $0.24 The decrease in revenue for the year ended August 31, 2013 was primarily the result of a lower volume of deliveries in the Manufacturing segment of ourbusiness. The increase in revenue for the year ended August 31, 2012 was primarily the result of higher levels of activity associated with the economicrecovery in the freight car market including higher railcar deliveries as a result of increased demand.The decrease in net earnings for the year ended August 31, 2013 was primarily attributable to a non-cash goodwill impairment charge of $71.8 million, net oftax and restructuring charges of $1.8 million, net of tax. These were partially offset by an increase in gain on disposition of equipment. The increase in netearnings for The Greenbrier Companies 2013 Annual Report 27 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsthe year ended August 31, 2012 was primarily attributable to an increase in manufacturing margin in 2012 and loss on extinguishment of debt recognized in2011. These factors were partially offset by higher selling and administrative costs associated with operating at higher production levels in 2012.Manufacturing SegmentManufacturing revenue was $1.216 billion, $1.254 billion and $721.1 million for the years ended August 31, 2013, 2012 and 2011. Railcar deliveries,which are the primary source of manufacturing revenue, were 11,600 units in 2013 compared to 15,000 units in 2012 and 9,400 units in 2011.Manufacturing revenue decreased $38.2 million in 2013 compared to 2012 primarily due to a lower volume of deliveries as compared to the prior year. Theselower deliveries were a result of a change in product mix to more labor intensive railcar types and lower than expected demand for certain of our products.These factors were partially offset by a higher per unit average selling price as a result of a change in product mix and an increase in marine revenue from theprior year. Manufacturing revenue increased $532.9 million in 2012 compared to 2011 primarily due to higher railcar deliveries as a result of increaseddemand and a higher per unit average selling price principally due to a change in product mix.Manufacturing margin as a percentage of revenue was 10.9% in 2013, 10.5% in 2012 and 8.3% in 2011. The increase in 2013 compared to 2012 wasprimarily the result of a favorable change in product mix and an increase in marine revenue. These factors were partially offset by inefficiencies with rampingup tank car production. The increase in 2012 compared to 2011 was primarily the result of efficiencies from operating at higher production rates and a morefavorable pricing environment. In addition, 2011 was impacted by inefficiencies as we ramped up production at idle facilities.Wheels, Repair & Parts SegmentWheels, Repair & Parts revenue was $469.2 million, $481.9 million and $452.9 million for the years ended August 31, 2013, 2012 and 2011. The $12.7million decrease in revenue in 2013 compared to 2012 was primarily the result of lower demand for wheel set replacements and a decrease in scrap metalpricing and volume. These were partially offset by an increase in demand for repair work. The $29.0 million increase in revenue in 2012 compared to 2011was primarily the result of higher sales volumes of repair and parts due to higher demand.Wheels, Repair & Parts margin as a percentage of revenue was 8.0% for 2013, 10.0% for 2012 and 10.5% for 2011. The decrease in margin as a percentage ofrevenue in 2013 compared to 2012 was primarily the result of inefficiencies from operating at lower wheel volumes and inefficiencies at certainunderperforming facilities. These were partially offset by a favorable change in parts product mix. During 2013, we recorded adjustments to certain balancesheet accounts which related to prior years’ activities related to our Mexico City facility. The results for the year ended August 31, 2013 included a charge of$1.9 million within Cost of revenue to correct for the error. 2012 included an increase in warranty and related costs associated with replacing a number ofwheel sets produced at our Mexico City wheel shop which did not conform to American Association of Railroads mounting standards. The decrease in 2012compared to 2011 was primarily the result of a change in sales mix, operating inefficiencies in repair and refurbishment as we trained new employees and anincrease in warranty and related costs associated with replacing a number of wheel sets produced at our Mexico City wheel shop as previously discussed.Leasing & Services SegmentLeasing & Services revenue was $71.5 million, $71.9 million and $69.3 million for the years ended August 31, 2013, 2012 and 2011. The $0.4 milliondecrease in revenue in 2013 compared to 2012 was primarily the result of lower average volumes of rent-producing leased railcars for syndication and adecrease in earnings on mileage utilization leases. These were partially offset by an increase in management services revenue primarily due to the addition ofnew management service agreements. The $2.6 million increase in revenue in 2012 compared to 2011 was primarily the result of an increase in the size of theowned leased fleet and higher rents earned on increased volumes of leased railcars for syndication, partially offset by the expiration of a certain managementservices contract in 2011. 28 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLeasing & Services margin as a percentage of revenue was 50.1% in 2013 compared to 48.0% in 2012 and 46.4% in 2011. The increase in 2013 compared to2012 was primarily the result of a reduction in the maintenance accrual on terminated maintenance management agreements and a receipt of a settlement on aterminated railcar lease agreement. These were partially offset by lower average volumes of rent-producing leased railcars for syndication. The increase in 2012compared to 2011 was primarily the result of more favorable lease rates and higher rents earned on increased volumes of leased railcars for syndication, whichwas partially offset by the expiration of a certain management services contract in 2011.The percentage of owned units on lease as of August 31, 2013 was 97.4% compared to 93.5% at August 31, 2012 and 95.7% at August 31, 2011.Selling and AdministrativeSelling and administrative expense was $103.2 million, or 5.9% of revenue for the year ended August 31, 2013, $104.6 million, or 5.8% of revenue for theyear ended August 31, 2012 and $80.3 million, or 6.5% of revenue, for the year ended August 31, 2011. The $1.4 million decrease in 2013 compared to 2012was primarily due to a decrease in incentive compensation costs. The $24.3 million increase in 2012 compared to 2011 was primarily due to higher employeerelated costs including incentive compensation associated with increased levels of activity and profitability. In addition, the revenue-based administrative feespaid to our joint venture partner in Mexico in 2012 increased due to higher activity levels. Revenue-based fees paid to our joint venture partner in Mexico were$5.9 million, $6.3 million and $3.1 million for the years ended August 31, 2013, 2012 and 2011.Net Gain on Disposition of EquipmentNet gain on disposition of equipment was $18.1 million, $9.0 million and $8.4 million for the years ended August 31, 2013, 2012 and 2011.The gain for the year ended August 31, 2013 consists of $19.0 million in gains realized on the disposition of leased assets, a $0.6 million other gain and a$1.5 million loss related to the sale of certain assets from our roller bearing operation in Elizabethtown, Kentucky. The entire gain for the year endedAugust 31, 2012 was realized on the disposition of leased assets. The gain for the year ended August 31, 2011 consists of $5.1 million gain realized on thedisposition of leased assets and a $3.3 million gain on insurance proceeds related to the January 2009 fire at one of our Wheels, Repair & Parts facilities. Theincrease in gains realized on disposition of leased assets for the year ended August 31, 2013 as compared to prior years reflect refinements of our leasing modelas part of our previously announced strategic initiative to liberate capital.Assets from Greenbrier’s lease fleet are periodically sold in the normal course of business in order to take advantage of market conditions and manage risk andliquidity.Goodwill ImpairmentThe results of our annual goodwill impairment test during the third quarter of 2013 indicated that the carrying amount related to Wheels, Repair & Parts werein excess of fair value. As a result, a non-cash impairment loss was recorded to the extent that the carrying amount of the reporting unit’s goodwill exceeded theimplied fair value of that goodwill. A non-cash impairment charge of $76.9 million ($71.8 million, net of tax) was recorded for the year ended August 31,2013. The primary drivers of the impairment charge were lower than expected operating results, changes in forecasted future results, accompanied by areduction in observed market multiples.Restructuring ChargesDuring 2013, we implemented a restructuring plan to sell or close certain Wheels, Repair & Parts facilities to enhance margins and improve capital efficiency.Restructuring charges related to this plan totaled $2.7 million for the year ended August 31, 2013 and consisted of employee related termination costs, contracttermination expenses and other costs. We anticipate we will incur additional pre-tax cash restructuring charges of about $2.0 - $3.0 million over the next 2quarters. This range does not include future non-cash gains or losses from facilities reductions, as these are amounts are not presently determinable. The Greenbrier Companies 2013 Annual Report 29 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInterest and Foreign ExchangeInterest and foreign exchange expense was composed of the following: (In thousands) Years ended August 31, Increase(decrease) 2013 2012 Interest and foreign exchange: Interest and other expense $19,203 $22,474 $(3,271) Accretion of convertible debt discount 2,455 3,259 (804) Foreign exchange (gain) loss 500 (924) 1,424 $22,158 $24,809 $(2,651) Interest and other expense decreased in 2013 from 2012 primarily due to lower interest expense on reduced levels of borrowings and benefit from interestaccruals associated with uncertain tax positions that expired during the year. This was partially offset by a foreign exchange gain in the prior year and a foreignexchange loss in the current year.Interest and foreign exchange expense was composed of the following: (In thousands) Years ended August 31, Increase(decrease) 2012 2011 Interest and foreign exchange: Interest and other expense $22,474 $30,155 $(7,681) Accretion of term loan debt discount – 3,564 (3,564) Accretion of convertible debt discount 3,259 3,021 238 Foreign exchange (gain) loss (924) 252 (1,176) $24,809 $36,992 $(12,183) Interest and other expense decreased in 2012 from 2011 primarily due to lower interest rates from refinancing certain indebtedness. In 2011, we repaid $235.0million of 8.375% senior unsecured loans and replaced it with $230.0 million of 3.5% convertible debt. The accretion of term loan debt discount in 2011 wasdue to the expensing of unamortized debt discount that was fully amortized in 2011.Loss on Extinguishment of DebtThe results of operations for the year ended August 31, 2011 included a loss on extinguishment of debt of $15.7 million associated with the write-off ofunamortized debt issuance costs of $2.9 million and prepayment premiums and other costs of $7.2 million due to the full retirement of $235.0 million ofsenior unsecured notes and the write-off of unamortized loan fees of $1.7 million and a debt discount of $3.9 million due to the full retirement of a $71.8million term loan.Income TaxIn 2013 our tax expense was $25.1 million on $19.5 million of pre-tax earnings. Results include a goodwill impairment charge of $76.9 million that waslargely nondeductible. Excluding the impact of the goodwill impairment charge, the effective tax rate was 30.4%. The decline from an effective tax rate of 34.5%in 2012 was primarily due to a benefit from the reversal of uncertain tax positions in 2013 and a change in the geographical mix of pre-tax earnings and lossesfrom 2012 to 2013.In 2012 our tax expense was $32.4 million on $94.0 million of pre-tax earnings for an effective tax rate of 34.5%. The fluctuation from the U.S. federalstatutory tax rate of 35% was due to the geographical mix of pre-tax earnings and losses, the change in the recognition of deferred tax assets in certain foreignjurisdictions and the 30 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsimpact of a restructuring of a foreign subsidiary for tax purposes. In addition, an income tax liability was not recorded on the noncontrolling interest earningsof $1.1 million from a consolidated subsidiary that is a “flow through entity” only taxed at the owner’s level. The increase in the effective tax rate in 2012 from2011 was primarily due to the change in geographical mix of pre-tax earnings.In 2011 our tax expense was $3.6 million on $14.9 million of pre-tax earnings for an effective tax rate of 23.9%. The fluctuation from the U.S. federalstatutory tax rate of 35% was due to the geographical mix of pre-tax earnings and losses, minimum tax requirements in certain local jurisdictions and operatingresults for certain operations with no related tax effect. In addition, an income tax liability was not recorded on the noncontrolling interest earnings of $1.9million from a consolidated subsidiary that is a “flow through entity” only taxed at the owner’s level.Earnings (Loss) from Unconsolidated AffiliatesEarnings from unconsolidated affiliates were $0.2 million for the year ended August 31, 2013 and primarily included the results of operations from ourcastings joint venture. Loss from unconsolidated affiliates was $0.4 million and $3.0 million for the years ended August 31, 2012 and 2011 and included theresults of operations from our castings joint venture and from WLR–Greenbrier Rail Inc.Net Earnings Attributable to Noncontrolling InterestThe years ended August 31, 2013, 2012 and 2011 include net earnings attributable to non-controlling interest of $5.7 million, $2.5 million and $1.9 millionwhich primarily represents our joint venture partner’s share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted forintercompany sales. The changes from year to year are primarily a result of increased sales to third parties and lower intercompany activity. The Greenbrier Companies 2013 Annual Report 31 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLiquidity and Capital Resources Years Ended August 31, (In thousands) 2013 2012 2011 Net cash provided by (used in) operating activities $104,592 $116,056 $(34,252) Net cash provided by (used in) investing activities 6,159 (88,947) (69,264) Net cash provided by (used in) financing activities (65,732) (28,794) 57,991 Effect of exchange rate changes (1,155) 5,034 (3,117) Net increase (decrease) in cash and cash equivalents $43,864 $3,349 $(48,642) We have been financed through cash generated from operations, borrowings and issuance of stock. At August 31, 2013 cash and cash equivalents was $97.4million, an increase of $43.8 million from $53.6 million at the prior year end.Cash provided by operating activities was $104.6 million and $116.1 million for the years ended August 31, 2013 and 2012 compared to cash used inoperating activities of $34.3 million for the year ended August 31, 2011. The decrease in 2013 was primarily due to a change in the timing of working capitalneeds and timing of sales of leased railcars for syndication. The increase in 2012 was primarily due to increased profitability and a change in the timing ofworking capital needs as a result of working capital management initiatives and build up of working capital in 2011 to prepare for operating at higherproduction levels in 2012. These factors were partially offset by an increase in leased railcars for syndication expected to be sold in the following year.Cash provided by (used in) investing activities primarily related to capital expenditures less proceeds from the sale of assets. Cash provided by investingactivities for the year ended August 31, 2013 was $6.2 million compared to cash used in investing activities of $88.9 million in 2012 and $69.3 million in2011.Capital expenditures totaled $60.8 million, $117.9 million and $84.3 million for the years ended August 31, 2013, 2012 and 2011. Proceeds from the sale ofassets, which primarily related to sales of railcars from our lease fleet within Leasing & Services, were approximately $75.3 million, $33.6 million and $18.7million for the years ended August 31, 2013, 2012 and 2011.Of these capital expenditures, approximately $16.3 million, $73.3 million and $44.2 million for the years ended August 31, 2013, 2012 and 2011 wereattributable to Leasing & Services operations. Leasing & Services capital expenditures for 2014 are expected to be approximately $10.0 million. Proceeds fromsales of leased railcar equipment are expected to be approximately $60.0 million for 2014. During the years ended August 31, 2013 and 2012, we transferred$6.4 million and $9.0 million, respectively from Leased railcars for syndication to Equipment on operating leases, net. We regularly sell assets from our leasefleet.Approximately $37.0 million, $33.3 million and $20.0 million of capital expenditures for the years ended August 31, 2013, 2012 and 2011 were attributable toManufacturing operations. Capital expenditures for Manufacturing are expected to be approximately $35.0 million in 2014 and primarily relate toenhancements to our manufacturing facilities.Wheels, Repair & Parts capital expenditures for the years ended August 31, 2013, 2012 and 2011 were $7.5 million, $11.2 million and $20.1 million and areexpected to be approximately $10.0 million in 2014 for maintenance and improvement of existing facilities.Cash used in financing activities was $65.7 million and $28.8 million for the years ended August 31, 2013 and 2012 and primarily relates to the retirementof debt utilizing cash from operations. Cash provided by financing activities of $58.0 million for the year ended August 31, 2011 was primarily attributed to$63.2 million in proceeds from an equity offering.In May 2013, we retired $52.9 million of our Convertible senior notes (“Notes”), due 2026. As of August 31, 2013, the remaining principal balance of theNotes was $14.9 million. 32 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSenior secured credit facilities, consisting of three components, aggregated to $358.9 million as of August 31, 2013. We had an aggregate of $303.9 millionavailable to draw down under the committed credit facilities as of August 31, 2013. This amount consists of $283.2 million available on the North Americancredit facility, $18.9 million on the European credit facilities and $1.8 million on the Mexican joint venture credit facilities as of August 31, 2013.As of August 31, 2013 a $290.0 million revolving line of credit secured by substantially all of our assets in the U.S. not otherwise pledged as security for termloans, maturing June 2016, was available to provide working capital and interim financing of equipment, principally for the U.S. and Mexicanoperations. Advances under this facility bear interest at LIBOR plus 2.25% or Prime plus 1.25% depending on the type of borrowing. Available borrowingsunder the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, as well as totaldebt to consolidated capitalization and fixed charges coverage ratios.As of August 31, 2013, lines of credit totaling $18.9 million secured by certain of our European assets, with various variable rates that range from WarsawInterbank Offered Rate (WIBOR) plus 1.3% to WIBOR plus 1.5%, were available for working capital needs of the European manufacturing operation.European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from December 2013 through June2015.As of August 31, 2013 our Mexican joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $20.0 million and issecured by certain of the joint venture’s accounts receivable and inventory. Advances under this facility bear interest at LIBOR plus 2.5%. The Mexican jointventure will be able to draw amounts available under this facility through December 2013. This line of credit expires annually and we anticipate renewing it onnormal terms prior to expiration. The second line of credit provides up to $30.0 million and is fully guaranteed by each of the joint venture partners, includingour Company. Advances under this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility throughFebruary 2015.As of August 31, 2013 outstanding borrowings under the senior secured credit facilities consisted of $6.8 million in letters of credit under the North Americancredit facility and $48.2 million outstanding under the Mexican joint venture credit facilities.The revolving and operating lines of credit, along with notes payable, contain covenants with respect to us and our various subsidiaries, the most restrictive ofwhich, among other things, limit our ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into sale leasebacktransactions; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited toloans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all our assets; and enter into new lines ofbusiness. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage.We may from time to time seek to repurchase or otherwise retire or exchange securities, including outstanding borrowings and equity securities, and take othersteps to reduce our debt or otherwise improve our balance sheet. These actions may include open market repurchases, unsolicited or solicited privatelynegotiated transactions or other retirements, repurchases or exchanges. Such repurchases or exchanges, if any, will depend on a number of factors, including,but not limited to, prevailing market conditions, trading levels of our debt, our liquidity requirements and contractual restrictions, if applicable.In November 2011, affiliates of WL Ross & Co. LLC (WL Ross) sold 1,482,341 shares of our common stock and in July 2013, sold 431,200 shares of ourcommon stock. The shares sold were acquired by the cashless net exercise of warrants for purchase of our common stock. The warrants were issued in 2009in connection with a term loan to Greenbrier that was repaid in June 2011. As of August 31, 2013, there are no remaining warrants outstanding to purchase ourcommon stock. The Greenbrier Companies 2013 Annual Report 33 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe have operations in Mexico and Poland that conduct business in their local currencies as well as other regional currencies. To mitigate the exposure totransactions denominated in currencies other than the functional currency, we enter into foreign currency forward exchange contracts with established financialinstitutions to protect the margin on a portion of foreign currency sales in firm backlog primarily in Euro. No provision has been made for credit loss due tocounterparty non-performance.As of August 31, 2013, the Mexican joint venture had $50.4 million of third party debt, of which we have guaranteed approximately $40.2 million. Inaddition, we, along with our joint venture partner, have committed to contributing $10.0 million to fund the capital expenditures to expand productioncapacity, of which we and our joint venture partner will each contribute 50%. These amounts will be contributed at various intervals from May 31, 2012 toOctober 31, 2013. As of August 31, 2013, we and our joint venture partner have each contributed $4.6 million.In accordance with customary business practices in Europe, we have $2.2 million in bank and third party warranty and performance guarantee facilities as ofAugust 31, 2013. To date no amounts have been drawn under these guarantee facilities.We expect existing funds and cash generated from operations, together with proceeds from financing activities including borrowings under existing creditfacilities and long-term financings, to be sufficient to fund working capital needs, planned capital expenditures and expected debt repayments for the nexttwelve months.The following table shows our estimated future contractual cash obligations as of August 31, 2013: Years Ending August 31, (In thousands) Total 2014 2015 2016 2017 2018 Thereafter Notes payable $373,889 $85,147 $42,620 $15,465 $437 $230,220 $– Interest 44,678 11,280 8,779 8,455 8,088 8,076 – Revolving notes 48,209 48,209 – – – – – Operating leases 20,008 6,710 3,435 2,393 2,184 1,620 3,666 Railcar leases 12,044 5,720 4,867 940 517 – – Other 1,103 880 162 57 4 – – $501,108 $158,888 $60,098 $27,310 $11,230 $239,916 $3,666 A portion of the estimated future cash obligation relates to interest on variable rate borrowings.Due to uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits at August 31, 2013, we are unable to estimatethe period of cash settlement with the respective taxing authority. Therefore, approximately $0.8 million in uncertain tax positions have been excluded from thecontractual table above. See Note 19 to the Consolidated Financial Statements for a discussion on income taxes.Off Balance Sheet ArrangementsWe do not currently have off balance sheet arrangements that have or are likely to have a material current or future effect on our Consolidated FinancialStatements.Critical Accounting Policies and EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgment on the part of managementto arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets, liabilities, revenue andexpenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within the financial statements.Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from those estimates. 34 The Greenbrier Companies 2013 Annual Report (1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIncome taxes - For financial reporting purposes, income tax expense is estimated based on planned tax return filings. The amounts anticipated to be reported inthose filings may change between the time the financial statements are prepared and the time the tax returns are filed. Further, because tax filings are subject toreview by taxing authorities, there is also the risk that a position taken in preparation of a tax return may be challenged by a taxing authority. If the taxingauthority is successful in asserting a position different than that taken by us, differences in tax expense or between current and deferred tax items may arise infuture periods. Such differences, which could have a material impact on our financial statements, would be reflected in the financial statements whenmanagement considers them probable of occurring and the amount is reasonably estimable. Valuation allowances reduce deferred tax assets to an amount thatwill more likely than not be realized. Our estimates of the realization of deferred tax assets is based on the information available at the time the financialstatements are prepared and may include estimates of future income and other assumptions that are inherently uncertain.Maintenance obligations - We are responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenance obligationsdefined in the underlying lease or management agreement. The estimated maintenance liability is based on maintenance histories for each type and age ofrailcar. These estimates involve judgment as to the future costs of repairs and the types and timing of repairs required over the lease term. As we cannot predictwith certainty the prices, timing and volume of maintenance needed in the future on railcars under long-term leases, this estimate is uncertain and could bematerially different from maintenance requirements. The liability is periodically reviewed and updated based on maintenance trends and known future repairor refurbishment requirements. These adjustments could be material due to the inherent uncertainty in predicting future maintenance requirements.Warranty accruals - Warranty costs to cover a defined warranty period are estimated and charged to operations. The estimated warranty cost is based onhistorical warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historicalinformation for similar product types. These estimates are inherently uncertain as they are based on historical data for existing products and judgment for newproducts. If warranty claims are made in the current period for issues that have not historically been the subject of warranty claims and were not taken intoconsideration in establishing the accrual or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense mayexceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than estimates. The warranty accrual is periodicallyreviewed and updated based on warranty trends. However, as we cannot predict future claims, the potential exists for the difference in any one reporting periodto be material.Environmental costs - At times we may be involved in various proceedings related to environmental matters. We estimate future costs for knownenvironmental remediation requirements and accrue for them when it is probable that we have incurred a liability and the related costs can be reasonablyestimated based on currently available information. If further developments or resolution of an environmental matter result in facts and circumstances that aresignificantly different than the assumptions used to develop these reserves, the accrual for environmental remediation could be materially understated oroverstated. Adjustments to these liabilities are made when additional information becomes available that affects the estimated costs to study or remediate anyenvironmental issues or when expenditures for which reserves are established are made. Due to the uncertain nature of estimating potential environmentalmatters, there can be no assurance that we will not become involved in future litigation or other proceedings or, if we were found to be responsible or liable inany litigation or proceeding, that such costs would not be material to us.Revenue recognition - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, theprice is fixed or determinable and collectability is reasonably assured.Railcars are generally manufactured, repaired or refurbished and wheels and parts produced under firm orders from third parties. Revenue is recognized whenthese products or services are completed, accepted by an unaffiliated customer and contractual contingencies removed. Certain leases are operated under carhire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement. Car hire revenue is reported from athird party source two months in arrears; however, such revenue The Greenbrier Companies 2013 Annual Report 35 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsis accrued in the month earned based on estimates of use from historical activity and is adjusted to actual as reported. These estimates are inherently uncertainas they involve judgment as to the estimated use of each railcar. Adjustments to actual have historically not been significant. Revenues from construction ofmarine barges are either recognized on the percentage of completion method during the construction period or on the completed contract method based on theterms of the contract. Under the percentage of completion method, judgment is used to determine a definitive threshold against which progress towardscompletion can be measured to determine timing of revenue recognition.We sell railcars with leases attached to financial investors. In addition we will often perform management or maintenance services at market rates for theserailcars. Pursuant to the guidance in ASC 840-20-40, we evaluate the terms of any remarketing agreements and any contractual provisions that representretained risk and the level of retained risk based on those provisions. We apply a 10% threshold to determine whether the level of retained risk exceeds 10% ofthe individual fair value of the railcars delivered. For any contracts with multiple elements (i.e. railcars, maintenance, management services, etc) we allocaterevenue among the deliverables primarily based upon objective and reliable evidence of the fair value of each element in the arrangement. If objective andreliable evidence of fair value of any element is not available, we will use the element’s estimated selling price for purposes of allocating the total arrangementconsideration among the elements.Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assetsare evaluated for impairment. If the forecast undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reduce thecarrying value of the assets to fair value is recognized in the current period. These estimates are based on the best information available at the time of theimpairment and could be materially different if circumstances change. If the forecast undiscounted future cash flows exceeded the carrying amount of theassets it would indicate that the assets were not impaired.Goodwill and acquired intangible assets - We periodically acquire businesses in purchase transactions in which the allocation of the purchase price mayresult in the recognition of goodwill and other intangible assets. The determination of the value of such intangible assets requires management to makeestimates and assumptions. These estimates affect the amount of future period amortization and possible impairment charges.Goodwill and indefinite-lived intangible assets are tested for impairment annually during the third quarter. Goodwill is also tested more frequently if changes incircumstances or the occurrence of events indicates that a potential impairment exists. When changes in circumstances, such as a decline in the market priceof our common stock, changes in demand or in the numerous variables associated with the judgments, assumptions and estimates made in assessing theappropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be recoverable, the assets are evaluated for impairment.Among other things, our assumptions used in the valuation of goodwill include growth of revenue and margins, market multiples, discount rates andincreased cash flows over time. If actual operating results were to differ from these assumptions, it may result in an impairment of our goodwill.The provisions of Accounting Standards Codification (ASC) 350, Intangibles—Goodwill and Other, require that we perform a two-step impairment test ongoodwill. In the first step, we compare the fair value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on aweighting of income and market approaches. Under the income approach, we calculate the fair value of a reporting unit based on the present value of estimatedfuture cash flows. Under the market approach, we estimate the fair value based on observed market multiples for comparable businesses. The second step ofthe goodwill impairment test is required only in situations where the carrying value of the reporting unit exceeds its fair value as determined in the first step. Inthe second step we would compare the implied fair value of goodwill to its carrying value. The implied fair value of goodwill is determined by allocating thefair value of a reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fairvalue of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amounts assigned to itsassets and liabilities is the implied fair value of goodwill. An impairment loss is recorded to the extent that the carrying amount of the reporting unit goodwillexceeds the implied fair value of that goodwill. A non-cash impairment charge of $76.9 million ($71.8 million, net of tax) was recorded for the 36 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsyear ended August 31, 2013 which relates to our Wheels, Repair & Parts segment. The goodwill balance as of August 31, 2013 of $57.4 million relates to theWheels, Repair & Parts segment.New Accounting PronouncementsSee Note 2 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKForeign Currency Exchange RiskWe have operations in Mexico and Poland that conduct business in their local currencies as well as other regional currencies. To mitigate the exposure totransactions denominated in currencies other than the functional currency of each entity, we enter into foreign currency forward exchange contracts to protectthe margin on a portion of forecast foreign currency sales. At August 31, 2013, $53.4 million of forecast sales in Europe were hedged by foreign exchangecontracts. Because of the variety of currencies in which purchases and sales are transacted and the interaction between currency rates, it is not possible topredict the impact a movement in a single foreign currency exchange rate would have on future operating results.In addition to exposure to transaction gains or losses, we are also exposed to foreign currency exchange risk related to the net asset position of our foreignsubsidiaries. At August 31, 2013, net assets of foreign subsidiaries aggregated $51.6 million and a 10% strengthening of the U.S. dollar relative to the foreigncurrencies would result in a decrease in equity of $5.2 million, or 1.2% of Total equity Greenbrier. This calculation assumes that each exchange rate wouldchange in the same direction relative to the U.S. dollar.Interest Rate RiskWe have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $41.6 million of variable rate debt to fixed ratedebt. As a result, we are exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At August 31, 2013,68% of our outstanding debt has fixed rates and 32% has variable rates. At August 31, 2013, a uniform 10% increase in interest rates would result inapproximately $0.2 million of additional annual interest expense. The Greenbrier Companies 2013 Annual Report 37 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Independent Registered Public Accounting FirmThe Board of Directors and StockholdersThe Greenbrier Companies, Inc.We have audited the accompanying consolidated balance sheets of The Greenbrier Companies, Inc. and subsidiaries (the “Company”) as of August 31, 2013and 2012 and the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the years in the three-yearperiod ended August 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to expressan opinion on these consolidated financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The GreenbrierCompanies, Inc. and subsidiaries as of August 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended August 31, 2013, in conformity with U.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal controlover financial reporting as of August 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO), and our report dated October 31, 2013 expressed an unqualified opinion on theeffectiveness of the Company’s internal control over financial reporting./s/ KPMG LLPPortland, OregonOctober 31, 2013 38 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAConsolidated Balance SheetsAS OF AUGUST 31, (In thousands) 2013 2012 Assets Cash and cash equivalents $97,435 $53,571 Restricted cash 8,807 6,277 Accounts receivable, net 154,848 146,326 Inventories 316,783 316,741 Leased railcars for syndication 68,480 97,798 Equipment on operating leases, net 305,468 362,968 Property, plant and equipment, net 201,533 182,429 Goodwill 57,416 137,066 Intangibles and other assets, net 78,971 81,368 $1,289,741 $1,384,544 Liabilities and Equity Revolving notes $48,209 $60,755 Accounts payable and accrued liabilities 315,938 329,508 Deferred income taxes 86,040 95,363 Deferred revenue 8,838 17,194 Notes payable 373,889 428,079 Commitments and contingencies (Notes 22 & 23) Equity:Greenbrier Preferred stock - without par value; 25,000 shares authorized; none outstanding – – Common stock - without par value; 50,000 shares authorized; 28,084 and 27,143 outstanding at August 31, 2013and 2012 – – Additional paid-in capital 259,864 252,256 Retained earnings 174,842 185,890 Accumulated other comprehensive loss (6,504) (6,369) Total equity Greenbrier 428,202 431,777 Noncontrolling interest 28,625 21,868 Total equity 456,827 453,645 $1,289,741 $1,384,544 The accompanying notes are an integral part of these financial statements. The Greenbrier Companies 2013 Annual Report 39 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConsolidated Statements of OperationsYEARS ENDED AUGUST 31, (In thousands, except per share amounts) 2013 2012 2011 Revenue Manufacturing $1,215,734 $1,253,964 $721,102 Wheels, Repair & Parts 469,222 481,865 452,865 Leasing & Services 71,462 71,887 69,323 1,756,418 1,807,716 1,243,290 Cost of revenue Manufacturing 1,082,889 1,122,384 661,127 Wheels, Repair & Parts 431,501 433,541 405,449 Leasing & Services 35,655 37,371 37,183 1,550,045 1,593,296 1,103,759 Margin 206,373 214,420 139,531 Selling and administrative 103,175 104,596 80,326 Net gain on disposition of equipment (18,072) (8,964) (8,369) Goodwill impairment 76,900 – – Restructuring charges 2,719 – – Earnings from operations 41,651 118,788 67,574 Other costs Interest and foreign exchange 22,158 24,809 36,992 Loss on extinguishment of debt – – 15,657 Earnings before income tax and earnings (loss) from unconsolidated affiliates 19,493 93,979 14,925 Income tax expense (25,060) (32,393) (3,564) Earnings (loss) before earnings (loss) from unconsolidated affiliates (5,567) 61,586 11,361 Earnings (loss) from unconsolidated affiliates 186 (416) (2,974) Net earnings (loss) (5,381) 61,170 8,387 Net earnings attributable to noncontrolling interest (5,667) (2,462) (1,921) Net earnings (loss) attributable to Greenbrier $(11,048) $58,708 $6,466 Basic earnings (loss) per common share: $(0.41) $2.21 $0.27 Diluted earnings (loss) per common share: $(0.41) $1.91 $0.24 Weighted average common shares: Basic 26,678 26,572 24,100 Diluted 26,678 33,718 26,501 The accompanying notes are an integral part of these financial statements. 40 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConsolidated Statements of Comprehensive Income (Loss)YEARS ENDED AUGUST 31, (In thousands) 2013 2012 2011 Net earnings (loss) $(5,381) $61,170 $8,387 Other comprehensive income (loss) Translation adjustment 1,056 (4,168) 2,205 Reclassification of derivative financial instruments recognized in net earnings (loss) (561) 4,988 (1,029) Unrealized gain (loss) on derivative financial instruments (399) 708 (1,861) Other (net of tax effect) (203) (130) (6) (107) 1,398 (691) Comprehensive income (loss) (5,488) 62,568 7,696 Comprehensive income attributable to noncontrolling interest (5,695) (2,334) (1,921) Comprehensive income (loss) attributable to Greenbrier $(11,183) $60,234 $5,775 Net of tax of effect of $0.3 million, $1.3 million and $0.7 million for the years ended August 31, 2013, 2012 and 2011. Net of tax of effect of $0.2 million, $0.3 million and $1.0 million for the years ended August 31, 2013, 2012 and 2011.The accompanying notes are an integral part of these financial statements. The Greenbrier Companies 2013 Annual Report 41 (1)(2)(1)(2)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConsolidated Statements of Equity Attributable to Greenbrier (In thousands) CommonStockShares AdditionalPaid-inCapital RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) TotalAttributableto Greenbrier Attributable toNoncontrollingInterest TotalEquity Balance September 1, 2010 21,875 172,426 120,716 (7,204) 285,938 11,469 297,407 Net earnings – – 6,466 – 6,466 1,921 8,387 Other comprehensive loss, net (691) (691) – (691) Noncontrolling interest adjustments – – – – – 938 938 Net proceeds from equity offering 3,000 62,760 – – 62,760 – 62,760 Restricted stock awards (net of cancellations and expense) 306 7,197 – – 7,197 – 7,197 Unamortized restricted stock – (7,197) – – (7,197) – (7,197) Restricted stock amortization – 7,073 – – 7,073 – 7,073 Stock options exercised 5 27 – – 27 – 27 Balance August 31, 2011 25,186 242,286 127,182 (7,895) 361,573 14,328 375,901 Net earnings – – 58,708 – 58,708 2,462 61,170 Other comprehensive income (loss), net – – – 1,526 1,526 (128) 1,398 Investment by joint venture partner – – – – – 1,362 1,362 Noncontrolling interest adjustments – – – – – 3,844 3,844 Restricted stock awards (net of cancellations and expense) 461 9,392 – – 9,392 – 9,392 Unamortized restricted stock – (9,392) – – (9,392) – (9,392) Restricted stock amortization – 8,343 – – 8,343 – 8,343 Warrants exercised 1,496 – – – – – – Excess tax benefit from restricted stock awards – 1,627 – – 1,627 – 1,627 Balance August 31, 2012 27,143 $252,256 $185,890 $(6,369) $431,777 $21,868 $453,645 Net earnings (loss) – – (11,048) – (11,048) 5,667 (5,381) Other comprehensive income (loss), net – – – (135) (135) 28 (107) Noncontrolling interest adjustments – – – – – (2,144) (2,144) Investment by joint venture partner – – – – – 3,206 3,206 Restricted stock awards (net of cancellations and expense) 27 8,913 – – 8,913 – 8,913 Unamortized restricted stock – (8,921) – – (8,921) – (8,921) Restricted stock amortization – 6,716 – – 6,716 – 6,716 Excess tax benefit from restricted stock awards – 900 – – 900 – 900 Warrants exercised 914 – – – – – – Balance August 31, 2013 28,084 $259,864 $174,842 $(6,504) $428,202 $28,625 $456,827 The accompanying notes are an integral part of these financial statements. 42 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConsolidated Statements of Cash FlowsYEARS ENDED AUGUST 31, (In thousands) 2013 2012 2011 Cash flows from operating activities: Net earnings (loss) $(5,381) $61,170 $8,387 Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Deferred income taxes (9,662) 11,617 2,399 Depreciation and amortization 41,447 42,371 38,293 Net gain on disposition of equipment (18,072) (8,964) (5,121) Accretion of debt discount 2,455 3,259 6,583 Stock based compensation expense 6,302 8,757 7,073 Goodwill impairment 76,900 – – Loss on extinguishment of debt (non-cash portion) – – 8,453 Other (1,055) 4,905 (311) Decrease (increase) in assets: Accounts receivable (7,323) 37,763 (96,552) Inventories 19,045 3,709 (116,866) Leased railcars for syndication 22,881 (76,071) (20,839) Other 969 – 8,863 Increase (decrease) in liabilities: Accounts payable and accrued liabilities (15,429) 16,236 130,673 Deferred revenue (8,485) 11,304 (5,287) Net cash provided by (used in) operating activities 104,592 116,056 (34,252) Cash flows from investing activities: Proceeds from sales of assets 75,338 33,560 18,730 Capital expenditures (60,827) (117,885) (84,302) Decrease (increase) in restricted cash (2,530) (4,164) 412 Investment in and advances to unconsolidated affiliates (2,240) (506) (2,330) Other (3,582) 48 (1,774) Net cash provided by (used in) investing activities 6,159 (88,947) (69,264) Cash flows from financing activities: Net changes in revolving notes with maturities of 90 days or less (16,396) (57,302) 71,625 Proceeds from revolving notes with maturities longer than 90 days 38,177 63,773 25,159 Repayments of revolving notes with maturities longer than 90 days (34,966) (33,934) (10,000) Proceeds from issuance of notes payable 2,186 2,750 231,250 Debt issuance costs – – (11,469) Repayments of notes payable (58,831) (7,070) (311,360) Proceeds from equity offering – – 63,180 Expenses from equity offering – – (420) Excess tax benefit from restricted stock awards 900 1,627 – Investment by joint venture partner 3,206 1,362 – Other (8) – 26 Net cash provided by (used in) financing activities (65,732) (28,794) 57,991 Effect of exchange rate changes (1,155) 5,034 (3,117) Increase (decrease) in cash and cash equivalents 43,864 3,349 (48,642) Cash and cash equivalents Beginning of period 53,571 50,222 98,864 End of period $97,435 $53,571 $50,222 Cash paid during the period for: Interest $14,964 $12,737 $27,872 Income taxes, net $29,680 $8,601 $677 Non-cash activity Transfer of Leased railcars for syndication to Equipment on operating leases $6,437 $8,963 $– Transfer of Equipment on operating leases to Inventories $17,826 $– $– Transfer of Property, plant and equipment, net to Intangibles and other assets, net $1,856 $– $– The accompanying notes are an integral part of these financial statements. The Greenbrier Companies 2013 Annual Report 43 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNotes to Consolidated Financial StatementsNote 1 - Nature of OperationsThe Greenbrier Companies, Inc. and its subsidiaries (Greenbrier or the Company) currently operate in three primary business segments: Manufacturing;Wheels, Repair & Parts; and Leasing & Services. The three business segments are operationally integrated. With operations in the United States (U.S.),Mexico and Poland, the Manufacturing segment produces double-stack intermodal railcars, conventional railcars, tank cars and marine vessels. The Wheels,Repair & Parts segment performs railcar repair, refurbishment and maintenance activities in North America as well as wheel and axle servicing andproduction of a variety of parts for the railroad industry. The Leasing & Services segment owns approximately 8,600 railcars and provides managementservices for approximately 224,000 railcars for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in NorthAmerica. Greenbrier also produces railcar castings through an unconsolidated joint venture.Note 2 - Summary of Significant Accounting PoliciesPrinciples of consolidation - The financial statements include the accounts of the Company and its subsidiaries in which it has a controlling interest. Allintercompany transactions and balances are eliminated upon consolidation.Unclassified Balance Sheet - The balance sheets of the Company are presented in an unclassified format as a result of significant leasing activities for whichthe current or non-current distinction is not relevant. In addition, the activities of the Manufacturing; Wheels, Repair & Parts; and Leasing & Servicessegments are so intertwined that in the opinion of management, any attempt to separate the respective balance sheet categories would not be meaningful andmay lead to the development of misleading conclusions by the reader.Foreign currency translation - Certain operations outside the U.S., primarily in Poland, prepare financial statements in currencies other than the U.S. dollar.Revenues and expenses are translated at average exchange rates for the year, while assets and liabilities are translated at year-end exchange rates. Translationadjustments are accumulated as a separate component of equity in other comprehensive income (loss). The foreign currency translation adjustment balanceswere $4.9 million, $6.0 million and $1.9 million as of August 31, 2013, 2012 and 2011.Cash and cash equivalents - Cash may temporarily be invested primarily in money market funds. All highly-liquid investments with a maturity of threemonths or less at the date of acquisition are considered cash equivalents.Restricted cash - Restricted cash relates to amounts held in restricted accounts to support a target minimum rate of return as part of an agreement furtherdescribed in Note 26 – Variable Interest Entities and a pass through account for activity related to management services provided for certain third partycustomers.Accounts receivable - Accounts receivable are stated net of allowance for doubtful accounts of $3.9 million and $3.5 million as of August 31, 2013 and 2012. As of August 31, (In thousands) 2013 2012 2011 Allowance for doubtful accounts Balance at beginning of period $3,525 $3,913 $3,931 Additions, net of reversals 543 641 351 Usage (285) (663) (673) Currency translation effect 111 (366) 304 Balance at end of period $3,894 $3,525 $3,913 Inventories - Inventories are valued at the lower of cost or market primarily using the first-in first-out method. Work-in-process includes material, labor andoverhead.Leased railcars for syndication - Leased railcars for syndication consist of newly-built railcars manufactured at one of the Company’s facilities or railcarspurchased from a third party, which have been placed on lease to a 44 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscustomer and which the Company intends to sell to an investor with the lease attached. These railcars are not depreciated and are generally anticipated to besold within six months of delivery of the last railcar or six months from when the Company acquires the railcar from a third party. The Company does notbelieve any economic value of a railcar is lost in the first six months; therefore the Company does not depreciate these assets. In the event the railcars are notsold, the railcars are transferred to Equipment on operating leases and depreciated.Equipment on operating leases, net - Equipment on operating leases is stated net of accumulated depreciation. Depreciation to estimated salvage value isprovided on the straight-line method over the estimated useful lives of up to thirty-five years. Management periodically reviews salvage value estimates basedon current scrap prices and what the Company expects to receive upon disposal.Property, plant and equipment - Property, plant and equipment is stated at cost net of accumulated depreciation. Depreciation is provided on the straight-linemethod over estimated useful lives which are as follows: Depreciable Life Buildings and improvements 10 – 25 years Machinery and equipment 3 – 15 years Other 3 – 7 years Goodwill - Goodwill is recorded when the purchase price of an acquisition exceeds the fair market value of the net assets acquired. Goodwill is not amortizedand is tested for impairment at least annually and more frequently if material changes in events or circumstances arise. This testing compares carrying valuesto fair values and if the carrying value of these assets is in excess of fair value, the carrying value is reduced to the implied fair value.Intangible and other assets, net - Intangible assets are recorded when a portion of the purchase price of an acquisition is allocated to assets such as customercontracts and relationships, trade names, certifications and backlog. Intangible assets with finite lives are amortized using the straight line method over theirestimated useful lives and include the following: trade names, 5 years; and long-term customer agreements, 5 to 20 years. Other assets include loan fees anddebt acquisition costs which are capitalized and amortized as interest expense over the life of the related borrowings.Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived assets may not be recoverable, the assetsare evaluated for impairment. If the forecasted undiscounted future cash flows are less than the carrying amount of the assets, an impairment charge to reducethe carrying value of the assets to estimated realizable value is recognized in the current period. No impairment was recorded in the years ended August 31,2013, 2012 and 2011.Maintenance obligations - The Company is responsible for maintenance on a portion of the managed and owned lease fleet under the terms of maintenanceobligations defined in the underlying lease or management agreement. The estimated liability is based on maintenance histories for each type and age of railcar.The liability, included in Accounts payable and accrued liabilities, is reviewed periodically and updated based on maintenance trends and known future repairor refurbishment requirements.Warranty accruals - Warranty costs are estimated and charged to operations to cover a defined warranty period. The estimated warranty cost is based onhistory of warranty claims for each particular product type. For new product types without a warranty history, preliminary estimates are based on historicalinformation for similar product types. The warranty accruals, included in Accounts payable and accrued liabilities, are reviewed periodically and updatedbased on warranty trends.Income taxes - The liability method is used to account for income taxes. Deferred income taxes are provided for the temporary effects of differences betweenassets and liabilities recognized for financial statement and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount thatwill more likely than not be realized. As a result, we recognize liabilities for uncertain tax positions based on whether evidence indicates that it is more likelythan not that the position will be sustained on audit. It is inherently difficult and subjective to estimate such amounts, as this requires us to estimate theprobability of various possible outcomes. The Greenbrier Companies 2013 Annual Report 45 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company reevaluates these uncertain tax positions on a quarterly basis. Changes in assumptions may result in the recognition of a tax benefit or anadditional charge to the tax provision.Noncontrolling interest - The Company has a joint venture with Grupo Industrial Monclova, S.A. (GIMSA) that manufactures new railroad freight cars forthe North American marketplace at GIMSA’s existing manufacturing facility located in Frontera, Mexico. Each party owns a 50% interest in the joint venture.The financial results of this operation are consolidated for financial reporting purposes as the Company maintains a controlling interest as evidenced by theright to appoint the majority of the board of directors, control over accounting, financing, marketing and engineering, and approval and design of products.The noncontrolling interest reflected in the Company’s consolidated financial statements primarily represents the joint venture partner’s equity in this venture.Accumulated other comprehensive loss - Accumulated other comprehensive loss, net of tax as appropriate, consisted of the following: (In thousands) UnrealizedGain (Loss)on DerivativeFinancialInstruments PensionAdjustment ForeignCurrencyTranslationAdjustment AccumulatedOtherComprehensiveLoss Balance, August 31, 2012 $(93) $(325) $(5,951) $(6,369) 2013 activity (960) (203) 1,028 (135) Balance, August 31, 2013 $(1,053) $(528) $(4,923) $(6,504) Revenue recognition - Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, theprice is fixed or determinable and collectability is reasonably assured.Railcars are generally manufactured, repaired or refurbished under firm orders from third parties. Revenue is recognized when new, refurbished or repairedrailcars are completed, accepted by an unaffiliated customer and contractual contingencies removed. Marine revenues are either recognized on the percentage ofcompletion method during the construction period or on the completed contract method based on the terms of the contract. Cash payments received prior tomeeting revenue recognition criteria are accounted for in Deferred revenue. Operating lease revenue is recognized as earned under the lease terms. Certain leasesare operated under car hire arrangements whereby revenue is earned based on utilization, car hire rates and terms specified in the lease agreement.The Company sells railcars with leases attached to financial investors. In addition the Company will often perform management or maintenance services atmarket rates for these railcars. Pursuant to the guidance in ASC 840-20-40, the Company evaluates the terms of any remarketing agreements and anycontractual provisions that represent retained risk and the level of retained risk based on those provisions. The Company applies a 10% threshold to determinewhether the level of retained risk exceeds 10% of the individual fair value of the rail cars delivered. For any contracts with multiple elements (i.e. railcars,maintenance, management services, etc) the Company allocates revenue among the deliverables primarily based upon objective and reliable evidence of the fairvalue of each element in the arrangement. If objective and reliable evidence of fair value of any element is not available, the company will use its estimatedselling price for purposes of allocating the total arrangement consideration among the elements. 46 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInterest and foreign exchange - Includes foreign exchange gains and losses, amortization of loan fee expense, accretion of debt discounts and external interestexpense. Years ended August 31, (In thousands) 2013 2012 2011 Interest and foreign exchange: Interest and other expense $19,203 $22,474 $30,155 Accretion of term loan debt discount – – 3,564 Accretion of convertible debt discount 2,455 3,259 3,021 Foreign exchange (gain) loss 500 (924) 252 $22,158 $24,809 $36,992 Research and development - Research and development costs are expensed as incurred. Research and development costs incurred for new productdevelopment during the years ended August 31, 2013, 2012 and 2011 were $2.0 million, $2.0 million and $3.0 million.Forward exchange contracts - Foreign operations give rise to risks from changes in foreign currency exchange rates. Forward exchange contracts withestablished financial institutions are utilized to hedge a portion of such risk. Realized and unrealized gains and losses are deferred in other comprehensiveincome (loss) and recognized in earnings concurrent with the hedged transaction or when the occurrence of the hedged transaction is no longer consideredprobable. Ineffectiveness is measured and any gain or loss is recognized in foreign exchange gain or loss. Even though forward exchange contracts are enteredinto to mitigate the impact of currency fluctuations, certain exposure remains, which may affect operating results. In addition, there is risk for counterpartynon-performance.Interest rate instruments - Interest rate swap agreements are utilized to reduce the impact of changes in interest rates on certain debt. The net cash amountspaid or received under the agreements are accrued and recognized as an adjustment to interest expense.Net earnings per share - Basic earnings per common share (EPS) excludes the potential dilution that would occur if additional shares were issued uponexercise of outstanding warrants or conversion of bonds. Restricted share grants are treated as outstanding when issued and restricted stock units are nottreated as outstanding when issued. Restricted share grants and restricted stock units are included in weighted average basic common shares outstanding whencalculating EPS when the Company is in a net earnings position.Diluted EPS is calculated using the more dilutive of two approaches. The first approach includes the dilutive effect of outstanding warrants and sharesunderlying the 2026 Convertible notes in the share count using the treasury stock method. The second approach supplements the first by including the “ifconverted” effect of the 2018 Convertible notes. Under the “if converted method” debt issuance and interest costs, both net of tax, associated with theconvertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2026 Convertible noteswould only be included in the calculation of both approaches if the current stock price is greater than the initial conversion price using the treasury stockmethod.Stock-based compensation - The value, at the date of grant, of stock awarded under restricted share grants and restricted stock unit grants is amortized ascompensation expense over the lesser of the vesting period of one to five years or to the recipients eligible retirement date. Compensation expense recognizedrelated to restricted stock for the years ended August 31, 2013, 2012 and 2011 was $6.3 million, $8.8 million and $7.1 million and was recorded in Sellingand administrative on the Consolidated Statements of Operations.Management estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires judgmenton the part of management to arrive at estimates and assumptions on matters that are inherently uncertain. These estimates may affect the amount of assets,liabilities, revenue and expenses reported in the financial statements and accompanying notes and disclosure of contingent assets and liabilities within thefinancial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. Actual results could differ from thoseestimates. The Greenbrier Companies 2013 Annual Report 47 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInitial Adoption of Accounting Policies - In the first quarter of 2013, the Company adopted an accounting standard update that increased the prominence ofitems reported in other comprehensive income. The standard eliminated the option of presenting other comprehensive income as part of the statement of equityand instead requires the Company to present other comprehensive income as either a single statement of comprehensive income combined with net income or astwo separate but continuous statements. The adoption of this accounting standard update did impact the presentation of other comprehensive income, as theCompany has elected to present two separate but consecutive statements, but did not have an impact on the Company’s financial position, results ofoperations or cash flows.In the first quarter of 2013, the Company adopted an accounting standard update regarding how entities test goodwill for impairment. This accountingstandard update is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities an option to perform a qualitativeassessment to determine whether further impairment testing is necessary. This update impacts testing steps only and therefore the adoption did not have aneffect on the Company’s Consolidated Financial Statements.Prospective Accounting Changes - In July 2012, an accounting standard update was issued regarding the testing of indefinite-lived intangible assets forimpairment. This update is intended to reduce the cost and complexity of testing indefinite-lived intangible assets for impairment by providing entities with anoption to perform a qualitative assessment to determine whether further impairment testing is necessary. This update is effective for the Company as ofSeptember 1, 2013. This update impacts testing steps only, and therefore adoption will not have an effect on the Company’s Consolidated FinancialStatements.In February 2013, an accounting standard update was issued which amended prior reporting requirements with respect to comprehensive income by requiringadditional disclosures about the amounts reclassified out of accumulated other comprehensive loss by component. This update is effective for the Company asof September 1, 2013. As this accounting standard update impacts disclosure only, the adoption of this update is not expected to have an impact on theCompany’s financial position, results of operations or cash flows.Note 3 - RestructuringDuring 2013, the Company implemented a restructuring plan to sell or close certain Wheels, Repair & Parts facilities to enhance margins and improve capitalefficiency and anticipates completing the restructuring plan during 2014. Restructuring charges related to this plan totaled $2.7 million for the year endedAugust 31, 2013 and were included in the Consolidated Statement of Operations. All of the restructuring charges for the year ended August 31, 2013 and therestructuring reserve as of August 31, 2013 related to the Company’s Wheels, Repair & Parts segment. The Company anticipates that there will be additionalrestructuring charges in 2014 as the Company completes the plan. (In thousands) Accrual atAugust 31,2012 Charged toExpense Paid orSettled Accrual atAugust 31,2013 Employee termination costs $ – $1,610 $201 $1,409 Contract termination costs – 50 50 – Other costs – 1,059 760 299 Balance, August 31, 2013 $– $2,719 $1,011 $1,708 Note 4 - Loss on Extinguishment of DebtThe results of operations for the year ended August 31, 2011 included a loss on extinguishment of debt of $15.7 million associated with the write-off ofunamortized debt issuance costs of $2.9 million and prepayment premiums and other costs of $7.2 million due to the full retirement of $235.0 million ofsenior unsecured notes and the write-off of unamortized loan fees of $1.7 million and a debt discount of $3.9 million due to the full retirement of a $71.8million term loan. 48 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 5 - Inventories As of August 31, (In thousands) 2013 2012 Manufacturing supplies and raw materials $217,182 $228,092 Work-in-process 48,990 71,210 Finished goods 54,839 22,571 Excess and obsolete adjustment (4,228) (5,132) $316,783 $316,741 As of August 31, (In thousands) 2013 2012 2011 Excess and obsolete adjustment Balance at beginning of period $5,132 $4,450 $4,096 Charge to cost of revenue 2,661 3,042 1,202 Disposition of inventory (3,614) (2,210) (995) Currency translation effect 49 (150) 147 Balance at end of period $4,228 $5,132 $4,450 Note 6 - Leased Railcars for SyndicationLeased railcars for syndication consist of newly-built railcars manufactured at one of the Company’s facilities or railcars purchased from a third party, whichhave been placed on lease to a customer and which the Company intends to sell to an investor with the lease attached. These railcars are not depreciated and aregenerally anticipated to be sold within six months of delivery of the last railcar or six months from when the Company acquires the railcar from a third party.The Company does not depreciate these railcars because it does not believe any economic value of a railcar is lost in the first six months. In the event therailcars are not sold, the railcars are transferred to Equipment on operating leases and depreciated. As of August 31, 2013 Leased railcars for syndication were$68.5 million compared to $97.8 million as of August 31, 2012.Note 7 - Equipment on Operating Leases, netEquipment on operating leases is reported net of accumulated depreciation of $97.8 million and $100.2 million as of August 31, 2013 and 2012. Depreciationexpense was $12.0 million, $13.6 million and $12.9 million as of August 31, 2013, 2012 and 2011. In addition, certain railcar equipment leased-in by theCompany on operating leases (see Note 22 Lease Commitments) is subleased to customers under non-cancelable operating leases. Aggregate minimum futureamounts receivable under all non-cancelable operating leases and subleases are as follows: (In thousands) Year ending August 31, 2014 $22,793 2015 15,367 2016 7,565 2017 4,113 2018 2,262 Thereafter 2,896 $54,996 Certain equipment is also operated under daily, monthly or car hire utilization arrangements. Associated revenue amounted to $24.3 million, $23.4 million and$18.7 million for the years ended August 31, 2013, 2012 and 2011. The Greenbrier Companies 2013 Annual Report 49 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 8 - Property, Plant and Equipment, net As of August 31, (In thousands) 2013 2012 Land and improvements $36,132 $34,214 Machinery and equipment 233,737 198,141 Buildings and improvements 110,030 94,514 Other 52,094 63,541 431,993 390,410 Accumulated depreciation (230,460) (207,981) $201,533 $182,429 Depreciation expense was $25.1 million, $23.3 million and $20.7 million as of August 31, 2013, 2012 and 2011.Note 9 - GoodwillChanges in the carrying value of goodwill are as follows: (In thousands) Manufacturing Wheels, Repair& Parts Leasing& Services Total Balance August 31, 2012 $ – $137,066 $ – $137,066 Reductions – (2,750) – (2,750) Goodwill impairment – (76,900) – (76,900) Balance August 31, 2013 $– $57,416 $– $57,416 Reduction in goodwill relates to the sale of the Company’s roller bearing operations in Elizabethtown, Kentucky. Goodwill impairment relates to the non-cash goodwill impairment charge recognized as part of the Company’s annual goodwill impairment analysis as further discussed below.The Company performs a goodwill impairment test annually during the third quarter. Goodwill is also tested more frequently if changes in circumstances orthe occurrence of events indicates that a potential impairment exists. The provisions of ASC 350, Intangibles – Goodwill and Other, require the Company toperform a two-step impairment test on goodwill.The Company performed step one of the goodwill impairment test during the third quarter of 2013. In the first step, the Company compared the fair value ofeach reporting unit with its carrying value. The Company determined the fair value of the reporting unit based on a weighting of income and marketapproaches. Under the income approach, the Company calculated the fair value of a reporting unit based on the present value of estimated future cash flows.Under the market approach, the Company estimated the fair value based on observed market multiples for comparable businesses. Results of the step oneanalysis indicated that the carrying amounts related to Wheels, Repair & Parts were in excess of its fair value. Accordingly, the Company performed step twoof the impairment analysis to determine the amount, if any, of goodwill impairment to be recorded.In the second step, the Company compared the implied fair value of goodwill to its carrying value. The implied fair value of goodwill was determined byallocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combinationand the fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amountsassigned to its assets and liabilities was considered the implied fair value of goodwill. A non-cash impairment loss was recorded to the extent that the carryingamount of the reporting unit goodwill exceeded the implied fair value of that goodwill. The impairment loss was primarily due to a reduction in marketmultiples for comparable businesses and updated estimated future cash flows. A pre-tax non-cash impairment charge of $76.9 million was recorded for theyear ended August 31, 2013 which relates to the Wheels, Repair & Parts segment.The Company’s goodwill balance as of August 31, 2013 and 2012 related to our Wheels, Repair & Parts segment. The gross goodwill balance beforeaccumulated goodwill impairment losses and other reductions was 50 The Greenbrier Companies 2013 Annual Report (1)(2)(1)(2)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents$195.8 million for the years ended August 31, 2013 and 2012. The accumulated goodwill impairment losses were $128.2 million and $51.3 million as ofAugust 31, 2013 and 2012.Note 10 - Intangibles and Other Assets, netIntangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets with indefinite useful lives are not amortized andare periodically evaluated for impairment.The following table summarizes the Company’s identifiable intangible and other assets balance: As of August 31, (In thousands) 2013 2012 Intangible assets subject to amortization: Customer relationships $66,288 $66,825 Accumulated amortization (26,964) (22,995) Other intangibles 4,967 4,906 Accumulated amortization (4,162) (3,779) 40,129 44,957 Intangible assets not subject to amortization 912 912 Investment in unconsolidated affiliates 10,739 8,301 Prepaid and other assets 10,601 10,337 Debt issuance costs, net 7,802 10,194 Nonqualified savings plan investments 7,687 6,667 Assets held for sale 1,101 – $78,971 $81,368 Amortization expense for the years ended August 31, 2013, 2012 and 2011 was $4.3 million, $5.6 million and $4.7 million. Amortization expense for theyears ending August 31, 2014, 2015, 2016, 2017 and 2018 is expected to be $4.0 million, $3.9 million, $3.9 million, $3.8 million and $3.5 million.Note 11 - Revolving NotesSenior secured credit facilities, consisting of three components, aggregated to $358.9 million as of August 31, 2013.As of August 31, 2013, a $290.0 million revolving line of credit secured by substantially all the Company’s assets in the U.S. not otherwise pledged assecurity for term loans and maturing June 2016, was available to provide working capital and interim financing of equipment, principally for the U.S. andMexican operations. Advances under this facility bear interest at LIBOR plus 2.25% or Prime plus 1.25% depending on the type of borrowing. Availableborrowings under the credit facility are generally based on defined levels of inventory, receivables, property, plant and equipment and leased equipment, aswell as total debt to consolidated capitalization and fixed charges coverage ratios.As of August 31, 2013, lines of credit totaling $18.9 million secured by certain of the Company’s European assets, with various variable rates that rangefrom Warsaw Interbank Offered Rate (WIBOR) plus 1.3% to WIBOR plus 1.5%, were available for working capital needs of the European manufacturingoperation. European credit facilities are continually being renewed. Currently these European credit facilities have maturities that range from December 2013through June 2015.As of August 31, 2013, the Company’s Mexican joint venture had two lines of credit totaling $50.0 million. The first line of credit provides up to $20.0million and is secured by certain of the joint venture’s accounts receivable and inventory. Advances under this facility bear interest at LIBOR plus 2.5%. TheMexican joint venture will be able to draw amounts available under this facility through December 2013. The second line of credit provides up to $30.0 millionand is fully guaranteed by each of the joint venture partners, including the Company. Advances The Greenbrier Companies 2013 Annual Report 51 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsunder this facility bear interest at LIBOR plus 2.0%. The Mexican joint venture will be able to draw against this facility through February 2015.As of August 31, 2013, outstanding borrowings under the senior secured credit facilities consisted of $6.8 million in letters of credit under the NorthAmerican credit facility and $48.2 million outstanding under the Mexican joint venture credit facilities.As of August 31, 2012, outstanding borrowings under the senior secured credit facilities consisted of $5.6 million in letters of credit under the NorthAmerican credit facility, $15.8 million outstanding under the European credit facilities and $45.0 million outstanding under the Mexican joint venture creditfacilities.Note 12 - Accounts Payable and Accrued Liabilities As of August 31, (In thousands) 2013 2012 Trade payables $163,490 $186,639 Other accrued liabilities 70,691 71,677 Accrued payroll and related liabilities 42,047 37,915 Income taxes payable 13,094 9,625 Accrued maintenance 11,420 11,475 Accrued warranty 12,128 9,221 Other 3,068 2,956 $315,938 $329,508 Note 13 - Maintenance and Warranty Accruals As of August 31, (In thousands) 2013 2012 2011 Accrued maintenance Balance at beginning of period $11,475 $10,865 $12,460 Charged to cost of revenue 9,003 10,750 12,034 Payments (9,058) (10,140) (13,629) Balance at end of period $11,420 $11,475 $10,865 Accrued warranty Balance at beginning of period $9,221 $8,645 $6,304 Charged to cost of revenue 6,157 2,496 3,856 Payments (3,315) (1,746) (1,547) Currency translation effect 65 (174) 32 Balance at end of period $12,128 $9,221 $8,645 Note 14 - Notes Payable As of August 31, (In thousands) 2013 2012 Convertible senior notes, due 2018 $230,000 $230,000 Convertible senior notes, due 2026 14,856 67,724 Term loans 128,783 132,553 Other notes payable 250 257 373,889 430,534 Debt discount on convertible senior notes due 2026, net of accretion – (2,455) $373,889 $428,079 52 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsConvertible senior notes, due 2018, bear interest at a fixed rate of 3.5%, paid semi-annually in arrears on April 1and October 1. The convertible notes willmature on April 1, 2018, unless earlier repurchased by Greenbrier or converted in accordance with their terms. The convertible notes are senior unsecuredobligations and rank equally with other senior unsecured debt. The convertible notes are convertible into shares of the Company’s common stock, at an initialconversion rate of 26.2838 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $38.05 per share). The initialconversion rate and conversion price are subject to adjustment upon the occurrence of certain events, such as distributions, dividends or stock splits. Therewere $7.9 million in original debt issuance costs, included in Intangibles and other assets on the Consolidated Balance Sheets, which will be amortized usingthe effective interest method. The amortization expense is being included in Interest and foreign exchange on the Consolidated Statements of Operations.Convertible senior notes, due 2026, bear interest at a fixed rate of 2.375%, paid semi-annually in arrears on May 15 and November 15. In May 2013, theCompany retired $52.9 million of its then $67.7 million outstanding notes pursuant to a scheduled put option. The Company may be required to also paycontingent interest of 0.375% on the notes in certain circumstances. Greenbrier may redeem all or a portion of the notes at a redemption price equal to 100% ofthe principal amount of the notes plus accrued and unpaid interest. On May 15, 2016 and May 15, 2021 or in the event of certain fundamental changes,holders can require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes plus accrued andunpaid interest. Payment on the convertible notes is guaranteed by substantially all of the Company’s material domestic subsidiaries. The convertible seniornotes are convertible upon the occurrence of specified events into cash and shares, if any, of Greenbrier’s common stock at an initial conversion rate of20.8125 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $48.05 per share). The initial conversion rate issubject to adjustment upon the occurrence of certain events, as defined. The value of the equity component was $14.9 million as of August 31, 2013 and2012. The debt discount associated with the convertible senior notes was fully accreted using the effective interest rate method through May 2013 and theaccretion expense was included in Interest and foreign exchange on the Consolidated Statements of Operations. The pre-tax accretion of the debt discount was$2.5 million, $3.2 million and $3.0 million for the years ended August 31, 2013, 2012 and 2011.Term loans are primarily composed of:• A senior term note with an initial balance of $100.0 million, secured by a pool of leased railcars, maturing in March 2014. The note bears a floatinginterest rate of LIBOR plus 1% with principal of $0.7 million paid quarterly in arrears and a balloon payment of $81.8 million due at maturity. Theprincipal balance as of August 31, 2013 was $83.1 million. An interest rate swap agreement was entered into, on fifty percent of the initial balance, toswap the floating interest rate of LIBOR plus 1% to a fixed rate of 5.24%. At August 31, 2013, the notional amount of the agreement was $41.6 millionand matures in March 2014.• A senior term note with an initial balance of $50.0 million, secured by a pool of leased railcars, maturing in May 2015. The note bears a floating interestrate of LIBOR plus 1% with principal of $0.3 million paid quarterly in arrears and a balloon payment of $41.2 million due at maturity. The principalbalance as of August 31, 2013 was $43.3 million.• Other term loans with an aggregate balance of $2.4 million as of August 31, 2013 and maturity dates ranging from October 2013 to February 2018.The notes payable, along with the revolving and operating lines of credit, contain certain covenants with respect to the Company and various subsidiaries, themost restrictive of which, among other things, limit the ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter intosale leaseback transactions; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including butnot limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all the Company’s assets; andenter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interestand rent) coverage. The Greenbrier Companies 2013 Annual Report 53 st stththSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPrincipal payments on the notes payable are expected as follows: (In thousands) Year ending August 31, 2014 $85,147 2015 42,620 2016 15,465 2017 437 2018 230,220 Thereafter – $373,889 The repayment of the $14.9 million of Convertible senior notes due 2026 is assumed to occur in 2016, which is the next date holders can require the Company to repurchase all or a portion of the notes.Note 15 - Derivative InstrumentsForeign operations give rise to market risks from changes in foreign currency exchange rates. Foreign currency forward exchange contracts with establishedfinancial institutions are utilized to hedge a portion of that risk in Euro. Interest rate swap agreements are utilized to reduce the impact of changes in interestrates on certain debt. The Company’s foreign currency forward exchange contracts and interest rate swap agreements are designated as cash flow hedges, andtherefore the effective portion of unrealized gains and losses are recorded in accumulated other comprehensive loss.At August 31, 2013 exchange rates, forward exchange contracts for the purchase of Polish Zloty and the sale of Euro aggregated $53.4 million. Adjusting theforeign currency exchange contracts to the fair value of the cash flow hedges at August 31, 2013 resulted in an unrealized pre-tax loss of $0.3 million that wasrecorded in accumulated other comprehensive loss. The fair value of the contracts is included in Accounts payable and accrued liabilities when there is a loss,or Accounts receivable when there is a gain, on the Consolidated Balance Sheets. As the contracts mature at various dates through June 2014, any such gain orloss remaining will be recognized in manufacturing revenue along with the related transactions. In the event that the underlying sales transaction does not occuror does not occur in the period designated at the inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified tothe current year’s results of operations in Interest and foreign exchange.At August 31, 2013, an interest rate swap agreement had a notional amount of $41.6 million and matures March 2014. The fair value of this cash flow hedgeat August 31, 2013 resulted in an unrealized pre-tax loss of $1.3 million. The loss is included in Accumulated other comprehensive loss and the fair value ofthe contract is included in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. As interest expense on the underlying debt isrecognized, amounts corresponding to the interest rate swap are reclassified from accumulated other comprehensive loss and charged or credited to interestexpense. At August 31, 2013 interest rates, approximately $1.3 million would be reclassified to interest expense in the next 12 months.Fair Values of Derivative Instruments Asset Derivatives Liability Derivatives August 31, August 31, 2013 2012 2013 2012 (In thousands) Balance sheetlocation FairValue FairValue Balance sheetlocation FairValue FairValue Derivatives designated as hedging instruments Foreign forward exchange contracts Accounts receivable $819 $2,703 Accounts payableand accrued liabilities $342 $182 Interest rate swapcontracts Other assets – – Accounts payableand accrued liabilities 1,250 2,861 $819 $2,703 $1,592 $3,043 Derivatives not designated as hedging instruments Foreign forward exchange contracts Accounts receivable $223 $141 Accounts payableand accrued liabilities $40 $102 54 The Greenbrier Companies 2013 Annual Report (1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Effect of Derivative Instruments on the Statement of Operations Derivatives in cashflow hedging relationships Location of gain (loss) recognized inincome on derivative Gain (loss) recognized inincome on derivativeYears endedAugust 31, 2013 2012 Foreign forward exchange contract Interest and foreign exchange $(204) $371 Derivatives incash flowhedgingrelationships Gain (loss)recognized in OCI onderivatives (effectiveportion)Yearsended August 31, Location ofgain (loss)reclassifiedfromaccumulatedOCI intoincome Gain (loss)reclassified fromaccumulated OCI intoincome (effectiveportion)Yearsended August 31, Location ofgain (loss)in income onderivative(ineffectiveportion andamountexcluded fromeffectivenesstesting) Gainrecognized onderivative(ineffectiveportion andamountexcluded fromeffectivenesstesting)YearsendedAugust 31, 2013 2012 2013 2012 2013 2012 Foreign forward exchangecontracts $(570) $136 Revenue $1,917 $(4,615) Interest and foreignexchange $2,410 $1,403 Interest rate swapcontracts (68) (153) Interest and foreignexchange (1,679) (1,678) Interest and foreignexchange – – $(638) $(17) $238 $(6,293) $2,410 $1,403 Note 16 - EquityOn December 16, 2010, the Company issued 3,000,000 shares of its common stock in an underwritten at-the-market public offering at $21.06 per share, lessexpenses resulting in net proceeds of $62.8 million.In January 2011, the stockholders approved the 2010 Amended and Restated Stock Incentive Plan (formerly known as the 2005 Stock Incentive Plan asamended). This plan provides for the grant of incentive stock options, non-statutory stock options, restricted shares, restricted stock units and stockappreciation rights. There are no stock options or stock appreciation rights outstanding as of August 31, 2013. The Company currently grants restrictedshares and restricted stock units. Restricted share grants are considered outstanding shares of common stock at the time they are issued. The holders ofunvested restricted shares are entitled to voting rights and participation in dividends. The dividends are not forfeitable if the awards are later forfeited prior tovesting. The Company began granting restricted stock units during the year ended August 31, 2013. Shares associated with restricted stock unit awards arenot considered legally outstanding shares of common stock until vesting. Restricted stock unit awards, including performance based awards, are entitled toparticipate in dividends and these awards are considered participating securities and are considered outstanding for earnings per share purposes when theeffect is dilutive.In January 2013, the stockholders approved an amendment to the 2010 Amended and Restated Stock Incentive Plan to increase the total number of sharesreserved for issuance by 1,500,000 shares. As a result, the maximum aggregate number of the Company’s common shares authorized for issuance is4,325,000. On August 31, 2013 there were 1,384,997 shares available for grant compared to 259,650 and 720,047 shares available for grant as of the yearsended August 31, 2012 and 2011.During the years ended August 31, 2013, 2012 and 2011, the Company awarded restricted share and restricted stock unit grants totaling 387,986, 466,680and 309,380 shares which include performance based grants. As of August 31, 2013, there were a total of 516,495 shares associated with unvestedperformance based grants. The actual number of shares that will vest associated with performance based grants will vary depending on the Company’sperformance. Approximately 535,945 additional shares may be granted if performance based The Greenbrier Companies 2013 Annual Report 55 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrestricted share and restricted stock unit awards vest at stretch levels of performance. These additional shares are associated with restricted share and restrictedstock unit awards granted during the years ended August 31, 2013, 2012 and 2011. The fair value of awards granted was $9.2 million, $9.5 million and$7.2 million for the years ended August 31, 2013, 2012 and 2011.The value, at the date of grant, of stock awarded under restricted share grants and restricted stock unit grants are amortized as compensation expense over thelesser of the vesting period of one to five years or to the recipients eligible retirement date. Compensation expense recognized related to restricted share grants andrestricted stock unit grants for the years ended August 31, 2013, 2012 and 2011 was $6.3 million, $8.8 million and $7.1 million and was recorded in Sellingand administrative on the Consolidated Statements of Operations. Unamortized compensation cost related to restricted stock grants was $12.5 million as ofAugust 31, 2013.The unvested restricted share and restricted stock unit grants were 913,918 and 903,554 as of August 31, 2013 and 2012. The following table summarizesrestricted share and restricted stock unit grant transactions for shares, both vested and unvested, under the 2010 Amended and Restated Stock Incentive Plan: Shares Balance at September 1, 2010 1,799,573 Granted 309,380 Forfeited (4,000) Balance at August 31, 2011 2,104,953 Granted 466,680 Forfeited (6,283) Balance at August 31, 2012 2,565,350 Granted 387,986 Forfeited (13,333) Balance at August 31, 2013 2,940,003 Balance represents cumulative grants net of forfeitures.At August 31, 2013 there were no options outstanding. The following table summarizes stock option transactions for shares under option and the relatedweighted average option price: Shares WeightedAverageOptionPrice Balance at September 1, 2010 5,500 $4.74 Exercised (5,500) $4.74 Balance at August 31, 2011 – $– Exercised – $– Balance at August 31, 2012 – $– Exercised – $– Balance at August 31, 2013 – $– 56 The Greenbrier Companies 2013 Annual Report (1)(1)(1)(1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 17 - Earnings (Loss) per ShareThe shares used in the computation of the Company’s basic and diluted earnings (loss) per common share are reconciled as follows: Years ended August 31, (In thousands) 2013 2012 2011 Weighted average basic common shares outstanding 26,678 26,572 24,100 Dilutive effect of warrants – 1,101 2,401 Dilutive effect of convertible notes – 6,045 – Weighted average diluted common shares outstanding 26,678 33,718 26,501 Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a netearnings position. Weighted average basic common shares outstanding exclude 0.9 million shares of unvested restricted stock and restricted stock units for the year ended August 31, 2013 as they are anti-dilutive dueto a net loss. No restricted stock or warrants were anti-dilutive for the years ended August 31, 2012 and 2011. The dilutive effect of common stock equivalents is excluded from the share calculations for the year ended August 31, 2013 due to a net loss.In 2012, the dilutive effect of the 2018 Convertible notes are included as they were considered dilutive under the “if converted” method. In 2011, the dilutive effect of the 2018 Convertible Notes was excluded from theshare calculation as it was the less dilutive of the two approaches further discussed below. The dilutive effect of the 2026 Convertible notes was excluded from the share calculations as the stock price for each yearpresented was less than the initial conversion price of $48.05 and therefore considered anti-dilutive.Dilutive EPS for the years ended August 31, 2012 and 2011 was calculated using the more dilutive of two approaches. The first approach includes the dilutiveeffect of outstanding warrants and shares underlying the 2026 Convertible notes in the share count using the treasury stock method. The second approachsupplements the first by including the “if converted” effect of the 2018 Convertible notes issued in March 2011. Under the “if converted method” debtissuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the sharesunderlying the convertible notes. The 2026 Convertible notes would only be included in the calculation of both approaches if the current stock price is greaterthan the initial conversion price of $48.05 using the treasury stock method. Year Ended August 31, 2012 Net earnings attributable to Greenbrier $58,708 Add back: Interest and debt issuance costs on the 2018 Convertible notes, net of tax 5,677 Earnings before interest and debt issuance costs on convertible notes $64,385 Weighted average diluted common shares outstanding 33,718 Diluted earnings per share $1.91 Diluted earnings per share was calculated as follows:Earnings before interest and debt issuance costs on convertible notes Weighted average diluted common shares outstandingNote 18 - Related Party TransactionsOn June 10, 2009, the Company entered into a transaction with affiliates of WL Ross & Co., LLC (WL Ross) which provided for a $75.0 million securedterm loan, which has subsequently been repaid. In connection with the loan, the Company also entered into a warrant agreement pursuant to which theCompany issued warrants to WL Ross and its affiliates to purchase a current total of 3,401,095 shares of the Company’s Common Stock with an exerciseprice of $5.96 per share. In connection with Victoria McManus’ 3% participation in the WL Ross transaction, WL Ross and its affiliates transferred the rightto purchase 101,337 shares of Common Stock under the warrant agreement to Ms. McManus, a director of the Company. As of August 31, 2013, there are nooutstanding warrants to purchase shares of the Company’s Common Stock.Wilbur L. Ross, Jr., founder, Chairman and Chief Executive Officer at WL Ross was a director of the Company through January 2013, and WendyTeramoto, Senior Vice President at WL Ross, is currently a director of the Company. The Greenbrier Companies 2013 Annual Report 57 (1)(2)(2)(3)(1)(2)(3)(1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn April 2010, WLR–Greenbrier Rail Inc. (WLR-GBX) was formed and acquired a lease fleet of nearly 4,000 railcars valued at approximately $256.0 million.WLR-GBX is wholly owned by affiliates of WL Ross. The Company paid a $6.1 million contract placement fee to WLR-GBX for the right to perform certainmanagement and advisory services and in exchange will receive management and other fee income and incentive compensation tied to the performance of WLR-GBX. The Company has also paid certain incidental fees and agreed to indemnify WLR-GBX and its affiliates against certain liabilities in connection withsuch advisory services. Under the management agreement the Company received $0.9 million in fees for each of the years ended August 31, 2013 and 2012and $0.8 million for the year ended August 31, 2011. The contract placement fee is accounted for under the equity method and is recorded in Intangibles andother assets on the Consolidated Balance Sheet. As a result of losses experienced by WLR-GBX the carrying value of the investment is zero as of August 31,2013. The Company also leases approximately 400 railcars from the WLR-GBX lease fleet. The Company has paid $3.2 million, $3.1 million and $2.8million in lease expense for the years ended August 31, 2013, 2012 and 2011, respectively and has future lease commitments totaling $6.1 million.In March 2012, the Company purchased a 1% interest in three trusts (the “Trusts”). The company accounts for this investment under the equity method ofaccounting. The Company sold a total of $38.5 million and $61.1 million to the Trusts for the years ended August 31, 2013 and 2012, respectively. See Note26 – Variable Interest Entities for additional information.In May 2013, the Company purchased an 8% interest in an entity that owns a portfolio of railcar assets that is leases to third parties. The company accountsfor this investment under the equity method of accounting. The Company sold a total of $23.2 million to this entity for the year ended August 31, 2013. SeeNote 26 – Variable Interest Entities for additional information.William Furman, Director, President and Chief Executive Officer of the Company, also serves as director of Schnitzer Steel Industries, Inc. (Schnitzer). In thenormal course of business, the Company sells scrap metal to Schnitzer. During the years ended August 31, 2013, 2012 and 2011, the Company sold scrapmetal to Schnitzer totaling $8.0 million, $9.2 million and $7.3 million, respectively.Mr. Furman is the owner of private aircraft managed by a private independent management company. From time to time, the Company’s business requirescharter use of privately-owned aircraft. In such instances, it is possible that charters may be placed with the company that manages Mr. Furman’s aircraft.The Company placed charters with the company that manages Mr. Furman’s aircraft aggregating $0.2 million for each of the years ended August 31, 2013and 2012 and $10 thousand for the year ended August 31, 2011.Note 19 - Income TaxesComponents of income tax expense of continuing operations were as follows: Years ended August 31, (In thousands) 2013 2012 2011 Current Federal $20,162 $10,750 $(683) State 2,491 2,783 620 Foreign 11,465 8,548 333 34,118 22,081 270 Deferred Federal (6,597) 19,426 2,956 State (2,357) (3,399) 351 Foreign (134) (6) 239 (9,088) 16,021 3,546 Change in valuation allowance 30 (5,710) (252) $25,060 $32,392 $3,564 58 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIncome tax expense is computed at rates different than statutory rates. The reconciliation between effective and statutory tax rates on continuing operations wereas follows: Years ended August 31, 2013 2012 2011 Federal statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal benefit (1.2) (1.9) 4.1 Impact of foreign operations (19.1) (2.1) (2.1) Change in valuation allowance related to deferred tax asset 1.3 (6.1) (1.7) Change in income tax reserve for uncertain tax positions (7.1) (0.1) (0.8) Reversal of net deferred tax assets related to foreign restructuring – 1.9 – Noncontrolling interest in flow through entity (1.2) (0.4) (5.1) Permanent differences 4.5 5.4 (7.1) Goodwill impairment 119.0 – – Other (2.6) 2.8 1.6 128.6% 34.5% 23.9% The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities were as follows: As of August 31, (In thousands) 2013 2012 Deferred tax assets: Contract placement $2,051 $2,145 Maintenance and warranty accruals 7,963 7,127 Accrued payroll and related liabilities 8,616 13,193 Deferred revenue 4,072 3,702 Inventories and other 8,708 8,449 Derivative instruments and translation adjustment 478 1,132 Investment and asset tax credits 1,324 337 Net operating loss 2,168 8,409 35,380 44,494 Deferred tax liabilities: Fixed assets 107,725 111,915 Original issue discount 2,962 12,064 Intangibles 4,792 9,977 Deferred gain on redemption of debt 4,430 4,430 Other 31 36 119,940 138,422 Valuation allowance 1,480 1,435 Net deferred tax liability $86,040 $95,363 As of August 31, 2013 the Company has $22.4 million of state net operating loss (NOL) carryforwards that will begin to expire in 2015, $1.3 million of statecredit carryforwards that will begin to expire in 2017, and $6.6 million of foreign NOL carryforwards that will begin to expire in 2014. The Company usestax law ordering for purposes of determining when excess tax benefits have been realized.During the current year the Company recognized excess tax benefits of $0.3 million from the vesting of restricted stock awards. In addition, previouslyunrecognized NOL carryforwards created by excess tax benefits of $1.7 million reduced taxes payable in the current year. The utilization of thesecarryforwards resulted in an increase to stockholders’ equity of $0.6 million. The Greenbrier Companies 2013 Annual Report 59 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe net increase in the valuation allowance for the year ended August 31, 2013 was approximately $45 thousand. The increase in the valuation allowance isprimarily due to the increase in state tax credits for which no benefit is provided.No provision has been made for U.S. income taxes on approximately $31.8 million of cumulative undistributed earnings of certain foreign subsidiaries as theCompany plans to reinvest these earnings indefinitely in operations outside the U.S. Generally, such amounts become subject to U.S. taxation upon theremittance of dividends and under certain other circumstances. It is not practicable to estimate the amount of deferred tax liability related to investments inforeign subsidiaries.The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years presented: (In thousands) 2013 2012 2011 Unrecognized Tax Benefit – Opening Balance $3,720 $3,053 $3,526 Gross increases – tax positions in prior period 511 878 – Gross decreases – tax positions in prior period (2,942) (211) (233) Settlements – – (193) Lapse of statute of limitations – – (47) Unrecognized Tax Benefit – Ending Balance $1,289 $3,720 $3,053 The Company is subject to taxation in the U.S., various states and foreign jurisdictions. The Company is no longer subject to U.S. Federal examination fortax years before 2010, to state and local examinations before 2008, or to foreign examinations before 2007.Unrecognized tax benefits at August 31, 2013 were $1.1 million of which $0.7 million, if recognized, would affect the effective tax rate. The unrecognized taxbenefits at August 31, 2012 were $2.7 million. Accrued interest on reserves for uncertain tax positions as of August 31, 2013 and 2012 were $0.2 million and$1.0 million, respectively. The Company recorded an interest benefit of $0.8 million for changes in the reserves during the year ended August 31, 2013 andinterest expense of $0.1 million for changes during the year ended August 31, 2012. The Company had not accrued any penalties on the reserves. Interest andpenalties related to income taxes are not classified as a component of income tax expense. Benefits from the realization of unrecognized tax benefits fordeductible differences attributable to ordinary operations will be recognized as a reduction of income tax expense. The Company does not anticipate asignificant decrease in the reserves for uncertain tax positions during the next twelve months.Note 20 - Segment InformationGreenbrier operates in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services. The accounting policies of the segmentsare the same as those described in the summary of significant accounting policies. Performance is evaluated based on margin. The Company’s integratedbusiness model results in selling and administrative costs being intertwined among the segments. Currently, Greenbrier’s management does not allocate thesecosts for either external or internal reporting purposes. Intersegment sales and transfers are valued as if the sales or transfers were to third parties. Relatedrevenue and margin is eliminated in consolidation and therefore are not included in consolidated results in the Company’s Consolidated Financial Statements. 60 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe information in the following table is derived directly from the segments’ internal financial reports used for corporate management purposes. Years ended August 31, (In thousands) 2013 2012 2011 Revenue: Manufacturing $1,200,613 $1,370,900 $770,596 Wheels, Repair & Parts 484,180 498,336 492,355 Leasing & Services 90,203 90,538 70,498 Intersegment eliminations (18,578) (152,058) (90,159) $1,756,418 $1,807,716 $1,243,290 Margin: Manufacturing $132,845 $131,580 $59,975 Wheels, Repair & Parts 37,721 48,324 47,416 Leasing & Services 35,807 34,516 32,140 $206,373 $214,420 $139,531 Assets: Manufacturing $401,630 $402,976 $423,295 Wheels, Repair & Parts 318,483 413,013 400,643 Leasing & Services 463,381 508,539 424,839 Unallocated 106,247 60,016 52,878 $1,289,741 $1,384,544 $1,301,655 Depreciation and amortization: Manufacturing $13,469 $11,754 $9,853 Wheels, Repair & Parts 12,843 13,265 11,853 Leasing & Services 15,135 17,352 16,587 $41,447 $42,371 $38,293 Capital expenditures: Manufacturing $37,017 $33,313 $20,016 Wheels, Repair & Parts 7,492 11,248 20,087 Leasing & Services 16,318 73,324 44,199 $60,827 $117,885 $84,302 The following table summarizes selected geographic information. Years ended August 31, (In thousands) 2013 2012 2011 Revenue: U.S. $1,544,775 $1,642,348 $1,103,423 Foreign 211,643 165,368 139,867 $1,756,418 $1,807,716 $1,243,290 Identifiable assets: U.S. $865,294 $982,078 $1,000,249 Canada 756 718 – Mexico 348,144 323,318 228,406 Europe 75,547 78,430 73,000 $1,289,741 $1,384,544 $1,301,655 Revenue is presented on the basis of geographic location of customers. The Greenbrier Companies 2013 Annual Report 61 (1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReconciliation of segment margin to earnings before income tax and earnings (loss) from unconsolidated affiliates: Years ended August 31, (In thousands) 2013 2012 2011 Segment margin $206,373 $214,420 $139,531 Less unallocated items: Selling and administrative 103,175 104,596 80,326 Net gain on disposition of equipment (18,072) (8,964) (8,369) Goodwill impairment 76,900 – – Restructuring charges 2,719 – – Interest and foreign exchange 22,158 24,809 36,992 Loss on extinguishment of debt – – 15,657 Earnings before income tax and earnings (loss) fromunconsolidated affiliates $19,493 $93,979 $14,925 Note 21 - Customer ConcentrationCustomer concentration is defined as a single customer that accounts for more than 10% of total revenues or accounts receivable. In 2013, revenue from twocustomers represented 17% and 10% of total revenue, respectively. In 2012, revenue from three customers represented 26%, 16% and 11% of total revenue,respectively. In 2011, revenue from four customers represented 19%, 14%, 12% and 11% of total revenue, respectively. No other customers accounted formore than 10% of total revenues for the years ended August 31, 2013, 2012, or 2011. One customer had balances that individually equaled or exceeded 10% ofaccounts receivable and in total represented 18% of the consolidated accounts receivable balance at August 31, 2013. One customer had balances thatindividually equaled or exceeded 10% of accounts receivable and in total represented 13% of the consolidated accounts receivable balance at August 31, 2012.Note 22 - Lease CommitmentsLease expense for railcar equipment leased-in under non-cancelable leases was $6.7 million, $6.0 million and $6.5 million for the years ended August 31,2013, 2012 and 2011. Aggregate minimum future amounts payable under these non-cancelable railcar equipment leases are as follows: (In thousands) Year ending August 31, 2014 $5,720 2015 4,867 2016 940 2017 517 2018 – Thereafter – $12,044 Operating leases for domestic railcar repair facilities, office space and certain manufacturing and office equipment expire at various dates through December2019. Rental expense for facilities, office space and 62 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsequipment was $13.1 million, $14.1 million and $12.2 million for the years ended August 31, 2013, 2012 and 2011. Aggregate minimum future amountspayable under these non-cancelable operating leases are as follows: (In thousands) Year ending August 31, 2014 $6,710 2015 3,435 2016 2,393 2017 2,184 2018 1,620 Thereafter 3,666 $20,008 Note 23 - Commitments and ContingenciesThe Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. The Company has entered into a Voluntary CleanupAgreement with the Oregon Department of Environmental Quality (“DEQ”) in which the Company agreed to conduct an investigation of whether, and to whatextent, past or present operations at the Portland property may have released hazardous substances to the environment. The Company is also conductinggroundwater remediation relating to a historical spill on the property which preceded its ownership.The U.S. Environmental Protection Agency (EPA) has classified portions of the river bed of the Portland Harbor, including the portion fronting theCompany’s manufacturing facility, as a federal “National Priority List” or “Superfund” site due to sediment contamination (the “Portland Harbor Site”). TheCompany and more than 140 other parties have received a “General Notice” of potential liability from the EPA relating to the Portland Harbor Site. The letteradvised the Company that it may be liable for the costs of investigation and remediation (which liability may be joint and several with other potentiallyresponsible parties) as well as for natural resource damages resulting from releases of hazardous substances to the site. At this time, ten private and publicentities, including the Company (the “Lower Willamette Group” or “LWG”), have signed an Administrative Order on Consent (“AOC”) to perform a remedialinvestigation/feasibility study (“RI/FS”) of the Portland Harbor Site under EPA oversight, and several additional entities have not signed such consent, but arenevertheless contributing money to the effort. The EPA-mandated RI/FS is being conducted by the LWG and has cost over $100 million during a 13-yearperiod. The Company has agreed to initially bear a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’saggregate expenditure has not been material during the 13-year period. Some or all of any such outlay may be recoverable from other responsible parties. Theinvestigation is expected to continue for at least one more year.Eighty-three parties, including the State of Oregon and the federal government, have entered into a non-judicial mediation process to try to allocate costsassociated with the Portland Harbor site. Approximately 110 additional parties have signed tolling agreements related to such allocations. On April 23, 2009,the Company and the other AOC signatories filed suit against 69 other parties due to a possible limitations period for some such claims; Arkema Inc. et al v. A& C Foundry Products, Inc.et al, US District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreementsand be dismissed without prejudice, and the case has now been stayed by the court, pending completion of the RI/FS. Although, as described below, the draftfeasibility study has been submitted, the RI/FS will not be complete until the EPA approves it, which is not likely to occur until at least 2015.A draft of the remedial investigation study was submitted to the EPA on October 27, 2009. The draft feasibility study was submitted to the EPA on March 30,2012. The draft feasibility study evaluates several alternative cleanup approaches. The approaches submitted would take from 2 to 28 years with costsranging from $169 million to $1.8 billion for cleanup of the entire Portland Harbor Site, depending primarily on the selected remedial action levels. The draftfeasibility study suggests costs ranging from $9 million to $163 million for cleanup of the area of the Willamette River adjacent to the Company’s Portland,Oregon manufacturing facility, depending primarily on the selected remedial action level. The Greenbrier Companies 2013 Annual Report 63 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe draft feasibility study does not address responsibility for the costs of clean-up or allocate such costs among the potentially responsible parties, or defineprecise boundaries for the cleanup. Responsibility for funding and implementing the EPA’s selected cleanup will be determined after the issuance of the Recordof Decision. Based on the investigation to date, the Company believes that it did not contribute in any material way to the damage of natural resources in thePortland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its ownership of the Portland, Oregonmanufacturing facility. Because these environmental investigations are still underway, sufficient information is currently not available to determine theCompany’s liability, if any, for the cost of any required remediation of the Portland Harbor Site or to estimate a range of potential loss. Based on the results ofthe pending investigations and future assessments of natural resource damages, the Company may be required to incur costs associated with additional phasesof investigation or remedial action, and may be liable for damages to natural resources. In addition, the Company may be required to perform periodicmaintenance dredging in order to continue to launch vessels from its launch ways in Portland, Oregon, on the Willamette River, and the river’s classificationas a Superfund site could result in some limitations on future dredging and launch activities. Any of these matters could adversely affect the Company’sbusiness and Consolidated Financial Statements, or the value of its Portland property.We have also signed an Order on Consent with DEQ to finalize the investigation of potential onsite sources of contamination that may have a release pathwayto the Willamette River. Interim precautionary measures are also required in the order and those are in the process of being completed. Our aggregate expenditurehas not been material during the 13-year period. Some or all of any such outlay may be recoverable from other responsible parties.From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the outcome of which cannot be predicted withcertainty. While the ultimate outcome of such legal proceedings cannot be determined at this time, management believes that the resolution of these actions willnot have a material adverse effect on the Company’s Consolidated Financial Statements.In accordance with customary business practices in Europe, the Company has $2.2 million in bank and third party performance and warranty guaranteefacilities, all of which have been utilized as of August 31, 2013. To date no amounts have been drawn under these guarantee facilities.At August 31, 2013, the Mexican joint venture had $50.4 million of third party debt outstanding, for which the Company has guaranteed approximately $40.2million. In addition, the Company, along with its joint venture partner, has committed to contributing $10.0 million to fund the capital expenditures to expandproduction capacity, of which the Company and its joint venture partner will each contribute 50%. These amounts will be contributed at various intervalsfrom May 31, 2012 to October 31, 2013. As of August 31, 2013, the Company and the joint venture partner have each contributed $4.6 million.As of August 31, 2013 the Company had outstanding letters of credit aggregating $6.8 million associated with facility leases and workers compensationinsurance.Note 24 - Fair Value of Financial InstrumentsThe estimated fair values of financial instruments and the methods and assumptions used to estimate such fair values are as follows: (In thousands) CarryingAmount EstimatedFairValue Notes payable as of August 31, 2013 $373,889 $324,631 Notes payable as of August 31, 2012 $428,079 $364,062 The carrying amount of cash and cash equivalents, accounts and notes receivable, revolving notes, accounts payable and accrued liabilities, foreign currencyforward contracts and interest rate swaps is a reasonable estimate of fair value of these financial instruments. Estimated rates currently available to theCompany for debt with similar terms and remaining maturities are used to estimate the fair value of notes payable. 64 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 25 - Fair Value MeasuresCertain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value, for this disclosure, is defined as an exit price,representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, under athree-tier fair value hierarchy which prioritizes the inputs used in measuring a fair value as follows: Level 1 - observable inputs such as unadjusted quoted prices in active markets for identical instruments;Level 2 - inputs, other than the quoted market prices in active markets for similar instruments, which are observable, either directly or indirectly; andLevel 3 - unobservable inputs for which there is little or no market data available, which require the reporting entity to develop its own assumptions.Assets and liabilities measured at fair value on a recurring basis as of August 31, 2013 are: (In thousands) Total Level 1 Level 2 Level 3 Assets: Derivative financial instruments $1,042 $– $1,042 $ – Nonqualified savings plan investments 7,687 7,687 – – Cash equivalents 1,004 1,004 – – $9,733 $8,691 $1,042 $– Liabilities: Derivative financial instruments $1,632 $– $1,632 $– Level 2 assets include derivative financial instruments which are valued based on significant observable inputs. See Note 15 Derivative Instruments for further discussion.Assets or liabilities measured at fair value on a nonrecurring basis as of August 31, 2013 are: (In thousands) Total Level 1 Level 2 Level 3 Assets: Goodwill $57,416 $ – $ – $57,416 Assets and liabilities measured at fair value on a recurring basis as of August 31, 2012 are: (In thousands) Total Level 1 Level 2 Level 3 Assets: Derivative financial instruments $2,844 $– $2,844 $ – Nonqualified savings plan investments 6,667 6,667 – – Cash equivalents 1,002 1,002 – – $10,513 $7,669 $2,844 $– Liabilities: Derivative financial instruments $3,145 $– $3,145 $– Level 2 assets include derivative financial instruments which are valued based on significant observable inputs. See Note 15 Derivative Instruments for further discussion.Assets or liabilities measured at fair value on a nonrecurring basis as of August 31, 2012 are: (In thousands) Total Level 1 Level 2 Level 3 Assets: Goodwill $137,066 $ – $ – $137,066 The Greenbrier Companies 2013 Annual Report 65 (1)(1)(1)(1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 26 - Variable Interest EntitiesMarch 2012 AgreementIn March 2012, the Company purchased a 1% interest in three trusts (the “Trusts”) which are 99% owned by a third party. As of August 31, 2013, theCompany had completed the sale of 1,163 railcars to the Trusts for an aggregate value of $99.6 million.Gains and losses are allocated between the Company and the third party equal to their respective ownership interest in the Trusts, with the exception that theCompany may be entitled to receive a small portion of excess rent if the actual performance of the Trusts exceeds a target rate of return.The Company contributed $6.9 million of cash collateral into restricted cash accounts to support the railcar portfolio meeting a target minimum rate of return.If the actual return is less than the target return, the third party may withdraw amounts in the restricted cash accounts at certain intervals based onpredetermined criteria. This obligation expires in March 2033. This $6.9 million, which is held in restricted cash, was recorded as a reduction in revenue onthe sale of 1,020 new railcars and a reduction in gain on sale on the sale of the 143 used railcars with a credit to deferred revenue.In connection with this transaction, the Company entered into an agreement to provide administrative and remarketing services to the Trusts. The agreement iscurrently set to expire in March 2033. The Company also entered into an agreement to provide maintenance services to the Trusts during the initial lease term ofthe railcars. The Company will receive management and maintenance fees under each of the aforementioned agreements.The Company has evaluated this relationship under ASC 810-10 and has concluded that the Trusts qualify as variable interest entities and that the Companyis not the primary beneficiary. The Company will not consolidate the Trusts and will account for the investments under the equity method of accounting.As of August 31, 2013, the carrying amount of the Company’s investment in the Trust is $1.0 million which is recorded in Intangibles and Other Assets, neton the Consolidated Balance Sheets.May 2013 AgreementIn May 2013, the Company purchased an 8% interest in an entity that owns a portfolio of railcar assets that it leases to third parties which is 92% owned by athird party. As of August 31, 2013, the Company has sold 264 railcars manufactured by the Company and subject to operating leases, for $23.2 million tothis entity.Gains and losses will be allocated between the Company and the third party equal to their respective ownership interest in this entity.In connection with this transaction, the Company entered into an agreement to provide administrative and remarketing services to this entity and will earn amanagement fee for these services. The agreement is currently set to expire in May 2033.The Company has evaluated this relationship under ASC 810-10 and has concluded that this entity qualifies as a variable interest entity and that theCompany is not the primary beneficiary. The Company will not consolidate this entity and will account for the investment under the equity method ofaccounting. The Company will eliminate 8% of the revenue and margin on railcars that were manufactured by the Company and sold to this entity.As of August 31, 2013, the carrying amount of the Company’s investment in this entity is $1.9 million which is recorded in Intangibles and Other Assets, neton the Consolidated Balance Sheets. 66 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 27 - Investment in Unconsolidated AffiliatesIn April 2010, WLR–Greenbrier Rail Inc. (WLR-GBX) was formed and acquired a lease fleet of nearly 4,000 railcars valued at approximately $256.0 million.WLR-GBX is wholly owned by affiliates of WL Ross & Co., LLC (WL Ross). The Company paid a $6.1 million contract placement fee to WLR-GBX forthe right to perform certain management and advisory services and in exchange will receive management and other fee income and incentive compensation tiedto the performance of WLR-GBX. The contract placement fee is accounted for under the equity method and was recorded in Intangibles and other assets on theConsolidated Balance Sheet. The Company recorded its share of losses of $2.1 million and $2.5 million for the years ended August 31, 2012 and 2011against the investment, reducing the investment balance to zero in 2012. While the Company acts as asset manager to WLR-GBX, it is not the primarybeneficiary. The Company has no authority to make decisions regarding key business activities that most significantly impact the entity’s economicperformance, such as asset re-marketing and disposition activities, which requires the approval of affiliates of WL Ross. As of August 31, (In thousands) 2013 2012 Current assets $7,508 $8,003 Total assets $230,626 $240,372 Current liabilities $7,335 $6,671 Equity $(4,209) $(3,537) Years ended August 31, (In thousands) 2013 2012 2011 Revenue $20,230 $19,403 $17,943 Net income (loss) $(598) $(6,235) $(5,997) In June 2003, the Company acquired a 33% minority ownership interest in Ohio Castings LLC, a joint venture which produces castings for freight cars. Thisjoint venture is accounted for under the equity method and the investment is included in Intangibles and other assets on the Consolidated Balance Sheets. Theinvestment balance as of August 31, 2013 was $7.9 million. The facility was temporarily idled during the economic downturn, but was re-opened during thethird quarter of 2011.Summarized financial data for the castings joint venture is as follows: As of August 31, (In thousands) 2013 2012 Current assets $15,084 $16,758 Total assets $23,649 $26,323 Current liabilities $4,522 $7,625 Equity $19,127 $18,698 Years ended August 31, (In thousands) 2013 2012 2011 Revenue $55,307 $82,698 $5,813 Net income (loss) $665 $5,823 $(5,648) The Greenbrier Companies 2013 Annual Report 67 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 28 - Guarantor/Non GuarantorThe convertible senior notes due 2026 (the Notes) issued on May 22, 2006 are fully and unconditionally and jointly and severally guaranteed by substantiallyall of Greenbrier’s material 100% owned U.S. subsidiaries: Autostack Company LLC, Greenbrier-Concarril, LLC, Greenbrier Leasing Company LLC,Greenbrier Leasing Limited Partner, LLC, Greenbrier Management Services, LLC, Greenbrier Leasing, L.P., Greenbrier Railcar LLC, Gunderson LLC,Gunderson Marine LLC, Gunderson Rail Services LLC, Meridian Rail Holding Corp., Meridian Rail Acquisition Corp., Meridian Rail Mexico City Corp.,Brandon Railroad LLC, Gunderson Specialty Products, LLC and Greenbrier Railcar Leasing, Inc. No other subsidiaries guarantee the Notes includingGreenbrier Union Holdings I LLC, Greenbrier MUL Holdings I LLC, Greenbrier Leasing Limited, Greenbrier Europe B.V., Greenbrier Germany GmbH,WagonySwidnica S.A., Zaklad Naprawczy Taboru Kolejowego Olawa sp. z o.o., Zaklad Transportu Kolejowego SIARKOPOL sp. z o.o., Gunderson-Concarril, S.A. de C.V., Greenbrier Rail Services Canada, Inc., Mexico Meridianrail Services, S.A. de C.V., Greenbrier Railcar Services – Tierra Blanca S.A.de C.V., YSD Doors, S.A. de C.V., Gunderson-Gimsa S.A. de C.V., Greenbrier, S.A. de C.V. and Greenbrier-Gimsa, LLC.The following represents the supplemental consolidating condensed financial information of Greenbrier and its guarantor and non guarantor subsidiaries, as ofAugust 31, 2013 and 2012 and for the years ended August 31, 2013, 2012 and 2011. The information is presented on the basis of Greenbrier accounting forits ownership of its wholly owned subsidiaries using the equity method of accounting. The equity method investment for each subsidiary is recorded by theparent in intangibles and other assets. Intercompany transactions of goods and services between the guarantor and non guarantor subsidiaries are presented asif the sales or transfers were at fair value to third parties and eliminated in consolidation. 68 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Balance SheetAs of August 31, 2013 Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Assets Cash and cash equivalents $63,173 $25 $34,237 $– $97,435 Restricted cash – 1,907 6,900 – 8,807 Accounts receivable, net 37,623 217,268 54,412 (154,455) 154,848 Inventories – 151,023 165,855 (95) 316,783 Leased railcars for syndication – 68,827 – (347) 68,480 Equipment on operating leases, net – 304,234 3,809 (2,575) 305,468 Property, plant and equipment, net 2,112 103,315 96,106 – 201,533 Goodwill – 57,416 – – 57,416 Intangibles and other assets, net 716,029 118,541 13,515 (769,114) 78,971 $818,937 $1,022,556 $374,834 $(926,586) $1,289,741 Liabilities and Equity Revolving notes $– $– $48,209 $– $48,209 Accounts payable and accrued liabilities 137,631 178,662 154,096 (154,451) 315,938 Deferred income taxes 8,093 86,610 – (8,663) 86,040 Deferred revenue 155 8,546 98 39 8,838 Notes payable 244,856 126,863 2,170 – 373,889 Total equity-Greenbrier 428,202 621,875 141,945 (763,820) 428,202 Noncontrolling interest – – 28,316 309 28,625 Total equity 428,202 621,875 170,261 (763,511) 456,827 $818,937 $1,022,556 $374,834 $(926,586) $1,289,741 The Greenbrier Companies 2013 Annual Report 69 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of OperationsFor the year ended August 31, 2013 Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Revenue Manufacturing $– $666,171 $1,001,017 $(451,454) $1,215,734 Wheels, Repair & Parts – 480,849 – (11,627) 469,222 Leasing & Services 806 70,672 1 (17) 71,462 806 1,217,692 1,001,018 (463,098) 1,756,418 Cost of revenue Manufacturing – 610,379 928,461 (455,951) 1,082,889 Wheels, Repair & Parts – 443,337 – (11,836) 431,501 Leasing & Services – 35,754 – (99) 35,655 – 1,089,470 928,461 (467,886) 1,550,045 Margin 806 128,222 72,557 4,788 206,373 Selling and administrative 38,636 30,937 33,602 – 103,175 Net gain on disposition of equipment – (16,238) (1,276) (558) (18,072) Goodwill impairment – 76,900 – – 76,900 Restructuring charges – 2,719 – – 2,719 Earnings (loss) from operations (37,830) 33,904 40,231 5,346 41,651 Other costs Interest and foreign exchange 15,358 3,901 3,100 (201) 22,158 Earnings (loss) before income taxes andearnings (loss) from unconsolidatedaffiliates (53,188) 30,003 37,131 5,547 19,493 Income tax (expense) benefit 21,367 (36,202) (9,067) (1,158) (25,060) Earnings (loss) before earnings (loss) fromunconsolidated affiliates (31,821) (6,199) 28,064 4,389 (5,567) Earnings (loss) from unconsolidated affiliates 20,773 11,532 45 (32,164) 186 Net earnings (loss) (11,048) 5,333 28,109 (27,775) (5,381) Net (earnings) loss attributable tononcontrolling interest – – (3,946) (1,721) (5,667) Net earnings (loss) attributable toGreenbrier $(11,048) $5,333 $24,163 $(29,496) $(11,048) 70 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Consolidating Statement of Comprehensive Income (Loss)For the year ended August 31, 2013 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Net earnings (loss) $(11,048) $5,333 $28,109 $(27,775) $(5,381) Other comprehensive income (loss) Translation adjustment – (34) 1,090 – 1,056 Reclassification of derivative financialinstruments recognized in net earnings(loss) – 1,197 (1,758) – (561) Unrealized loss on derivative financialinstruments – (202) (197) – (399) Other (net of tax effect) – – (203) – (203) – 961 (1,068) – (107) Comprehensive income (loss) (11,048) 6,294 27,041 (27,775) (5,488) Comprehensive (income) loss attributable tononcontrolling interest – – (3,974) (1,721) (5,695) Comprehensive income (loss) attributable toGreenbrier $(11,048) $6,294 $23,067 $(29,496) $(11,183) The Greenbrier Companies 2013 Annual Report 71 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of Cash FlowsFor the year ended August 31, 2013 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net earnings (loss) $(11,048) $5,333 $28,109 $(27,775) $(5,381) Adjustments to reconcile net earnings (loss) to net cashprovided by (used in) operating activities: Deferred income taxes (1,005) (9,983) (611) 1,937 (9,662) Depreciation and amortization 2,124 29,688 9,734 (99) 41,447 Net gain on disposition of equipment – (16,238) (1,276) (558) (18,072) Accretion of debt discount 2,455 – – – 2,455 Stock based compensation expense 6,196 106 – – 6,302 Goodwill impairment – 76,900 – – 76,900 Other – 1,160 (70) (2,145) (1,055) Decrease (increase) in assets: Accounts receivable 15,704 (360) (6,140) (16,527) (7,323) Inventories – 4,975 14,280 (210) 19,045 Leased railcars for syndication – 25,325 – (2,444) 22,881 Other 272 416 28,400 (28,119) 969 Increase (decrease) in liabilities: Accounts payable and accrued liabilities (626) (27,742) (3,200) 16,139 (15,429) Deferred revenue (154) (7,505) (836) 10 (8,485) Net cash provided by (used in) operating activities 13,918 82,075 68,390 (59,791) 104,592 Cash flows from investing activities: Proceeds from sales of assets – 74,545 793 – 75,338 Capital expenditures (515) (28,586) (32,017) 291 (60,827) Decrease (increase) in restricted cash – 139 (2,669) – (2,530) Investment in and advances to unconsolidated affiliates (28,175) (31,325) (2,240) 59,500 (2,240) Other – – (3,582) – (3,582) Net cash provided by (used in) investing activities (28,690) 14,773 (39,715) 59,791 6,159 Cash flows from financing activities: Net changes in revolving notes with maturities of 90 daysor less – – (16,396) – (16,396) Proceeds from revolving notes with maturities longer than90 days – – 38,177 – 38,177 Repayment of revolving notes with maturities longer than90 days – – (34,966) – (34,966) Intercompany advances 95,598 (93,991) (1,607) – – Proceeds from issuance of notes payable – – 2,186 – 2,186 Repayments of notes payable (52,868) (4,090) (1,873) – (58,831) Excess tax benefit from restricted stock awards 900 – – – 900 Investment by joint venture partner – – 3,206 – 3,206 Other (8) – – – (8) Net cash provided by (used in) financing activities 43,622 (98,081) (11,273) – (65,732) Effect of exchange rate changes – 964 (2,119) – (1,155) Increase (decrease) in cash and cash equivalents 28,850 (269) 15,283 – 43,864 Cash and cash equivalents Beginning of period 34,323 294 18,954 – 53,571 End of period $63,173 $25 $34,237 $– $97,435 72 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Balance SheetAs of August 31, 2012 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Assets Cash and cash equivalents $34,323 $294 $18,954 $– $53,571 Restricted cash – 2,047 4,230 – 6,277 Accounts receivable, net 53,326 122,917 45,467 (75,384) 146,326 Inventories – 138,236 178,810 (305) 316,741 Leased railcars for syndication – 100,590 – (2,792) 97,798 Equipment on operating leases, net – 365,925 – (2,957) 362,968 Property, plant and equipment, net 3,721 106,219 72,489 – 182,429 Goodwill – 137,066 – – 137,066 Intangibles and other assets, net 688,261 91,278 11,304 (709,475) 81,368 $779,631 $1,064,572 $331,254 $(790,913) $1,384,544 Liabilities and Equity Revolving notes $– $– $60,755 $– $60,755 Accounts payable and accrued liabilities 43,178 205,477 155,844 (74,991) 329,508 Deferred income taxes 9,097 96,593 – (10,327) 95,363 Deferred revenue 310 15,970 901 13 17,194 Notes payable 295,269 130,953 1,857 – 428,079 Total equity Greenbrier 431,777 615,579 90,761 (706,340) 431,777 Noncontrolling interest – – 21,136 732 21,868 Total equity 431,777 615,579 111,897 (705,608) 453,645 $779,631 $1,064,572 $331,254 $(790,913) $1,384,544 The Greenbrier Companies 2013 Annual Report 73 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of OperationsFor the year ended August 31, 2012 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Revenue Manufacturing $– $809,629 $1,057,996 $(613,661) $1,253,964 Wheels, Repair & Parts – 494,359 – (12,494) 481,865 Leasing & Services 1,102 71,382 – (597) 71,887 1,102 1,375,370 1,057,996 (626,752) 1,807,716 Cost of revenue Manufacturing – 730,850 996,591 (605,057) 1,122,384 Wheels, Repair & Parts – 446,034 – (12,493) 433,541 Leasing & Services – 37,450 – (79) 37,371 – 1,214,334 996,591 (617,629) 1,593,296 Margin 1,102 161,036 61,405 (9,123) 214,420 Selling and administrative 42,486 29,383 32,727 – 104,596 Net gain on disposition of equipment – (8,963) – (1) (8,964) Earnings (loss) from operations (41,384) 140,616 28,678 (9,122) 118,788 Other costs Interest and foreign exchange 18,839 3,754 3,336 (1,120) 24,809 Earnings (loss) before income taxes andearnings (loss) from unconsolidatedaffiliates (60,223) 136,862 25,342 (8,002) 93,979 Income tax (expense) benefit 21,560 (51,655) (4,362) 2,064 (32,393) (38,663) 85,207 20,980 (5,938) 61,586 Earnings (loss) from unconsolidated affiliates 97,371 (537) (1) (97,249) (416) Net earnings (loss) 58,708 84,670 20,979 (103,187) 61,170 Net loss (earnings) attributable tononcontrolling interest – – (5,574) 3,112 (2,462) Net earnings (loss) attributable toGreenbrier $58,708 $84,670 $15,405 $(100,075) $58,708 74 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Consolidating Statement of Comprehensive Income (Loss)For the year ended August 31, 2012 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Net earnings (loss) $58,708 $84,670 $20,979 $(103,187) $61,170 Other comprehensive income (loss) Translation adjustment 11 (367) (3,812) – (4,168) Reclassification of derivative financialinstruments recognized in net earnings(loss) – 1,025 3,963 – 4,988 Unrealized gain (loss) on derivativefinancial instruments – (122) 830 – 708 Other (net of tax effect) – – (130) – (130) 11 536 851 – 1,398 Comprehensive income (loss) 58,719 85,206 21,830 (103,187) 62,568 Comprehensive (income) loss attributable tononcontrolling interest – – (5,446) 3,112 (2,334) Comprehensive income (loss) attributable toGreenbrier $58,719 $85,206 $16,384 $(100,075) $60,234 The Greenbrier Companies 2013 Annual Report 75 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of Cash FlowsFor the year ended August 31, 2012 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net earnings (loss) $58,708 $84,670 $20,979 $(103,187) $61,170 Adjustments to reconcile net earnings (loss) to net cash providedby (used in) operating activities: Deferred income taxes 23,749 (7,548) (2,520) (2,064) 11,617 Depreciation and amortization 2,596 31,618 8,236 (79) 42,371 Gain on sales of leased equipment – (8,963) – (1) (8,964) Accretion of debt discount 3,259 – – – 3,259 Stock based compensation expense 8,757 – – – 8,757 Other – 1,024 37 3,844 4,905 Decrease (increase) in assets: Accounts receivable 13,197 44,373 (20,223) 416 37,763 Inventories – 3,395 313 1 3,709 Leased railcars for syndication – (78,863) – 2,792 (76,071) Other 1,847 (393) 4,878 (6,332) – Increase (decrease) in liabilities: Accounts payable and accrued liabilities (43,798) 55,609 4,448 (23) 16,236 Deferred revenue (155) 10,711 735 13 11,304 Net cash provided by (used in) operating activities 68,160 135,633 16,883 (104,620) 116,056 Cash flows from investing activities: Proceeds from sales of equipment – 33,560 – – 33,560 Capital expenditures (709) (89,531) (28,684) 1,039 (117,885) Decrease (increase) in restricted cash – 66 (4,230) – (4,164) Investment in and net advances to unconsolidated affiliates (103,703) 230 (614) 103,581 (506) Intercompany advances 19,092 – – (19,092) – Other – 48 – – 48 Net cash provided by (used in) investing Activities (85,320) (55,627) (33,528) 85,528 (88,947) Cash flows from financing activities: Net changes in revolving notes with maturities of 90days or less (60,000) – 2,698 – (57,302) Proceeds from revolving notes with maturities longerthan 90 days – – 63,773 – 63,773 Repayment of revolving notes with maturities longerthan 90 days – – (33,934) – (33,934) Intercompany advances 76,476 (76,936) (18,632) 19,092 – Proceeds from issuance of notes Payable – 250 2,500 – 2,750 Repayments of notes payable – (4,166) (2,904) – (7,070) Excess tax benefit from restricted stock awards 1,627 – – – 1,627 Investment by joint venture partner – – 1,362 – 1,362 Net cash provided by (used in) financing activities 18,103 (80,852) 14,863 19,092 (28,794) Effect of exchange rate changes 12 611 4,411 – 5,034 Increase (decrease) in cash and cash equivalents 955 (235) 2,629 – 3,349 Cash and cash equivalents Beginning of period 33,368 529 16,325 – 50,222 End of period $34,323 $294 $18,954 $– $53,571 76 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of OperationsFor the year ended August 31, 2011 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Revenue Manufacturing $1,429 $413,608 $532,444 $(226,379) $721,102 Wheels, Repair & Parts – 467,544 – (14,679) 452,865 Leasing & Services 1,833 68,646 – (1,156) 69,323 3,262 949,798 532,444 (242,214) 1,243,290 Cost of revenue Manufacturing – 394,638 492,855 (226,366) 661,127 Wheels, Repair & Parts – 419,824 – (14,375) 405,449 Leasing & Services – 37,253 – (70) 37,183 – 851,715 492,855 (240,811) 1,103,759 Margin 3,262 98,083 39,589 (1,403) 139,531 Selling and administrative 37,450 22,256 20,620 – 80,326 Gain on disposition of equipment – (8,227) – (142) (8,369) Earnings (loss) from operations (34,188) 84,054 18,969 (1,261) 67,574 Other costs Interest and foreign exchange 32,002 4,022 2,134 (1,166) 36,992 Loss on extinguishment of debt 15,657 – – – 15,657 Earnings (loss) before income taxes andearnings (loss) from unconsolidatedaffiliates (81,847) 80,032 16,835 (95) 14,925 Income tax (expense) benefit 30,940 (32,953) (1,642) 91 (3,564) (50,907) 47,079 15,193 (4) 11,361 Earnings (loss) from unconsolidatedaffiliates 57,373 4,196 – (64,543) (2,974) Net earnings (loss) 6,466 51,275 15,193 (64,547) 8,387 Net loss (earnings) attributable tononcontrolling interest – – (1,923) 2 (1,921) Net earnings (loss) attributable toGreenbrier $6,466 $51,275 $13,270 $(64,545) $6,466 The Greenbrier Companies 2013 Annual Report 77 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Consolidating Statement of Comprehensive Income (Loss)For the year ended August 31, 2011 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Net earnings (loss) $6,466 $51,275 $15,193 $(64,547) $8,387 Other comprehensive income (loss) Translation adjustment – 390 1,815 – 2,205 Reclassification of derivative financialinstruments recognized in net earnings(loss) – (1,100) 71 – (1,029) Unrealized gain (loss) on derivativefinancial instruments – 1,560 (3,421) – (1,861) Other (net of tax effect) – – (6) – (6) – 850 (1,541) – (691) Comprehensive income (loss) 6,466 52,125 13,652 (64,547) 7,696 Comprehensive (income) loss attributable tononcontrolling interest – – (1,923) 2 (1,921) Comprehensive income (loss) attributable toGreenbrier $6,466 $52,125 $11,729 $(64,545) $5,775 78 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Greenbrier Companies, Inc.Condensed Consolidating Statement of Cash FlowsFor the year ended August 31, 2011 (In thousands) Parent CombinedGuarantorSubsidiaries CombinedNon-GuarantorSubsidiaries Eliminations Consolidated Cash flows from operating activities: Net earnings (loss) $6,466 $51,275 $15,193 $(64,547) $8,387 Adjustments to reconcile net earnings (loss) to net cash providedby (used in) operating activities: Deferred income taxes (15,380) 16,560 1,311 (92) 2,399 Depreciation and amortization 2,701 29,413 6,250 (71) 38,293 Gain on sales of leased equipment – (4,979) – (142) (5,121) Accretion of debt discount 6,583 – – – 6,583 Stock based compensation expense 7,073 – – – 7,073 Loss on extinguishment of debt (non-cash portion) 8,453 – – – 8,453 Other – 151 (465) 3 (311) Decrease (increase) in assets: Accounts receivable 3,033 (97,572) (1,992) (21) (96,552) Inventories – (3,503) (113,667) 304 (116,866) Leased railcars for syndication – (21,857) 1,018 – (20,839) Other 4,265 3,181 338 1,079 8,863 Increase (decrease) in liabilities: Accounts payable and accrued liabilities 394 36,161 94,096 22 130,673 Deferred revenue (155) (4,154) (978) – (5,287) Net cash provided by (used in) operating activities 23,433 4,676 1,104 (63,465) (34,252) Cash flows from investing activities: Proceeds from sales of equipment – 18,730 – – 18,730 Capital expenditures (1,996) (65,140) (17,168) 2 (84,302) Decrease (increase) in restricted cash – 412 – – 412 Investment in and net advances to unconsolidated affiliates (57,373) (8,420) – 63,463 (2,330) Intercompany advances (1,334) – – 1,334 – Other – 61 (1,835) – (1,774) Net cash provided by (used in) investing activities (60,703) (54,357) (19,003) 64,799 (69,264) Cash flows from financing activities: Net changes in revolving notes with maturities of 90 daysor less 60,000 – 11,625 – 71,625 Proceeds from revolving notes with maturities longer than90 days – – 25,159 – 25,159 Repayment of revolving notes with maturities longer than90 days – – (10,000) – (10,000) Intercompany advances (55,401) 52,806 3,929 (1,334) – Proceeds from issuance of notes payable 230,000 – 1,250 – 231,250 Debt issuance costs (11,469) – – (11,469) Repayments of notes payable (306,750) (4,206) (404) – (311,360) Proceeds from equity offering 63,180 – – – 63,180 Expenses from equity offering (420) – – – (420) Other 26 – – – 26 Net cash provided by (used in) financing activities (20,834) 48,600 31,559 (1,334) 57,991 Effect of exchange rate changes – 751 (3,868) – (3,117) Increase (decrease) in cash and cash equivalents (58,104) (330) 9,792 – (48,642) Cash and cash equivalents Beginning of period 91,472 859 6,533 – 98,864 End of period $33,368 $529 $16,325 $– $50,222 The Greenbrier Companies 2013 Annual Report 79 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNote 29 – Subsequent EventsIn October 2013, the Board of Directors authorized the Company to repurchase up to $50 million of the Company’s common stock. Under the share buybackprogram, shares of common stock may be purchased on the open market or through privately negotiated transactions from time-to-time. The timing andamount of purchases will be based upon market conditions, securities law limitations and other factors. The share buyback program does not obligate theCompany to acquire any specific number of shares in any period. The share buyback program expires April 30, 2015, but may be modified, suspended ordiscontinued at any time without prior notice.The Company operates two manufacturing facilities in Sahagun, Mexico, one of which the Company owns and one which is leased. In September 2013, theCompany was notified by the landlord of its leased facility that the landlord does not intend to renew the lease following the expiration of the lease term inNovember 2014. While the Company continues to discuss the potential extension of the lease, the Company is also planning for alternatives to replace themanufacturing capacity of such facility, including potentially through expanding production capacity at the Company’s owned facility in Sahagun, Mexico orat other manufacturing sites. 80 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsQuarterly Results of Operations (Unaudited)Operating results by quarter for 2013 are as follows: (In thousands, except per share amount) First Second Third Fourth Total 2013 Revenue Manufacturing $285,368 $294,047 $284,591 $351,728 $1,215,734 Wheels, Repair & Parts 112,100 111,952 131,167 114,003 469,222 Leasing & Services 17,906 17,167 17,905 18,484 71,462 415,374 423,166 433,663 484,215 1,756,418 Cost of revenue Manufacturing 258,492 262,650 253,360 308,387 1,082,889 Wheels, Repair & Parts 101,476 103,134 120,476 106,415 431,501 Leasing & Services 7,627 9,107 9,808 9,113 35,655 367,595 374,891 383,644 423,915 1,550,045 Margin 47,779 48,275 50,019 60,300 206,373 Selling and administrative 26,100 24,942 25,322 26,811 103,175 Net gain on disposition of equipment (1,408) (3,076) (5,131) (8,457) (18,072) Goodwill impairment – – 76,900 – 76,900 Restructuring charges – – – 2,719 2,719 Earnings (loss) from operations 23,087 26,409 (47,072) 39,227 41,651 Other costs Interest and foreign exchange 5,900 6,322 5,905 4,031 22,158 Earnings (loss) before income tax and earnings (loss) from unconsolidatedaffiliates 17,187 20,087 (52,977) 35,196 19,493 Income tax expense (4,586) (5,590) (2,729) (12,155) (25,060) Earnings (loss) from unconsolidated affiliates (40) (105) 82 249 186 Net earnings (loss) 12,561 14,392 (55,624) 23,290 (5,381) Net earnings attributable to noncontrolling interest (2,134) (553) (406) (2,574) (5,667) Net earnings (loss) attributable to Greenbrier $10,427 $13,839 $(56,030) $20,716 $(11,048) Basic earnings (loss) per common share: $0.38 $0.51 $(2.10) $0.74 $(0.41) Diluted earnings (loss) per common share: $0.35 $0.45 $(2.10) $0.64 $(0.41) (1)Quarterly amounts do not total to the year to date amount as each period is calculated discretely.(2)Quarterly amounts do not total to the year to date amount as each period is calculated discretely. For the first, second and fourth quarters, diluted earnings per common share includes the outstanding warrants usingthe treasury stock method and the dilutive effect of shares underlying the 2018 Convertible Notes using the “if converted” method in which debt issuance and interest costs, net of tax, were added back to net earnings. The Greenbrier Companies 2013 Annual Report 81 (1)(2)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsQuarterly Results of Operations (Unaudited)Operating results by quarter for 2012 are as follows: (In thousands, except per share amount) First Second Third Fourth Total 2012 Revenue Manufacturing $262,656 $320,206 $364,930 $306,172 $1,253,964 Wheels, Repair & Parts 117,749 119,894 125,145 119,077 481,865 Leasing & Services 17,794 18,086 17,722 18,285 71,887 398,199 458,186 507,797 443,534 1,807,716 Cost of revenue Manufacturing 236,188 290,851 325,424 269,921 1,122,384 Wheels, Repair & Parts 105,891 106,554 111,610 109,486 433,541 Leasing & Services 9,663 9,295 8,825 9,588 37,371 351,742 406,700 445,859 388,995 1,593,296 Margin 46,457 51,486 61,938 54,539 214,420 Selling and administrative 23,235 24,979 28,784 27,598 104,596 Net gain on disposition of equipment (3,658) (2,654) (2,585) (67) (8,964) Earnings from operations 26,880 29,161 35,739 27,008 118,788 Other costs Interest and foreign exchange 5,383 6,630 6,560 6,236 24,809 Earnings before income tax and earnings (loss) from unconsolidatedaffiliates 21,497 22,531 29,179 20,772 93,979 Income tax expense (7,797) (5,348) (8,655) (10,593) (32,393) Earnings (loss) from unconsolidated affiliates (372) 72 201 (317) (416) Net earnings 13,328 17,255 20,725 9,862 61,170 Net (earnings) loss attributable to Noncontrolling interest 1,189 415 (1,608) (2,458) (2,462) Net earnings attributable to Greenbrier $14,517 $17,670 $19,117 $7,404 $ 58,708 Basic earnings per common share: $0.57 $0.66 $0.71 $0.27 $ 2.21 Diluted earnings per common share: $0.48 $0.57 $0.61 $0.26 $ 1.91 (1)Quarterly amounts do not total to the year to date amount as each period is calculated discretely. Dilutive earnings per common share includes the outstanding warrants using the treasury stock method and thedilutive effect of shares underlying the 2018 Convertible Notes using the “if converted” method in which debt issuance and interest costs, net of tax, were added back to net earnings. 82 The Greenbrier Companies 2013 Annual Report (1)Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURENone. Item 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls and ProceduresOur management has evaluated, under the supervision and with the participation of our President and Chief Executive Officer and Chief Financial Officer, theeffectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15(b) under the SecuritiesExchange Act of 1934 (the Exchange Act). Based on that evaluation, our President and Chief Executive Officer and Chief Financial Officer have concludedthat, as of the end of the period covered by this report, our disclosure controls and procedures were effective in ensuring that information required to bedisclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to ourmanagement, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding requireddisclosure.Changes in Internal ControlsThere have been no changes in our internal control over financial reporting during the quarter ended August 31, 2013 that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting.Management’s Report on Internal Control over Financial ReportingManagement of The Greenbrier Companies, Inc. together with its consolidated subsidiaries (the Company), is responsible for establishing and maintainingadequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of theCompany’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the UnitedStates of America.As of the end of the Company’s 2013 fiscal year, management conducted an assessment of the effectiveness of the Company’s internal control over financialreporting based on the framework established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of theTreadway Commission (COSO). Based on this assessment, management has determined that the Company’s internal control over financial reporting as ofAugust 31, 2013 is effective.Our independent registered public accounting firm, KPMG LLP, independently assessed the effectiveness of the Company’s internal control over financialreporting, as stated in their attestation report, which is included at the end of Part II, Item 9A of this Form 10-K. The Greenbrier Companies 2013 Annual Report 83 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInherent Limitations on Effectiveness of ControlsThe Company’s management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and proceduresor our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that thereare resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues andinstances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can befaulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, bycollusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptionsabout the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential futureconditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because ofchanges in conditions or deterioration in the degree of compliance with policies or procedures. 84 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersThe Greenbrier Companies, Inc.We have audited The Greenbrier Companies, Inc. and subsidiaries (the “Company”) internal control over financial reporting as of August 31, 2013, based oncriteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of theeffectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of August 31, 2013 based on criteriaestablished in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof the Company as of August 31, 2013 and 2012 and the related consolidated statements of operations, comprehensive income (loss), equity and cash flowsfor the three years ended August 31, 2013, and our report dated October 31, 2013 expressed an unqualified opinion on those consolidated financial statements./s/ KPMG LLPPortland, OregonOctober 31, 2013 The Greenbrier Companies 2013 Annual Report 85 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 9B.OTHER INFORMATIONNonePART III Item 10.DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThere is hereby incorporated by reference the information under the captions “Election of Directors,” “Board Committees, Meetings and Charters,” “Section16(a) Beneficial Ownership Reporting Compliance” and “Executive Officers of the Company” in the Company’s definitive Proxy Statement to be filedpursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end ofRegistrant’s year ended August 31, 2013. Item 11.EXECUTIVE COMPENSATIONThere is hereby incorporated by reference the information under the caption “Executive Compensation” and “Compensation Committee Report” in Registrant’sdefinitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and ExchangeCommission within 120 days after the end of Registrant’s year ended August 31, 2013. Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDERS MATTERSThere is hereby incorporated by reference the information under the captions “Security Ownership of Certain Beneficial Owners and Management” and“Equity Compensation Plan Information” in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement isanticipated to be filed with the Securities and Exchange Commission within 120 days after the end of Registrant’s year ended August 31, 2013. Item 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORINDEPENDENCEThere is hereby incorporated by reference the information under the caption “Transactions with Related Persons” and “Independence of Directors” inRegistrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities andExchange Commission within 120 days after the end of Registrant’s year ended August 31, 2013. Item 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThere is hereby incorporated by reference the information under the caption “Ratification of Appointment of Auditors” in Registrant’s definitive ProxyStatement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120days after the end of the Registrant’s year ended August 31, 2013. 86 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IV Item 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (1)Financial StatementsSee Consolidated Financial Statements in Item 8 (a)(2) Financial Statements Schedule* *All other schedules have been omitted because they are inapplicable, not required or because the information is given in the Consolidated Financial Statements or notes thereto. This supplemental schedule should beread in conjunction with the Consolidated Financial Statements and notes thereto included in this report. (a)(3) The following exhibits are filed herewith and this list is intended to constitute the exhibit index: 3.1 Registrant’s Articles of Incorporation are incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 10-Q filed April 5, 2006.3.2 Articles of Merger amending the Registrant’s Articles of Incorporation are incorporated herein by reference to Exhibit 3.2 to the Registrant’s Form10-Q filed April 5, 2006.3.3 Registrant’s Bylaws, as amended January 11, 2006, are incorporated herein by reference to Exhibit 3.3 to the Registrant’s Form 10-Q filed April5, 2006.3.4 Amendment to the Registrant’s Bylaws, dated October 31, 2006, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-Kfiled November 6, 2006.3.5 Amendment to the Registrant’s Bylaws, dated January 8, 2008, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-Kfiled November 8, 2007.3.6 Amendment to the Registrant’s Bylaws, dated April 8, 2008, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filedApril 11, 2008.3.7 Amendment to the Registrant’s Bylaws, dated April 7, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filedApril 13, 2009.3.8 Amendment to the Registrant’s Bylaws, dated June 8, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filedJune 10, 2009.3.9 Amendment to the Registrant’s Bylaws, dated June 10, 2009, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filedJune 12, 2009.3.10 Amendment to the Registrant’s Bylaws, dated October 30, 2012, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-Kfiled November 5, 2012.3.11 Amendment to the Registrant’s Bylaws, dated January 9, 2013, is incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-Kfiled January 15, 2013.4.1 Specimen Common Stock Certificate of Registrant is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Registration Statement onForm S-3 filed April 7, 2010 (SEC File Number 333-165924).4.2 Indenture between the Registrant, the Guarantors named therein and U.S. Bank National Association as Trustee, dated May 22, 2006, isincorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed May 25, 2006.4.3 Rights Agreement between the Registrant and EquiServe Trust Company, N.A., as Rights Agent, dated as of July 13, 2004, is incorporated hereinby reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form 8-A filed September 16, 2004. The Greenbrier Companies 2013 Annual Report 87 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued) 4.4 Amendment No. 1 to the Rights Agreement, dated November 9, 2004, is incorporated herein by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed November 15, 2004.4.5 Amendment No. 2 to the Rights Agreement, dated February 5, 2005, is incorporated herein by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed February 9, 2005.4.6 Amendment No. 3 to the Rights Agreement, dated June 10, 2009, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-Kfiled June 12, 2009.4.7 Amendment No. 4 to the Rights Agreement, dated March 29, 2011, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-Kfiled March 30, 2011.4.8 Investor Rights and Restrictions Agreement among the Registrant, WLR Recovery Fund IV, L.P., WLR IV Parallel ESC, L.P., WL Ross & Co.LLC and the other holders from time to time party thereto, dated June 10, 2009, is incorporated herein by reference to Exhibit 4.3 to theRegistrant’s Form 8-K filed June 12, 2009.4.9 Indenture between the Registrant and U.S. Bank National Association, as Trustee, including the form of Global Note attached as Exhibit Athereto, dated April 5, 2011, is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed April 5, 2011.10.1 Registration Rights Agreement among the Registrant, the Guarantors named therein, Bear, Stearns & Co. Inc. and Banc of America SecuritiesLLC, dated May 22, 2006, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 25, 2006.10.2 Second Amended and Restated Credit Agreement among the Registrant, Bank of America, N.A., as Administrative Agent, Union Bank, NationalAssociation, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Sole Book Manager, and thelenders identified therein, dated June 30, 2011, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed July 7, 2011.10.3 Lender Joinder Agreement by and among The Private Bank and Trust Company, the Registrant and Bank Of America, N.A., dated as ofNovember 2, 2011, to the Second Amended and Restated Credit Agreement dated as of June 30, 2011 by and among the Registrant, the lendersparty thereto and Bank of America, N.A., is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed January 6, 2012.10.4 Lender Joinder Agreement by and among Wells Fargo Bank, National Association, the Registrant and Bank Of America, N.A., dated as ofDecember 12, 2011, to the Second Amended and Restated Credit Agreement dated as of June 30, 2011 by and among the Registrant, the lendersparty thereto and Bank of America, N.A., is incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed January 6, 2012.10.5 Amendment No. 1, dated October 7, 2010 [sic], to the Second Amended and Restated Credit Agreement among the Registrant, Bank of America,N.A., as Administrative Agent, Union Bank, National Association, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated,as Sole Lead Arranger and Sole Book Manager, and the lenders identified therein, dated as of June 30, 2011, is incorporated herein by reference toExhibit 10.3 to the Registrant’s Form 10-Q filed April 4, 2013.10.6 Amendment No. 2, dated February 8, 2013, to the Second Amended and Restated Credit Agreement among the Registrant, Bank of America,N.A., as Administrative Agent, Union Bank, National Association, as Syndication Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated,as Sole Lead Arranger and Sole Book Manager, and the lenders identified therein, dated as of June 30, 2011, is incorporated herein by reference toExhibit 10.4 to the Registrant’s Form 10-Q filed April 4, 2013. 88 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued) 10.7* Amended and Restated Employment Agreement between the Registrant and Mr. William A. Furman, dated August 28, 2012, is incorporatedherein by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed January 9, 2013.10.8* Form of Amended and Restated Employment Agreement between the Registrant and certain of its executive officers, as amended and restated onAugust 28, 2012, is incorporated herein by reference to Exhibit 10.8 to the Registrant’s Form 10-K filed November 1, 2012.10.9 Form of Agreement concerning Indemnification and Related Matters (Directors) between Registrant and its directors is incorporated herein byreference to Exhibit 10.15 to the Registrant’s Form 10-K filed November 10, 2008.10.10 Form of Agreement concerning Indemnification and Related Matters (Officers) between Registrant and its officers is incorporated herein byreference to Exhibit 10.2 to the Registrant’s Form 10-Q filed April 4, 2013.10.11* Consulting Agreement between A. Daniel O’Neal Jr. and Greenbrier Leasing Company LLC, dated December 31, 2010, is incorporated herein byreference to Exhibit 10.1 to the Registrant’s Form 10-Q filed April 7, 2011.10.12* Consulting Agreement between C. Bruce Ward and Greenbrier Leasing Corporation, dated March 31, 2005 and as amended on January 1, 2007,is incorporated herein by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed December 13, 2010.10.13* Consulting Agreement between Timothy A. Stuckey and the Registrant, dated June 30, 2013.10.14* Form of Change of Control Agreement is incorporated herein by reference to Exhibit 10.26 to the Registrant’s Form 10-K filed November 10,2008.10.15* The Greenbrier Companies, Inc. Form of Amendment to Change of Control Agreement, approved on May 28, 2013, is incorporated herein byreference to Exhibit 10.2 of the Registrant’s Form 8-K filed June 6, 2013.10.16* Second Amended and Restated Change of Control Agreement between the Registrant and William Glenn, dated August 28, 2012, is incorporatedherein by reference to Exhibit 10.17 to the Registrant’s Form 10-K filed November 1, 201210.17* 2009 Employee Stock Purchase Plan is incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement on Schedule 14A filedNovember 25, 2008.10.18* First Amendment to 2009 Employee Stock Purchase Plan, dated April 5, 2010, is incorporated herein by reference to Exhibit 10.1 to theRegistrant’s Form 10-Q filed July 7, 2010.10.19* The Greenbrier Companies, Inc. 2010 Amended and Restated Stock Incentive Plan is incorporated herein by reference to Appendix B to theRegistrant’s Proxy Statement on Schedule 14A filed November 24, 2010.10.20* Amendment No. 1 to The Greenbrier Companies, Inc. 2010 Amended and Restated Stock Incentive Plan is incorporated herein by reference to theRegistrant’s Form 10-Q filed April 4, 2013.10.21* Form of Director Restricted Share Agreement related to the 2010 Amended and Restated Stock Incentive Plan is incorporated herein by reference toExhibit 10.2 to the Registrant’s Form 10-Q filed April 7, 2011.10.22* Form of Employee Restricted Share Agreement (time and performance vesting) related to the 2010 Amended and Restated Stock Incentive Plan isincorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed July 8, 2011. The Greenbrier Companies 2013 Annual Report 89 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued) 10.23* Form of Employee Restricted Share Agreement as amended on April 2, 2012 (time and performance vesting) related to the 2010 Amended andRestated Stock Incentive Plan is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed June 29, 2012.10.24* The Greenbrier Companies, Inc. Nonqualified Deferred Compensation Plan Basic Plan Document is incorporated herein by reference to Exhibit10.38 to the Registrant’s Form 10-K filed November 4, 2011.10.25* The Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement is incorporated herein by reference to Exhibit 10.39 tothe Registrant’s Form 10-K filed November 4, 2011.10.26* Amendment No. 1 to the Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement, dated May 25, 2011, isincorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed July 8, 2011.10.27* Amendment No. 2 to the Greenbrier Companies Nonqualified Deferred Compensation Plan, dated August 28, 2012, is incorporated herein byreference to Exhibit 10.27 to the Registrant’s Form 10-K filed November 1, 2012.10.28* Updated Rabbi Trust Agreements, dated October 1, 2012, related to The Greenbrier Companies, Inc. Nonqualified Deferred Compensation Plan,are incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed January 9, 2013.10.29* The Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement for Directors, dated July 1, 2012, is incorporatedherein by reference to Exhibit 10.28 to the Registrant’s Form 10-K filed November 1, 2012.10.30* Updated Rabbi Trust Agreements, dated October 1, 2012, related to the Greenbrier Companies,Inc. Nonqualified Deferred Compensation Planfor Directors, are incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed January 9, 2013.10.31* The Greenbrier Companies, Inc. Form of Restricted Stock Unit Agreement, approved on May 28, 2013, is incorporated herein by reference toExhibit 10.1 of the Registrant’s Form 8-K filed June 3, 2013.10.32 Railcar Remarketing and Management Agreement between Greenbrier Management Services, LLC and WL Ross-Greenbrier Rail I LLC, dated asof April 29, 2010, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed May 3, 2010.**10.33 Advisory Services Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of April 29, 2010, isincorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed May 3, 2010.**10.34 Contract Placement Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of April 29, 2010, isincorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed May 3, 2010.**10.35 Syndication Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of April 29, 2010, is incorporatedherein by reference to Exhibit 10.4 to the Registrant’s Form 8-K filed May 3, 2010.**10.36 Amendment to Syndication Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of August 18, 2010,is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed August 20, 2010. 90 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsEXHIBITS AND FINANCIAL STATEMENT SCHEDULES (continued) 10.37 Line of Credit Participation Letter Agreement between Greenbrier Leasing Company LLC and WLR-Greenbrier Rail Inc., dated as of April 29,2010, is incorporated herein by reference to Exhibit 10.5 to the Registrant’s Form 8-K filed May 3, 2010.**10.38 Guaranty of Greenbrier Leasing Company LLC, dated as of April 29, 2010, is incorporated herein by reference to Exhibit 10.6 to the Registrant’sForm 8-K filed May 3, 2010.**10.39 Guaranty of the Greenbrier Companies, Inc., dated as of August 18, 2010, is incorporated herein by reference to Exhibit 10.2 to the Registrant’sForm 8-K filed August 20, 2010.10.40 Purchase Agreement among The Greenbrier Companies, Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co.,dated March 30, 2011, is incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed April 5, 2011.10.41 The Greenbrier Companies, Inc. Executive Stock Ownership Guidelines, adopted as of August 28, 2012, is incorporated herein by reference toExhibit 10.39 to the Registrant’s Form 10-K filed November 1, 2012.14.1 Code of Business Conduct and Ethics is incorporated herein by reference to Exhibit 14.1 to the Registrant’s Form 8-K filed January 11, 2012.21.1 List of the subsidiaries of the Registrant.23.1 Consent of KPMG LLP, independent auditors.31.1 Certification pursuant to Rule 13(a) – 14(a).31.2 Certification pursuant to Rule 13(a) – 14(a).32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101 The following financial information from the Company’s Annual Report on Form 10-K for the year ended August 31, 2013, formatted in XBRL(eXtensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the ConsolidatedStatements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss) (iv) the Consolidated Statements of Equity (v) theConsolidated Statements of Cash Flows; (vi) the Notes to Condensed Consolidated Financial Statements. *Management contract or compensatory plan or arrangement **Certain confidential information contained in these Exhibits was omitted by means of redacting a portion of the text and replacing it with brackets and asterisks ([***]). These Exhibits have been filed separately withthe SEC without the redaction and have been granted confidential treatment by the Securities and Exchange Commission pursuant to a Confidential Treatment Request under Rule 24b-2 of the Securities ExchangeAct of 1934, as amended.Note: For all exhibits incorporated by reference, unless otherwise noted above, the SEC file number is 001-13146. The Greenbrier Companies 2013 Annual Report 91 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsSIGNATURESPursuant 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 itsbehalf by the undersigned, thereunto duly authorized.THE GREENBRIER COMPANIES, INC.Dated: October 31, 2013 By: /s/ William A. Furman William A. Furman President and Chief Executive OfficerPursuant 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 andin the capacities and on the dates indicated. Signature Date/s/ Benjamin R. WhiteleyBenjamin R. Whiteley, Chairman of the Board October 31, 2013/s/ William A. FurmanWilliam A. Furman, President andChief Executive Officer, Director October 31, 2013/s/ Graeme A. JackGraeme A. Jack, Director October 31, 2013/s/ Duane C. McDougallDuane McDougall, Director October 31, 2013/s/ Victoria McManusVictoria McManus, Director October 31, 2013/s/ A. Daniel O’Neal, Jr.A. Daniel O’Neal, Jr., Director October 31, 2013/s/ Charles J. SwindellsCharles J. Swindells, Director October 31, 2013/s/ Wendy L. TeramotoWendy L. Teramoto, Director October 31, 2013/s/ C. Bruce WardC. Bruce Ward, Director October 31, 2013/s/ Donald A. WashburnDonald A. Washburn, Director October 31, 2013/s/ Mark J. RittenbaumMark J. Rittenbaum, Executive Vice President andChief Financial Officer (Principal Financial Officer) October 31, 2013/s/ Adrian J. DownesAdrian J. Downes, Senior Vice President andChief Accounting Officer (Principal Accounting Officer) October 31, 2013 92 The Greenbrier Companies 2013 Annual Report Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCERTIFICATIONSThe Company filed the required 303A.12(a) New York Stock Exchange Certification of its Chief Financial Officer with the New York Stock Exchange withno qualifications following the 2013 Annual Meeting of Shareholders and the Company filed as an exhibit to its Annual Report on Form 10-K for the yearended August 31, 2012, as filed with the Securities and Exchange Commission, a Certification of the Chief Executive Officer and a Certification of the ChiefFinancial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The Greenbrier Companies 2013 Annual Report 93 Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 10.13CONSULTING AGREEMENTThis Consulting Agreement (this “Agreement”) is entered into by and between Timothy A. Stuckey (“Consultant”) and The Greenbrier Companies, Inc.(“Greenbrier”) effective as of August 29, 2013. Consultant is retired from the position of President of Greenbrier’s wholly-owned subsidiary, Gunderson RailServices LLC dba Greenbrier Rail Services (“GRS”) as of June 30, 2013 and will be retiring as an employee of Greenbrier effective as of August 28, 2013, andthe parties desire to enter into this Agreement in order to provide for an orderly transition of functions and duties in connection with Consultant’s retirement.The parties hereby agree as follows:1. Consulting Term. The “Consulting Term” will commence on August 29, 2013 and will extend for a period of one year unless terminated by eitherparty upon not less than 30 days’ written notice.2. Consulting Services. During the Consulting Term, Consultant will provide consulting services to Greenbrier to support GRS and other Greenbrierbusiness (the “Consulting Services”), as directed by the President and Chief Executive Officer of Greenbrier (the “President”). Consultant is an Oregonresident and may work from his home; however, the parties anticipate that Consultant will be available travel to GRS facilities and to other destinations onGreenbrier business as necessary.3. Consulting Fees. During the Consulting Term Greenbrier will pay Consultant a fee in the amount of $12,042 per month (the “Consulting Fee”). Theparties anticipate that Consultant will provide Consulting Services averaging approximately 20 hours per week.4. Insurance; Expenses; Use of Company Property. During the Consulting Term Greenbrier will continue to cover Consultant under Greenbrier’sgroup health plan, and will pay the cost of the premiums for such coverage. In addition, during the Consulting Term, Greenbrier will provide Consultant witha mobile telephone, iPad, automobile allowance and office support. Consultant will not be eligible to participate in or receive benefits under any other employeebenefit or executive compensation plans or programs sponsored or maintained by Greenbrier or any of its subsidiaries. The foregoing sentence is not intendedto affect any rights that Consultant may have to receive payment of any benefits that accrued to him while he was an employee of Greenbrier or any of itssubsidiaries. For avoidance of doubt, the group health benefits continuation coverage period and automobile allowance continuation period provided for underConsultant’s Amended and Restatement Employment Agreement dated as of August 28, 2012 (the “Employment Agreement”) will begin as of the first day ofthe month following the end of the Consulting Term. Greenbrier will reimburse Consultant for all reasonable and ordinary business expenses incurred in theperformance of Consulting Services under this Agreement, provided that Consultant properly accounts for such expenses in the manner prescribed byGreenbrier from time to time.5. Independent Contractor Status. Consultant’s status will be that of an independent contractor, and nothing contained in this Agreement is intendedto operate or be construed to create an employment relationship between the parties. Consultant will be solely responsible for determining the means andmethods by which the Consulting Services are Page 1 Consulting AgreementSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.performed under this Agreement. Payment of all income, FICA and any other applicable taxes arising from Consultant’s performance under this Agreementwill be the responsibility of Consultant.6. Covenant Not to Compete.(a) During the Restriction Period, Consultant will not directly or indirectly own (as an asset or equity owner), or be employed by or consult for,any business in direct competition with the Company in the same product or service lines in which the Company is engaged as of the effective date of thisAgreement; provided that ownership of one percent (1%) or less of the outstanding stock of a publicly traded corporation will not be deemed to be a violation ofthis Agreement. The Restriction Period will commence on the effective date of this Agreement and will continue for a period following the end of the ConsultingTerm of 12 months plus the number of months this Agreement was in effect. For avoidance of doubt, it is the parties’ intent that the 12-month covenant not tocompete provided for in Section 5 of the Employment Agreement will commence immediately following the end of the Consulting Term and will be extended forthe number of months that this Agreement is in effect.(b) Consultant acknowledges and agrees that a breach of any provision of this Section 6 will cause irreparable damage to Greenbrier and that inthe event of such breach Greenbrier will have, in addition to any and all remedies of law, the right to an injunction, specific performance or other equitablerelief to prevent the violation of my obligations under this Agreement. Any waiver by Greenbrier of a breach of any provision of this Agreement will not operateor be construed as a waiver of any subsequent breach of such provision or any other provision of this Agreement.7. Modification or Termination. This Agreement may be amended, modified or terminated only by mutual agreement of Consultant and Greenbrier.Any amendment or modification of this Agreement will be valid only if in a writing signed by both parties.8. Severability. Each provision in this Agreement will be treated as a separate and independent clause, and the unenforceability of any one clause willin no way impair the enforceability of any of the other clauses in this Agreement. Moreover, if one or more of the provisions contained in this Agreement forany reason is held to be excessively broad as to scope, activity or subject so as to be unenforceable at law, such provision or provisions will be construed bythe appropriate arbitral or judicial body by limiting and reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable lawas it then exists.9. Binding Effect; Assignment. This Agreement will be binding upon and inure to the benefit of both parties and their respective successors, assigns,heirs and personal representatives. The obligations of the Consultant under this Agreement are personal and may not be assigned by Consultant.10. Governing Law; Dispute Resolution. This Agreement will be governed by, and construed in accordance with, the laws of the State of Oregonwithout regard to choice of law rules. Any controversy or claim arising out of or relating to this Agreement will be settled by final and binding arbitration inPortland, Oregon, by a single, neutral arbitrator administered by Page 2 Consulting AgreementSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the Arbitration Service of Portland, Inc. Any filing fee charged by the arbitrator initially and all arbitrator fees and hearing session fees that are required to bepaid in advance will be paid by Greenbrier, pending a determination by the arbitrator of the prevailing party. Consultant is a resident of the state of Oregon.Greenbrier is headquartered in the state of Oregon. Consultant specifically agrees that the venue of any arbitration proceeding will be Portland, Oregon andspecifically irrevocably consents and submits to the jurisdiction of any Oregon court with jurisdiction over the subject matter to compel arbitration under thisAgreement or to enforce an arbitration award, and hereby waives any objection to jurisdiction and venue in any such court, and waive any claim that suchforum is an inconvenient forum. Notwithstanding the provisions of this Section 10, nothing herein will prevent either party from bringing a claim in a court ofcompetent jurisdiction to compel arbitration under this Agreement or to enforce an arbitration award.IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date first written above. COMPANY: CONSULTANT:The Greenbrier Companies, Inc. By: /s/ Martin R. Baker /s/ Timothy A. Stuckey Martin R. BakerSenior Vice President Timothy A. Stuckey Page 3 Consulting AgreementSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 21.1THE GREENBRIER COMPANIES, INC.LIST OF SUBSIDIARIESAs of August 31, 2013 Name State ofIncorporation Names Under Which Does Business (if otherthan registered name)Alliance Castings Company, LLC DE Autostack Company LLC OR Brandon Railroad LLC OR Green Union Holdings I LLC OR Green Union I Trust DE Green Union II Trust DE Green Union III Trust DE Greenbrier MUL Holdings I LLC OR MUL Greenbrier, LLC DE Greenbrier Europe B.V. Netherlands Greenbrier Germany GmbH Germany Greenbrier – GIMSA, LLC OR Greenbrier Leasing Company LLC OR Greenbrier IntermodalGreenbrier Leasing Limited Nova Scotia,Canada Greenbrier Leasing Limited Partner, LLC DE Greenbrier Leasing, L.P. DE Greenbrier Management Services, LLC DE CIT Rail ServicesGreenbrier Rail Holdings I, LLC OR Greenbrier Rail Holdings II, LLC OR Greenbrier Rail Holdings III, LLC OR Greenbrier Rail Services Canada Inc Ontario, Canada Greenbrier Rail Services Tierra Blanca S.A. de C.V. Mexico Greenbrier Railcar Leasing, Inc. WA Greenbrier Railcar LLC OR Greenbrier-Concarril, LLC DE Gunderson-Concarril S.A. de C.V. Mexico Greenbrier S.A. de C.V. Mexico Gunderson – GIMSA S. A. de C.V. Mexico Gunderson LLC OR Gunderson Marine LLC OR Gunderson Rail Services LLC OR American HydraulicsGMO PartsGreenbrier Rail ServicesYSD IndustriesGreenbrier CastingsGunderson Specialty Products, LLC DE Meridian Rail Acquisition Corp. OR Greenbrier Rail ServicesMeridian Rail Holdings Corp. OR Meridian Rail Mexico City Corp. OR Mexico Meridian Rail Services, S.A. de C.V. Mexico Ohio Castings Company, LLC DE WagonySwidnica S.A. Poland YSD Doors, S.A. de C.V Mexico Zaklad Naprawczy Taboru KolejowegoOlawa sp. z o.o. Poland Zaklad Naprawczy Transportu KolejowegoSiarkopol Sp Zoo Poland Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 23.1Consent of Independent Registered Public Accounting FirmThe Board of DirectorsThe Greenbrier Companies, Inc.:We consent to the incorporation by reference in the registration statements (Nos. 333-52032, 333-127922, 333-172933, 333-157591, 333-157593 and 333-116102) on Form S-8 and registration statements (Nos. 333-136014, 333-165924) on Form S-3 of The Greenbrier Companies, Inc. and subsidiaries (the“Company”) of our reports dated October 31, 2013, with respect to the consolidated balance sheets of the Company as of August 31, 2013 and 2012 and therelated consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-year period endedAugust 31, 2013, and the effectiveness of internal control over financial reporting as of August 31, 2013, which reports appear in the August 31, 2013 annualreport on Form 10-K of the Company./s/ KPMGPortland, OregonOctober 31, 2013Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATIONSI, William A. Furman, certify that: 1I have reviewed this annual report on Form 10-K of the Greenbrier Companies for the annual period ended August 31, 2013; 2Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for the registrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for externalpurposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably liketo adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: October 31, 2013/s/ William A. FurmanWilliam A. FurmanPresident and Chief Executive Officer The Greenbrier Companies 2013 Annual ReportSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.2CERTIFICATIONS (cont’d)I, Mark J. Rittenbaum, certify that: 1.I have reviewed this annual report on Form 10-K of the Greenbrier Companies for the annual period ended August 31, 2013; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d-15(f)) for the registrant and have: a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for externalpurposes in accordance with generally accepted accounting principles; c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably liketo adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: October 31, 2013/s/ Mark J. RittenbaumMark J. RittenbaumExecutive Vice President andChief Financial Officer The Greenbrier Companies 2013 Annual ReportSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of The Greenbrier Companies, Inc. (the Company) on Form 10-K for the annual period ended August 31, 2013 as filedwith the Securities and Exchange Commission on the date therein specified (the Report), I, William A. Furman, President and Chief Executive Officer of theCompany, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: October 31, 2013/s/ William A. FurmanWilliam A. FurmanPresident and Chief Executive Officer The Greenbrier Companies 2013 Annual ReportSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of The Greenbrier Companies, Inc. (the Company) on Form 10-K for the annual period ended August 31, 2013 as filedwith the Securities and Exchange Commission on the date therein specified (the Report), I, Mark J. Rittenbaum, Executive Vice President and Chief FinancialOfficer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: October 31, 2013/s/ Mark J. RittenbaumMark J. RittenbaumExecutive Vice President andChief Financial Officer The Greenbrier Companies 2013 Annual ReportSource: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: GREENBRIER COMPANIES INC, 10-K, October 31, 2013Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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