The Greenbrier Companies, Inc. Annual Report 2019

FY2019 Annual Report · The Greenbrier Companies, Inc.

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2019

The Greenbrier Companies
Annual Report

William A. Furman
Chairman and
Chief Executive
Ofﬁcer

LETTER FROM THE CHAIRMAN
AND CHIEF EXECUTIVE OFFICER

To Our Shareholders:

Growth at scale characterized Greenbrier’s performance in ﬁscal 2019. Most prominently, this occurred through the largest
acquisition in the Company’s history: the purchase of the American Railcar Industries (ARI) manufacturing business. At the
same time, Greenbrier continued to bolster its international presence. These actions derive from Greenbrier’s four-pillar
strategy to:

• Protect and strengthen its position in its

• Develop a robust talent pipeline; and

core North American markets;

• Execute on its international strategy;

• Grow the business at scale.

Over the past ﬁve years, Greenbrier has become a sizable provider of freight transportation equipment and services in North
America, Europe, Brazil and the Gulf Cooperation Council (GCC) region.

Financial Proﬁle

Greenbrier achieved record revenue and railcar deliveries in ﬁscal 2019. Adjusted net earnings for the year were $95.2 million,
or $2.87 per diluted share, on revenue of $3.03 billion, with more than 23,000 railcars delivered. Despite challenges in several
business units, Greenbrier ended the year with an impressive cash balance of $330 million, a robust balance sheet and ample
liquidity. The Company starts ﬁscal 2020 with a diversiﬁed railcar backlog of 30,300 units valued at $3.3 billion.

Greenbrier’s shareholders participate in the Company’s ﬁnancial success through quarterly dividends. In the fourth quarter,
Greenbrier’s Board of Directors declared a dividend of $0.25 per share. This equals an annualized rate of $1.00 per share and,
at present share prices, results in a generous annual dividend yield exceeding 3%. The Company’s history of regular dividends
supports a focus on total shareholder return. In recent years, Greenbrier has returned over $269 million to shareholders in
dividends and stock buybacks. Beyond ﬁnancial returns to shareholders, Greenbrier published its inaugural Environmental,
Social and Governance (ESG) report, available at www.gbrx.com.

Manufacturing

ARI’s manufacturing business joined Greenbrier in late July. Through this transaction, Greenbrier welcomed more than 1,600
new employees and added six new operations in Arkansas, Missouri and Texas into Manufacturing. This acquisition aligns
with three of Greenbrier’s four strategic pillars. First, Greenbrier’s presence in its core North American market is stronger
with expansion into the midwestern U.S., closer to customers and their end markets. Next, with employees joining from ARI,
Greenbrier has enhanced its highly skilled workforce, adding more American jobs and deepening its talent pool, particularly
in manufacturing and engineering roles. Third, the acquisition grows Greenbrier’s business at scale through expansion of
its railcar product portfolio and the additional beneﬁts of vertical integration with the acquired ARI component facilities. The
transaction also meaningfully increases Greenbrier’s market share of North American freight railcar backlog, orders
and deliveries.

THE GREENBRIER COMPANIES CEO LETTER

Over the past year, Greenbrier withstood macroeconomic adversity and signiﬁcantly lower freight rail loadings in North
American and international markets. Despite these near-term trends, future demand is expected to remain positive for many
railcar types, including a variety of tank cars, plastic pellet covered hoppers and gondolas. Worldwide, Greenbrier generated
more than $2.4 billion in revenue from Manufacturing in ﬁscal 2019 and exited the year well-positioned and focused. It is now
ﬁrmly established as one of the world’s largest railcar manufacturers and service providers.

Ocean-going barge building remains strong at Greenbrier Gunderson, which celebrated 100 years of continuous operations
during ﬁscal 2019. Currently, the marine business is constructing the largest barge for Jones Act service in its history. As a
result of stronger demand, marine backlog stretches through calendar year-end 2020.

Greenbrier also reaped the beneﬁts of its ongoing product research and development investments with the introduction of a
new 5,185 cubic foot covered hopper, speciﬁcally designed for transporting grain. The most advanced feature of this railcar is
the proprietary Tsunami GateTM, a gate system that permits shippers to customize the discharge speed of grain. This railcar is
expected to be ready for rail interchange service by the second quarter of ﬁscal 2020.

New product designs and manufacturing automation are among the initiatives propelling Greenbrier to greater levels of market
share than at any time in its history.

Leasing & Services

In 2019, Greenbrier’s leasing company continued to invest strategically in its lease ﬂeet. The Company offers a variety
of ﬂexible ﬁnancing options and other unique solutions to customers. Despite lower rail loadings and higher rail velocity,
Greenbrier’s lease ﬂeet utilization remained solid at 93.3% as of August 31, 2019.

Greenbrier’s unique asset management services business supports about 400,000 railcars, and facilitates operations
on almost every Class I railroad. Greenbrier’s management services unit offers a broad array of software and services,
including railcar maintenance management, accounting services, car hire receivable and payable administration, total ﬂeet
management, and administration and railcar re-marketing. Finally, its railcar leasing syndication platform brings Greenbrier
into contact with the world’s leading ﬁxed-asset investors, providing unparalleled service to sophisticated capital market
participants. In addition to aiding placement of Greenbrier’s products, railcar syndication activities foster valuable business
relationships that beneﬁt the Company across its broad range of commercial endeavors.

Wheels, Repair & Parts

Greenbrier continues to make signiﬁcant structural changes in its railcar repair shop network to improve operating efﬁciency
and ﬁnancial performance. Since resuming operational responsibility for 12 repair shops in August 2018, four shops have
been closed. Further changes are underway to standardize processes and increase efﬁciency, to attain proﬁtability. Steady
improvement is expected in Repair operations over ﬁscal 2020.

The Parts group contributed another strong performance in ﬁscal 2019, as current demand is advantageous to Greenbrier’s
product portfolio. Constrained steel scrap prices and reduced railcar loadings have caused headwinds for the Wheels group,

2 0 19 A n n u a l R e p o r t

THE GREENBRIER COMPANIES CEO LETTER

but these operations still have strategic importance to Greenbrier’s customers. The Wheels group continues to improve
operating efﬁciencies, even at lower volume levels. The market for railcar wheels and related services will trend with overall
rail trafﬁc in the years ahead.

International

As a result of key component shortages and aggressively priced commercial transactions, European operations encountered
challenges in ﬁscal 2019. Now, under a new management team, these operations returned to overall proﬁtability in the fourth
quarter of ﬁscal 2019 and have good momentum entering ﬁscal 2020. Disruptions to production from component shortages
have been largely eliminated. The fourth quarter also brought improved order activity in Europe and a strong backlog.

Greenbrier continues to assist the Saudi Railway Company (SAR) with obtaining freight rail equipment in response to
expanding cargo rail movements throughout the Kingdom. The Company is also pursuing opportunities with other nations
in the GCC.

In Brazil, Greenbrier remains optimistic about the long-term outlook for wagon supply, with signiﬁcant demand occurring
as early as 2020 due to continued rail privatization, concession renewals, highway congestion and government policy.
Greenbrier’s Brazilian operations enter ﬁscal 2020 with an improved demand outlook and a growing backlog.

Conclusion

The objective to grow at scale will shape Greenbrier’s business opportunities over the years ahead. In ﬁscal 2019, Greenbrier
exceeded the $3 billion mark in total revenue for the ﬁrst time. The Company is focused on enhancing its presence in the core
North American market and achieving proﬁtable growth in international railcar markets. Greenbrier begins its ﬁscal 2020 year
with a stable backlog, favorable ﬁnancial proﬁle and high level of liquidity.

Greenbrier knows its success would not be possible without broad stakeholder support. The 2019 ESG report discusses the
Company’s dedication to its core values: caring for customers, fostering a diverse and inclusive work environment, investing in
employees, maintaining robust governance controls, protecting the environment and building strong communities. Greenbrier
looks forward to enhancing its ESG efforts in ﬁscal 2020.

Greenbrier’s future is bright, and we will ambitiously pursue our ﬁscal 2020 business plan.

Thank you for your continued support.

Sincerely,

William A. Furman
Chairman and Chief Executive Ofﬁcer

November 2019

iii

2 0 19 A n n u a l R e p o r t

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004
FORM 10-K

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

For the fiscal year ended August 31, 2019

‘ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

for the transition period from

Commission File No. 1-13146

THE GREENBRIER COMPANIES, INC.
(Exact name of Registrant as specified in its charter)

Oregon
(State of Incorporation)

93-0816972
(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
Common Stock without par value

Trading Symbol(s)
GBX
Securities registered pursuant to Section 12(g) of the Act:
None

Name of Each Exchange on Which Registered
New York Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No

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 the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes X

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer X Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘

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, 2019 (based on the closing price of such
shares on such date) was $1,311,532,035.

The number of shares outstanding of the registrant’s Common Stock on October 22, 2019 was 32,487,615 without par value.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive Proxy Statement prepared in connection with the Annual Meeting of Stockholders to be held on
January 8, 2020 are incorporated by reference into Parts II and III of this Report.

THE GREENBRIER COMPANIES, INC.

FORM 10-K

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART I

PAGE

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1.
Item 1A. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNRESOLVED STAFF COMMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B.
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
MINE SAFETY DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . .

PART II

Item 5.

Item 6.
Item 7.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

Item 8.
Item 9.

RISK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.
Item 11.
Item 12.

Item 13.

Item 14.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTING FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Item 15.
Item 16.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . .
FORM 10-K SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2
10
29
29
29
29
30

31
33

47
51

87
87
91

91
91

92
95
96

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and
other important factors that may cause our actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by the forward-looking statements.
Investors should not place undue reliance on forward-looking statements, which speak only as of the date they
are made and are not guarantees of future performance.

Forward-looking statements rely on a number of assumptions concerning future events and include statements
relating to our:
•
•

ability to grow our businesses;
ability to obtain lease and sales contracts which provide adequate protection against attempted modifications
or cancellations;
changes in interest rates and increased costs of materials and components;
ability to convert backlog of railcar orders and obtain and execute lease syndication commitments;
ability to recruit, train and retain adequate numbers of qualified employees;
ability to obtain adequate certification and licensing of products on a timely basis;
availability of financing sources and borrowing base and loan covenant flexibility for working capital, other
business development activities, capital spending and leased railcars for syndication (sale of railcars with
lease attached);
ability to utilize beneficial tax strategies;
ability to renew, maintain or obtain sufficient credit facilities and financial guarantees on acceptable terms
including loan covenants;
ability to obtain adequate insurance coverage at acceptable rates;
short-term and long-term revenue and earnings effects of the above items; and
other statements regarding our future operations, financial condition and prospects.

•
•
•
•
•

•
•

•
•
•

Words such as “affirms,” “anticipates,” “believes,” “forecast,” “potential,” “goal,” “contemplates,” “expects,”
“intends,” “plans,” “projects,” “hopes,” “seeks,” “estimates,” “strategy,” “could,” “would,” “should,” “likely,”
“will,” “may,” “can,” “designed to,” “future,” “foreseeable future” and similar expressions can also identify
forward-looking statements. These forward-looking statements are not guarantees of future performance and are
subject to factors 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. Factors that might cause such differences include, but are not limited to, those
described in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” each of which are incorporated herein by reference. You are cautioned not
to place undue reliance on any forward-looking statements, which reflect management’s opinions only as of the
date hereof. Except as otherwise required by law, we do not assume any obligation to update any forward-
looking statements.

All references to years refer to the fiscal years ended August 31st unless otherwise noted.

The Greenbrier Companies is a registered trademark of The Greenbrier Companies, Inc. Gunderson and
Auto-Max are registered trademarks of Gunderson LLC.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

PART I

Item 1. BUSINESS

Introduction

We are one of the leading designers, manufacturers and marketers of railroad freight car equipment in North
America, Europe, the Gulf Cooperation Council (GCC) and South America. We also are a manufacturer and
marketer of marine barges in North America. We are a leading provider of freight railcar wheel services, parts,
repair and refurbishment in North America through our wheels, repair & parts business. We also offer railcar
management, regulatory compliance services and leasing services to railroads and related transportation
industries in North America. Through unconsolidated affiliates we produce rail and industrial components, hold
an ownership stake in a railcar manufacturer in Brazil and hold an ownership stake in a lease financing
warehouse.

We operate an integrated business model in North America that combines freight car manufacturing, wheel
services, repair, refurbishment, component parts, leasing and fleet management services. Our model is designed
to provide customers with a comprehensive set of freight car solutions by utilizing our substantial engineering,
mechanical and technical capabilities as well as our experienced commercial personnel. Our integrated model
allows us to develop cross-selling opportunities and synergies among our various business segments thereby
enhancing our margins. We believe our integrated model is difficult to duplicate and provides greater value for
our customers and investors.

We operate in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services.
Financial information about our business segments as well as geographic information is located in Note 20 —
Segment Information to our Consolidated Financial Statements.

The Greenbrier Companies, Inc., is incorporated in Oregon. Our principal executive offices are located at One
Centerpointe Drive, Suite 200, Lake Oswego, Oregon 97035. Our telephone number is (503) 684-7000 and our
Internet website is located at http://www.gbrx.com.

Products and Services
Manufacturing Segment

North American Railcar Manufacturing - We manufacture most freight railcar types currently in use in the
North American market (other than coal cars) and we continue to expand our product offerings. We have
demonstrated an ability to capture high market shares in many of the car types we produce. The primary products
we produce for the North American market are:

Conventional Railcars - We produce a variety of covered hopper cars for industrial and food grade starches,
grain, fertilizer, sand, cement, heavy ore minerals and petrochemicals as well as gondolas and open top hoppers
for steel, metals and aggregates. We also produce a wide range of boxcars, which are used in the transport of
paper products, perishables and general merchandise. Our flat car products include center partition cars for the
forest products industry, and heavy-duty flat cars.

Tank Cars - We produce a variety of tank cars, including general service, pressurized, coiled, lined, insulated
carbon steel and stainless steel tank cars. These are designed for the transportation of petroleum products,
ethanol, liquefied petroleum gas (LPG), caustic soda, chlorine, fertilizers, vegetable oils, bio-diesel and various
other products.

Intermodal Railcars - We manufacture a comprehensive range of intermodal railcars. Our most important
intermodal product is our double-stack railcar. The double-stack railcar is designed to transport containers
stacked two-high on a single platform and provides significant operating and capital savings over other types of
intermodal railcars.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Automotive - We manufacture a full line of railcar equipment specifically designed for the transportation of light
vehicles. Our automotive offerings include the Auto-Max II and Multi-Max products, which are designed to carry
automobiles, SUVs and trucks efficiently.

On July 26, 2019 we completed our acquisition of the manufacturing business of American Rail Industries, Inc.
(American Railcar Industries or ARI). In connection with the acquisition, we acquired two railcar manufacturing
facilities in Arkansas that primarily produce two types of railcars, covered hoppers and tank cars, but have the
ability to produce additional railcar types. As part of the acquisition we also acquired other facilities which
produce a range of railcar components and parts and create enhanced vertical integration for our manufacturing
operations. These railcar components and parts include outlets for hopper railcars, tank car components and
valves, tank heads, manway covers, wheel pair sets, underframes and running boards. Employees at these
facilities as well as manufacturing and administrative employees in Missouri became Greenbrier employees upon
closing of the acquisition.

European Railcar Manufacturing - Our European manufacturing operations produce a variety of tank,
automotive and conventional freight railcar types, including a comprehensive line of pressurized tank cars for
liquid petroleum gas, chlorine and ammonia and non-pressurized tank cars for light oil, chemicals and other
products. In addition, we produce flat cars, coil cars for steel and metals, gondolas, sliding wall cars and
automobile transport cars.

Marine Vessel Fabrication - We manufacture a broad range of Jones Act ocean-going and river 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 although we have the capability to compete in other marine-
related products. Our Portland, Oregon manufacturing facility, located on a deep-water port on the Willamette
River, includes marine vessel fabrication capabilities. The marine facilities increase utilization of steel plate
burning and fabrication capacity providing flexibility for railcar production.

Wheels, Repair & Parts Segment

Wheel Services - We operate a large wheel services network in North America. Our wheel shops, provide
complete wheel services including reconditioning of wheels and axles in addition to new axle machining,
finishing and downsizing. Through a joint venture partnership we also provide axle machining, finishing and
downsizing.

Railcar Repair, Refurbishment and Maintenance - We operate a railcar repair, refurbishment and maintenance
network in North America including repair shops certified by the Association of American Railroads (AAR). Our
repair shops perform heavy railcar repair, refurbishment and routine railcar maintenance for third parties and for
our leased and managed railcar fleet.

Component Parts Manufacturing - Our component parts facilities recondition and manufacture railcar
cushioning units, couplers, yokes, side frames, bolsters and various other parts. We also produce roofs, doors and
associated parts for boxcars.

Leasing & Services Segment

Leasing - We operate a railcar leasing business in North America. Our relationships with financial institutions
combined with our ownership of a lease fleet of approximately 9,400 railcars enables us to offer flexible
financing programs to our customers including operating leases of varied intervals and “by the mile” leases. In
addition to leasing our own railcars, we originate leases of railcars, which are either newly built or refurbished by
us, or bought in the secondary market, and sell the railcars and attached leases to financial institutions typically
with multi-year management services agreements. As an equipment owner and an originator of leases, we
participate principally in the operating lease segment of the market. Under the majority of our leases, we are
responsible for maintenance and administration of the leased cars. Assets from our owned lease fleet are
periodically sold to take advantage of market conditions, manage risk and maintain liquidity.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Management Services - Our North American 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 railcar tracking
using proprietary software), administration and railcar re-marketing. We currently provide management services
for a fleet of approximately 380,000 railcars for railroads, shippers, carriers, institutional investors and other
leasing and transportation companies in North America. In addition, we have a Regulatory Services Group which
offers regulatory, engineering, process consulting and advocacy support to the tank car and petrochemical rail
shipper community, among other services.

Customer Profile

Managed Units:
Class I Railroads
Leasing Companies
Shipping Companies
Non-Class I Railroads
Off-lease

Total Managed Units

Total Owned Units (2)

Total Owned & Managed Units

Fleet Profile (1)
As of August 31, 2019

173,270
108,248
79,660
17,584
1,576

380,338
9,427

389,765

(1) Each platform of a railcar is treated as a separate unit.
(2) The percentage of owned units on lease was 93.3% at August 31, 2019 with an average remaining lease term of 2.9 years. The average

age of owned units is 9 years.

Unconsolidated Affiliates

Brazilian Railcar Manufacturing - We have a 60% ownership interest in Greenbrier-Maxion Equipamentos e
Serviços Ferroviários S.A. (Greenbrier-Maxion), the leading railcar manufacturer in South America, located near
São Paulo, Brazil. Greenbrier-Maxion also assembles bogies and offers a range of aftermarket services including
railcar overhaul and refurbishment.

Brazilian Castings and Component Parts Manufacturing - We have a 24.5% ownership interest in Amsted-
Maxion Fundição e Equipamentos Ferroviários S.A. (Amsted-Maxion) based in Cruzeiro, Brazil. Amsted-
Maxion is a manufacturer of various castings and components for railcars and other heavy industrial equipment.
Amsted-Maxion has a 40% ownership position in Greenbrier-Maxion and is integrated with the operations of our
Brazilian railcar manufacturer.

Lease Financing Warehouse - We have a 40% interest in the common equity of an entity that buys and sells railcar
assets that are leased to third parties. The railcars sold to this leasing warehouse are principally built by us. We also
provide administrative and remarketing services to this entity and we earn management fees for these services.

Other Unconsolidated Affiliates - We have other unconsolidated affiliates which primarily include joint ventures
that produce rail and industrial components.

Backlog

The following table depicts our reported railcar backlog subject to third party sale or lease in number of railcars
and estimated future revenue value attributable to such backlog, at the dates shown:

New railcar backlog units (1)
Estimated future revenue value (in millions) (2)
(1) Each platform of a railcar is treated as a separate unit.
(2) Subject to change based on finalization of product mix.

August 31,
2018

2017

2019

30,300
$ 3,280

27,400
$ 2,740

28,600
$ 2,800

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Our total manufacturing backlog of railcar units was approximately 30,300 units with an estimated value of
$3.28 billion as of August 31, 2019 and 27,400 units with an estimated value of $2.74 billion as of August 31,
2018. Approximately 3% of backlog units and 2% of estimated backlog value as of August 31, 2019 and 2018
was associated with our Brazilian manufacturing operations which are accounted for under the equity method.
Backlog as of August 31, 2019 reflects the transfer of 10,600 units from ARI and the removal of 3,500 small
cube covered hoppers for sand service for which we realized negotiated economic benefits. Remaining backlog
does not include any other orders for the sand market.

Based on current production schedules, approximately 20,000 units in the August 31, 2019 backlog are scheduled
for delivery in 2020. The balance of the production is scheduled for delivery in 2021 and beyond. Multi-year
supply agreements are common in the rail industry. Backlog units for lease may be syndicated to third parties or
held in our own fleet depending on a variety of factors. A portion of the orders included in backlog reflects an
assumed product mix. Under terms of the orders, the exact mix and pricing will be determined in the future as
customers select railcar specifications, which may impact the dollar amount of backlog. Marine backlog was
$100 million and $61 million as of August 31, 2019 and 2018, respectively.

Our backlog of railcar units and marine vessels is not necessarily indicative of future results of operations.
Certain orders in backlog are subject to customary documentation and completion of terms. Customers may
attempt to cancel or modify orders in backlog. Historically, little variation has been experienced between the
quantity ordered and the quantity actually delivered, though the timing of deliveries may be modified from time
to time. We cannot guarantee that our reported backlog will convert to revenue in any particular period, if at all.

Customers

Our customers include railroads, leasing companies, financial institutions, shippers, carriers and transportation
companies. We have strong, long-term relationships with many of our customers. We believe that our customers’
preference for high quality products, our technological leadership in developing innovative products, our focus
on being highly responsive to our customer’s needs and competitive pricing of our railcars have helped us
maintain our long-standing relationships with our customers.

In 2019, revenue from one customer, TTX Company (TTX) accounted for approximately 26% of total revenue,
28% of Manufacturing revenue and 24% of Wheels, Repair & Parts revenue. No other customers accounted for
greater than 10% of total revenue.

Raw Materials and Components

Our products require a supply of materials including steel and specialty components such as brakes, wheels and
axles. Specialty components purchased from third parties represent a significant amount of the cost of most
freight cars. Our customers often specify particular components and suppliers of such components. Although the
number of alternative suppliers of certain specialty components has declined in recent years, there are at least two
available suppliers for these 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 of certain materials and
components, we operate a replacement parts business which aids in our vertical integration 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, shipping and
transportation delays and possible price increases.

In 2019, the top ten suppliers for all inventory purchases accounted for approximately 52% of total purchases.
The top two suppliers accounted for 28% of total inventory purchases in 2019. No other suppliers accounted for
more than 10% of total inventory purchases. We believe we maintain good relationships with our suppliers.

Competition

We are currently one of the two largest railcar manufacturers of the five major railcar manufacturers competing
in North America. There are also a handful of specialty builders who focus on niche markets. We believe that in

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Europe we are in the top tier of railcar manufacturers. European freight car manufacturers are largely located in
central and eastern Europe where labor rates are lower and work rules are more flexible. We are the leading
railcar manufacturer in South America. The railcar manufacturing industry is becoming more global as customers
are purchasing railcars from manufacturers outside of their geographic region. In all railcar markets that we serve
or participate in, we compete on the basis of quality, price, reliability of delivery, product design and innovation,
reputation and customer service and support.

Competition in the marine industry is dependent on the type of product produced. There are few competitors that
build product types similar to ours. We compete on the basis of price, quality, reliability of delivery, launching
capacity and experience with certain product types.

Competition in the wheels, repair & parts businesses is dependent on the type of product or service provided.
There are many competitors in these businesses. We compete primarily on the basis of quality, timeliness of
delivery, customer service, location of shops, price and engineering expertise.

There are at least twenty institutions in North America that provide railcar leasing and services similar to ours.
Many of them are also customers that buy new railcars from our manufacturing facilities and used railcars from
our lease fleet, as well as utilize our management services. Many of these institutions have greater financial
resources than we do. We compete primarily on the basis of quality, price, delivery, reputation, service offerings
and deal structuring and syndication ability. We believe our strong servicing capability and our ability to sell
railcars with a lease attached (syndicate railcars), integrated with our manufacturing, repair shops, railcar
specialization and expertise in particular lease structures provide a strong competitive position.

Marketing and Product Development

In North America, we leverage an integrated marketing and sales effort to coordinate relationships in our various
segments. We provide our customers with a diverse 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 of railcar products, leasing, refurbishing and remarketing services. In addition, we provide
customized maintenance management, equipment management, accounting and compliance services and
proprietary software solutions.

In Europe and South America, we maintain relationships with customers through market-specific sales personnel.
Our engineering and technical staff works closely with their customer counterparts on the design and certification
of railcars. Many European railroads are state-owned and are subject to European Union (EU) regulations
covering the tender of government contracts.

Through our research and customer relationships, insights are derived into the potential need for new products
and services. Marketing and engineering personnel collaborate to evaluate opportunities and develop new
products and features. Recent product launches include a newly designed covered hopper specifically made for
grain. Research and development costs incurred during the years ended August 31, 2019, 2018 and 2017 were
$5.4 million, $6.0 million and $4.2 million, respectively.

Patents and Trademarks

We believe that manufacturing expertise, the improvement of existing technology and the development of new
products may be more important than patent protection in establishing and maintaining a competitive advantage
in our market. Nevertheless, we have obtained a number of U.S. and non-U.S. patents of varying duration, and
pending patent applications, registered trademarks, copyrights and trade names. We have a proactive program
aimed at protecting our intellectual property and the results from our research and development.

Environmental Matters

We are subject to national, state and local environmental laws and regulations concerning, among other matters,
air emissions, wastewater discharge, solid and hazardous waste disposal and employee health and safety. Prior to

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acquiring facilities, we usually conduct
investigations to evaluate the environmental condition of subject
properties and may negotiate contractual terms for allocation of environmental exposure arising from prior uses.
We operate our facilities in a manner designed to maintain compliance with applicable environmental laws and
regulations. Environmental studies have been conducted on certain of our owned and leased properties that
indicate additional investigation and some remediation on certain properties may be necessary.

Portland Harbor Superfund Site

Our Portland, Oregon manufacturing facility is located adjacent to the Willamette River. In December 2000, the
U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as the
Portland Harbor, including the portion fronting our manufacturing facility, as a federal “National Priority List” or
“Superfund” site due to sediment contamination (the Portland Harbor Site). Our company and more 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 that we 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 for natural resource damages
resulting from releases of hazardous substances to the site. Ten private and public entities, including us (the
Lower Willamette Group or LWG), signed an Administrative 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 did not sign such consent, but nevertheless contributed money to the effort. The EPA-mandated RI/FS
was produced by the LWG and cost over $110 million during a 17-year period. We bore a percentage of the total
costs incurred by the LWG in connection with the investigation. Our aggregate expenditure during the 17-year
period was not material. Some or all of any such outlay may be recoverable from other responsible parties. The
EPA issued its Record of Decision (ROD) for the Portland Harbor Site on January 6, 2017 and accordingly on
October 26, 2017, the AOC was terminated.

Separate from the process described above, which focused on the type of remediation to be performed at the
Portland Harbor Site and the schedule for such remediation, 83 parties, including the State of Oregon and the
federal government, entered into a non-judicial mediation process to try to allocate costs associated with
remediation of the Portland Harbor site. Approximately 110 additional parties signed tolling agreements related
to such allocations. On April 23, 2009, we 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, U.S.
District Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling
agreements and be dismissed without prejudice, and the case has been stayed by the court until January 16, 2020.
The allocation process is continuing in parallel with the process to define the remediation steps.

The EPA’s January 6, 2017 ROD identifies a clean-up remedy that the EPA estimates will take 13 years of active
remediation, followed by 30 years of monitoring with an estimated undiscounted cost of $1.7 billion. The EPA
typically expects its cost estimates to be accurate within a range of -30% to +50%, but this ROD states that
changes in costs are likely to occur as a result of new data it wanted to collect over a 2-year period prior to final
remedy design. The ROD identifies 13 Sediment Decision Units (SDUs). One of the units, RM9W, includes the
nearshore area of the river sediments offshore of our Portland, Oregon manufacturing facility as well as upstream
and downstream of the facility. It also includes a portion of our riverbank. The ROD does not break down total
remediation costs by SDU. The EPA’s ROD concluded that more data was needed to better define clean-up scope
and cost. On December 8, 2017, the EPA announced that Portland Harbor is one of 21 Superfund sites targeted
for greater attention. On December 19, 2017, the EPA announced that it had entered a new AOC with a group of
four potentially responsible parties to conduct additional sampling during 2018 and 2019 to provide more
certainty about clean-up costs and aid the mediation process to allocate those costs. The parties to the mediation,
including us, agreed to help fund the additional sampling. The sampling is completed and the EPA is evaluating
possible resulting changes to remediation cost estimates.

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precedes our ownership of
the Portland, Oregon manufacturing facility. Because these environmental
investigations are still underway, sufficient information is currently not available to determine our liability, if
any, for the cost of any required remediation or restoration of the Portland Harbor Site or to estimate a range of
potential loss. Based on the results of the pending investigations and future assessments of natural resource
damages, we may be required to incur costs associated with additional phases of investigation, remedial design,
or remedial action, and may be liable for damages to natural resources. In addition, we may be required 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 could adversely affect our business and
Consolidated Financial Statements, or the value of our Portland property.

On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including us as well
as the United States and the State of Oregon for costs it incurred in assessing alleged natural resource damages to
the Columbia River from contaminants deposited in Portland Harbor. Confederated Tribes and Bands of the
Yakama Nation v. Air Liquide America Corp., et al., United States Court for the District of Oregon Case No.
3i17-CV-00164-SB The complaint does not specify the amount of damages the Plaintiff will seek. The case has
been stayed until January 16, 2020.

Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing Operations

We have entered into a Voluntary Cleanup Agreement with the DEQ in which we agreed to conduct an
investigation of whether, and to what extent, past or present operations at our Portland property may have
released hazardous substances into the environment. We have also signed an Order on Consent with the DEQ to
finalize the investigation of potential onsite sources of contamination that may have a release pathway to the
Willamette River. Interim precautionary measures are also required in the order and we are discussing with the
DEQ potential remedial actions which may be required. Our aggregate expenditure has not been material,
however we could incur significant expenses for remediation. Some or all of any such outlay may be recoverable
from other responsible parties.

Regulation

We must comply with the rules of the U.S. Department of Transportation (USDOT) and the administrative
agencies it oversees including the Federal Railroad Administration in the U.S. and Transport Canada in Canada
who 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 and international
commerce throughout North America. The AAR promulgates rules and regulations governing the safety and
design of equipment, relationships among railroads and other railcar owners with respect
to railcars in
interchange, and other matters. The AAR also certifies railcar builders and component manufacturers that
provide equipment for use on North American railroads. These regulations require maintaining certifications with
the AAR as a railcar builder, repair and service provider and component manufacturer, and products sold and
leased by us in North America must meet AAR, Transport Canada, and Federal Railroad Administration
standards.

The primary regulatory and industry authorities involved in the regulation of the ocean-going barge industry are
the U.S. Coast Guard, the Maritime Administration of the USDOT, and private industry organizations such as the
American Bureau of Shipping.

The regulatory environment in Europe consists of a combination of EU regulations and country specific
regulations, including a harmonized set of Technical Standards for Interoperability of freight wagons throughout
the EU. The EU approval regime has recently been modified to replace country specific approvals with a single,
harmonized EU process. The switch could result in short term delays in wagon certification, but over time is
expected to streamline the process. The regulatory environment in Brazil consists of oversight from the Ministry
of Transportation, the National Agency of Ground Transportation and the National Association of Railroad
Transporters. In all other countries, we conform to country specific regulations where applicable.

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Employees

As of August 31, 2019, we had approximately 17,100 full-time employees at our consolidated entities, consisting
of 15,900 employees in Manufacturing, 900 in Wheels, Repair & Parts and 300 employees in Leasing & Services
and corporate. In Manufacturing, 8,900 employees are represented by unions. At our Wheels, Repair & Parts
locations, 40 employees are represented by a union. We believe that our relations with our employees are
generally good.

Additional Information

We are a reporting company and file annual, quarterly, current and special reports, proxy statements and other
information with the SEC. The SEC maintains an internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
Through a link on the Investor Relations section of our website, http://www.gbrx.com, we make available the
following filings as soon as reasonably 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 of 1934, as amended. All such filings are available free of charge. Copies of our Audit Committee Charter,
Compensation Committee Charter, Nominating and Corporate Governance Committee Charter and the
Company’s Corporate Governance Guidelines are also available on our web site at http://www.gbrx.com. In
addition, each of the reports and documents listed above are available free of charge by contacting our Investor
Relations Department at The Greenbrier Companies, Inc., One Centerpointe Drive, Suite 200, Lake Oswego,
Oregon 97035.

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Item 1A. RISK FACTORS

The following risk factors, as well as other comments included herein regarding risks and uncertainties, should
be carefully considered when evaluating our company. Our business, financial condition or financial results
could be materially and adversely affected by any of these risks or other risks unknown to us. In addition, new
risks may emerge at any time, and we cannot predict those risks or estimate the extent to which they may affect
us.

The cyclical nature of our business, economic downturns or a rising interest rate environment can result in
lower demand for our products and services and reduced revenue.

Our business is cyclical. Overall economic conditions (domestically and globally) and the purchasing practices of
buyers have a significant effect upon our business due to the impact on demand for our products and services. As
a result, during downturns, we could operate with a lower level of backlog and may slow down or halt production
at some or all of our facilities. We may fail to respond to such downturns in an efficient manner. Economic
conditions that result in higher interest rates increase the cost of new leasing arrangements, which could cause
some of our leasing customers to lease fewer of our railcars or demand shorter lease terms. An economic
downturn or increase in interest rates may reduce demand for our products and services, resulting in lower sales
volumes, lower prices, lower lease utilization rates and decreased profits.

Interest rates remain at relatively low levels. Higher interest rates could increase the cost of, or potentially deter,
new leasing arrangements with our customers, reduce our ability to syndicate railcars under lease to financial
institutions, or impact the sales price we may receive on such syndications, any of which could materially
adversely affect our business, financial condition and results of operations.

A change in our product mix due to shifts in demand or fluctuations in commodity and energy prices could
have an adverse effect on our profitability.

We manufacture, lease and repair a variety of railcars. The demand for specific types of these railcars and mix of
repair and refurbishment work varies from time to time. Instability and changes in the global economy, volatility
in the industries that our products serve or adverse changes in the financial condition of our customers could
adversely impact the demand for our railcars. In addition, fluctuations in commodity and energy prices, including
crude oil and gas prices, could negatively impact the activities of our customers resulting in a corresponding
adverse effect on the demand for our products and services. These shifts in demand could affect our results of
operations and could have an adverse effect on our profitability. Demand for railcars that are used to transport
crude oil and other energy related products is dependent on the demand for these commodities. Prices for oil and
gas are subject to large fluctuations in response to relatively minor changes in the supply of, and demand for, oil
and gas, market uncertainty and a variety of other economic factors that are beyond our control.

A decline in performance or demand, oversupply, or increase in efficiency, 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 large part depends
on the health of the United States and global economy. If railcar loadings decrease or industry demand for our
railcar products or services weakens or otherwise does not materialize, or if railcar freight transportation becomes
more efficient from, for example, an increase in train velocity or Precision Scheduled Railroading (PSR), a
decrease in dwell times, or due to technological advances, our financial condition and results of operations would
be adversely affected. In addition, the rail freight industry could become oversupplied, which could have a
significant impact on the pricing, lease rates or demand for new railcars.

The use of railcars may decline in favor of other modes of transportation. Our operations may be adversely
impacted by changes in the preferred method used by customers to ship their products, changes in demand for

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particular products, or government policies favoring other types of surface transportation. The industries in which
our customers operate are driven by dynamic market forces and trends, which are in turn influenced by
economic, regulatory, and political factors. Features and functionality specific to certain railcar types could result
in those railcars becoming obsolete as customer requirements for freight delivery change.

We could have difficulty integrating the operations of businesses that we have acquired and will acquire or
joint ventures we enter into, which could adversely affect our results of operations.

The success of our acquisition and joint venture strategies depends upon our ability to integrate any businesses
that we acquire into our existing business, including the manufacturing business of ARI. The integration of
acquired business operations could disrupt our business by causing unforeseen operating difficulties, diverting
management’s attention from day-to-day operations and requiring significant financial resources that would
otherwise be used for the ongoing development of our business. The difficulties of integration could be increased
by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate
business backgrounds and combining different corporate cultures, or discovering previously unknown liabilities.
Each of these circumstances could be more likely to occur or be more severe in consequence in the case of an
acquisition or joint venture involving a business that is outside of our core areas of expertise. In addition, we
could be unable to retain key employees or customers of the combined businesses. We could face integration
issues including those related to operations, internal controls, information systems and operational functions of
the acquired companies and we also could fail to realize cost efficiencies or synergies that we anticipated when
selecting our acquisition candidates and joint ventures or these acquisitions or joint ventures could fail to
complete successfully. Any of these items could adversely affect our results of operations.

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 potential revenue attributable to those orders. Some of this backlog is subject to
certain conditions, including potential adjustment to prices due to changes in prevailing market prices, or due to
lower prices for new orders accepted by us from other customers for similar cars on similar terms and conditions
during relevant time periods. Our reported backlog may not be converted to revenue in any particular period and
some of our contracts permit cancellations with limited compensation that would not replace lost revenue or
margins. In addition, some customers may attempt to delay orders, cancel or modify a contract even if the
contract does not allow for such cancellation or modification, and we may not be able to recover all revenue or
earnings lost due to a breach of contract or a contract may be found to be unenforceable. The likelihood of
attempted cancellations or modifications of contracts generally increases during periods of market weakness.
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.

Risks related to our operations outside of the U.S. could adversely affect our operating results.

We face risks arising from our business activities outside of the U.S. and with non-U.S. customers and suppliers.
Instability in the macroeconomic, political, legal, trade, financial, labor or market conditions in the countries
where we, or our customers or suppliers, operate could negatively impact our business activities and operations.
Some foreign countries in which we operate or may operate have authorities that regulate railroad safety, and rail
equipment design and manufacturing. If we do not have appropriate certifications, we could be unable to market
and sell our rail equipment. Adverse changes in foreign or cross-border regulations applicable to us or customers,
such as labor, environment, trade, tax, currency and price regulations could limit our operations, make the
manufacture and distribution of our products difficult, and delay or limit our ability to repatriate our money.

Among the political risks we face outside the U.S. are governments nationalizing our business or assets, or
repudiating, or renegotiating contracts with us, our customers or suppliers. In our cross-border business activities,
we could experience longer customer payment cycles, difficulty in collecting accounts receivable or an inability

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to protect our intellectual property. We operate in countries reported to have significant corruption. We could be
adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-corruption
laws. Strict compliance with anti-corruption laws is made more challenging because such laws may conflict with
local business customs. The failure to comply with laws governing international business may result
in
substantial penalties and fines. Transactions with non-U.S. entities expose us to business practices, local customs,
and legal processes with which we may not be familiar, as well as difficulty enforcing contracts and international
political and trade tensions. Any expansion of our activities outside of the U.S. could increase our risk profile. If
we are unable to successfully manage the risks associated with our foreign and cross-border business activities,
our results of operations, financial condition, liquidity and cash flows could be negatively impacted.

Changes impacting international trade and corporate tax provisions related to the production and sales of our
products may have an adverse effect on our financial condition and results of operations.

We own, lease, operate or have invested in joint ventures or entities which have manufacturing facilities in
Mexico, Brazil and Europe. Our business benefits from free trade agreements such as the North American Free
Trade Agreement (NAFTA) and we also rely on various U.S. corporate tax provisions related to international
commerce as we build, market and sell our products internationally. NAFTA and future import taxes have been
under scrutiny by the U.S. administration. On September 30, 2018 the President of the U.S. and the U.S. Trade
Representative announced a new trade pact with the governments of Canada and Mexico called the United
States-Mexico-Canada Agreement (USMCA). We believe the benefits we currently receive under NAFTA will
continue under the USMCA. To take effect, the USMCA must be enacted by the U.S. Congress under laws
governing Trade Promotion Authority. It is expected NAFTA will remain effective until this occurs. Any
changes in policies by the U.S. government or other governments with respect to trade treaties, corporate tax,
import taxes and foreign relations as well as embargoes, quotas or tariffs could adversely and significantly affect
our financial condition and results of operations.

We derive a significant amount of our revenue from a limited number of customers, the loss of or reduction of
business from one or more of which 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 major customers, we cannot be assured that we will continue to have good
relations with our customers, or that our customers will continue to purchase or lease our products or services,
that they will continue to do so at historical levels or will renew their existing contracts with us. A reduction in
the purchasing or leasing of our products, a termination of our services by one or more of our major customers, a
decline in the financial condition of a major customer, or our failure to replace expiring customer contracts with
new customer contracts on satisfactory terms could result in a loss of business and have an adverse effect on our
business and operating results.

We could be unable to lease railcars at satisfactory rates, remarket leased railcars on favorable terms upon
lease termination, or realize the expected residual values for end of life railcars due to changes in scrap prices
each of which could reduce our revenue and decrease our overall return or affect our ability to sell leased
assets in the future.

The profitability of our railcar leasing business depends on our ability to lease railcars at satisfactory rates, sell
railcars with sufficiently profitable leases to investors, and to remarket, sell or scrap railcars we own or manage
upon the expiration of leases. The rent we receive during the initial railcar lease term does not fully recover
acquisition costs of such railcars and thus exposes us to a shortfall if we do not recover the residual value of
railcars coming off of lease. Our ability to lease or remarket leased railcars profitably is dependent on several
factors, including, but not limited to, market and industry conditions, cost of, and demand for, competing used or
newer models, costs associated with the refurbishment of the railcars, the market demand or governmental
mandates for refurbishment, as well as market perceptions of residual values and interest rates. A downturn in the
industries in which our lessees operate and decreased demand for railcars could also increase our exposure to

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remarketing risks because lessees may demand shorter lease terms, requiring us to remarket leased railcars more
frequently. Furthermore, the resale market for previously leased railcars has a limited number of potential buyers.
Our inability to lease, remarket or sell leased railcars on favorable terms could result in an adverse impact to our
consolidated financial statements or affect our ability to sell leased railcars to investors in the future.

Shortages of skilled labor, increased labor costs, or failure to maintain good relations with our workforce
could adversely affect our operations.

We depend on skilled labor in the manufacture of railcars and marine barges, repair, refurbishment and
maintenance of railcars and provision of wheel services and supply of parts. Some of our facilities are located in
areas where demand for skilled labor often exceeds supply. Shortages of some types of skilled labor such as
welders and machine operators could restrict our ability to maintain or increase production rates, lead to
production inefficiencies and increase our labor costs. Due to the competitive nature of the labor markets in
which we operate and the cyclical nature of the railcar industry, the resulting employment cycle increases our
risk of not being able to recruit, train and retain the employees we require at efficient costs and on reasonable
terms, particularly when the economy expands, production rates are high or competition for such skilled labor
increases. Additionally, we may develop an adverse relationship with our workforce or third party labor
providers. Our costs to recruit, train and retain necessary, qualified employees may exceed our expectations. If
we are unable to recruit, train and retain adequate numbers of qualified employees and third party labor providers
on a timely basis or at a reasonable cost or on reasonable terms, our business and results of operations could be
adversely affected.

Equipment failures, technological failures, costs and inefficiencies associated with changing of production
lines, or transfer of production between facilities, could lead to production, delivery, or service curtailments or
shutdowns, loss of revenue or higher expenses.

We operate a substantial amount of equipment at our production facilities. An interruption in production
capabilities or maintenance and repair capabilities at our facilities, as a result of equipment or technology failure,
acts of nature, costs and inefficiencies associated with changing of production lines or transfer of production
between facilities, could reduce or prevent our production, delivery, service, or repair of our products and
increase our costs and expenses. A halt of production at any of our manufacturing facilities could severely affect
delivery times to our customers. Any significant delay in deliveries not otherwise contractually mitigated could
result in cancellation of all or a portion of our orders, cause us to lose future sales, and negatively affect our
reputation and our results of operations.

We face aggressive competition and a number of factors may influence our performance. If we are unable to
compete successfully, our market share, margin and results of operations may be adversely affected.

We face aggressive competition in all geographic markets in which we participate and in each segment of our
business, and we face the prospect of new competitors entering those markets in which we compete. Some of our
competitors are owned or financially supported by foreign governments or sovereign wealth funds, and may
potentially sell products and services below cost, or otherwise compete unfairly, in order to gain market share.
The markets in which we participate are intensely competitive and we expect them to remain intensely
competitive into the foreseeable future. The relative competitiveness of our manufacturing facilities and products
affects our performance. A number of competitive factors challenge or affect our ability to compete successfully
including the introduction of competitive products and new entrants into our markets, a limited customer base
and price pressures such as unfair competition and increases in raw materials and labor costs. In addition, new
technologies, new railcars or other new product offerings introduced to market by our competitors could render
our products obsolete or less competitive. If we do not compete successfully, our market share, margin and
results of operations may be adversely affected.

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We pursue strategic opportunities which rely upon the identification of new joint ventures, acquisitions and
new business endeavors which involve inherent risks, any of which may prevent us from growing our business
and realizing anticipated benefits and could adversely affect our results of operations.

We may not be able to successfully identify suitable joint venture, acquisition and new business endeavors to
invest in or complete potential transactions on acceptable terms. Our identification of suitable joint venture
opportunities, acquisition candidates and new business endeavors involve risks inherent in assessing the values,
strengths, weaknesses, risks and profitability of these opportunities. Our failure to identify suitable joint ventures,
acquisition opportunities and new business endeavors may restrict our ability to grow our business. If we are
successful in pursuing such opportunities, we may be required to expend significant funds or incur additional
debt, which could materially adversely affect our results of operations and limit our ability to obtain financing for
working capital or other purposes and we may be more vulnerable to economic downturns and competitive
pressures.

If we or our joint ventures fail to complete capital expenditure projects on time and within budget, or if these
projects, once completed, fail to operate as anticipated, or fail to improve the efficiencies of our operations, or
to generate additional revenue 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 operational capabilities. Our ability, and our joint ventures’ respective abilities, to
complete these projects on time and within budget, and for us to realize the anticipated increased revenues or
otherwise realize acceptable returns on these investments or other strategic capital projects that may be
undertaken are subject to a number of risks. Many of these risks are beyond our control, including a variety of
market, operational, permitting, and labor related factors. In addition, the cost to implement any given strategic
capital project ultimately may prove to 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 these strategic capital projects, or if
unanticipated implementation costs are incurred, our business, financial condition and results of operations may
be adversely affected.

A failure to design or manufacture products or technologies or to achieve timely certification or market
acceptance of new products or technologies could have an adverse effect on our profitability.

We continue to introduce new railcar product innovations and technologies. We occasionally accept orders prior
to receiving railcar certification or prior to proving our ability to manufacture a quality product that meets
customer standards. We could be unable to successfully design or manufacture new railcar product innovations
or technologies.

Our inability to develop and manufacture new product innovations or technologies in a timely and profitable
manner, or to obtain timely certification, or to achieve market acceptance, or to avoid quality problems in our
new products, could have a material adverse effect on our revenue and results of operations and subject us to
penalties, cancellation of orders and/or other damages.

Our relationships with our joint venture partners could be unsuccessful which could adversely affect our
business.

We have entered into several joint ventures to increase our sourcing alternatives, reduce costs and produce new
railcars or components. We may seek to expand our relationships or to enter into new ventures with other
companies. If our joint venture partners are unable to fulfill their contractual obligations or if these relationships
are otherwise not successful in the future, our manufacturing and other costs could increase, we could encounter
production disruptions, growth opportunities could fail to materialize, or we could be required to fund such joint
ventures in amounts significantly greater than initially anticipated, any of which events could adversely affect our
business.

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If any of our joint ventures generate significant losses, including future potential intangible asset or goodwill
impairment charges, our results of operations could be adversely affected or our investments could be impaired.

We have potential exposure to environmental liabilities, which could increase our operating costs or have an
adverse effect on our results of operations.

We are subject to extensive national, state, foreign, provincial and local environmental laws and regulations
concerning, among other things, air emissions, water discharge, solid waste and hazardous substances handling
and disposal and employee health and safety. These laws and regulations are complex and frequently change. We
could incur unexpected costs, penalties and other civil and criminal liability if we, or in certain circumstances
others, fail to comply with environmental laws or permits issued pursuant to those laws. We also could incur
costs or liabilities related to off-site waste disposal or remediating soil or groundwater contamination at our
properties, including as set forth below. In addition, future environmental laws and regulations may require
significant capital expenditures or changes to our operations, or may impose liability on us in the future for
actions that complied with then applicable laws and regulations when the action was taken.

Portland Harbor Superfund Site

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four potentially responsible parties to conduct additional sampling during 2018 and 2019 to provide more
certainty about clean-up costs and aid the mediation process to allocate those costs. The parties to the mediation,
including us, agreed to help fund the additional sampling. The sampling is completed and the EPA is evaluating
possible resulting changes to remediation cost estimates.

The ROD does not address responsibility for the costs of clean-up, nor does it allocate such costs among the
potentially responsible parties. Responsibility for funding and implementing the EPA’s selected cleanup remedy
will be determined at an unspecified later date. Based on the investigation to date, we believe that we did not
contribute in any material way to contamination in the river sediments or the damage of natural resources in the
Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to our property
precedes our ownership of
the Portland, Oregon manufacturing facility. Because these environmental
investigations are still underway, sufficient information is currently not available to determine our liability, if
any, for the cost of any required remediation or restoration of the Portland Harbor Site or to estimate a range of
potential loss. Based on the results of the pending investigations and future assessments of natural resource
damages, we may be required to incur costs associated with additional phases of investigation, remedial design,
or remedial action, and may be liable for damages to natural resources. In addition, we may be required 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 could adversely affect our business and
Consolidated Financial Statements, or the value of our Portland property.

Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing Operations

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 lease railcars to a customer with
the aim of selling such railcars on lease to a third party. In each case, the timing lag between production and the
ultimate sale subjects us to operational and market risks. In addition, we periodically sell railcars from our own
lease fleet and the timing and volume of such sales are difficult to predict. As a result, comparisons of our
manufacturing revenue, deliveries, quarterly net gain on disposition of equipment, income and liquidity between
quarterly periods within one year and between comparable periods in different years may not be meaningful and
should not be relied upon as indicators of our future performance.

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We depend on our senior management team and other key employees, and significant attrition within our
management team or unsuccessful succession planning for members of our senior management team and
other key employees who are at or nearing retirement age, 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 be difficult due to many factors, including fluctuations in global
economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of
our compensation programs. Competition for qualified personnel can be very intense. We must continue to
recruit, retain and motivate senior management and other key employees sufficient to maintain our current
business and support our future projects and growth objectives. We are vulnerable to attrition among our current
senior management team and other key employees. A loss of any such personnel, or the inability to recruit and
retain qualified personnel in the future, could have an adverse effect on our business, financial condition and
results of operations.

Many members of our senior management team and other key employees are at or nearing retirement age. If we
are unsuccessful in our succession planning efforts, the continuity of our business and results of operations could
be adversely affected.

Changes in the credit markets and the financial services industry could negatively impact our business, results
of operations, financial condition or liquidity.

The credit markets and the financial services industry may experience volatility which can result in tighter
availability of credit on more restrictive terms and limit our ability to sell railcar assets. Our liquidity, financial
condition and results of operations could be negatively impacted if our ability to borrow money to finance
operations, obtain credit from trade creditors, obtain credit to maintain our hedging programs, offer leasing
products to our customers or sell railcar assets were to be impaired. In addition, scarcity of capital could also
adversely affect our customers’ ability to purchase, lease, or pay for products from us or adversely affect our
suppliers’ ability to provide us with product, either of which could negatively affect our business and results of
operations.

Volatility in the global financial markets may adversely affect our business, financial condition and results of
operations.

During periods of volatility in the global financial markets, certain of our customers could delay or otherwise
reduce their purchases of railcars and other products and services. If volatile conditions in the global credit
markets impact our customers’ access to credit, product order volumes may decrease or customers may default
on payments owed to us.

Likewise, if our suppliers face challenges obtaining credit, or otherwise operating their businesses, the supply of
materials we purchase from them to manufacture our products may be interrupted. Any of these conditions or
events could result in reductions in our revenues, increased price competition, or increased operating costs, which
could adversely affect our business, financial condition and results of operations.

Our actual results may differ significantly from our announced expectations.

From time to time, we have released, and may continue to release guidance estimates in our quarterly and annual
earnings releases, quarterly and annual earnings conference calls, or otherwise, regarding our future performance
that represent our management’s estimates as of the date of release. Although we believe that any such guidance
or estimates would provide investors and analysts with a better understanding of management’s expectations for
the future and could be useful to our shareholders and potential shareholders, such guidance or estimates would
consist of forward-looking statements subject to the risks and uncertainties described in this report and in our
other public filings and public statements. Guidance and estimates are necessarily speculative in nature, and

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some or all of the assumptions underlying the guidance or estimates may not materialize or may vary
significantly from actual results. Our actual results may not always be in line with or exceed any guidance or
estimates we may provide, especially in times of economic uncertainty. If our financial results for a particular
period do not meet our guidance or estimates or the expectations of investors or research analysts, or if we reduce
our guidance or estimates for future period, the trading volume or market price of our common stock may
decline. In light of the foregoing, investors are urged not to unduly rely upon any guidance or estimates in
making an investment decision regarding our common stock.

Fluctuations in the availability and price of energy, freight transportation, steel and other raw materials, in
combination with our fixed price contracts could have an adverse effect on our ability to manufacture and sell
our products profitably and could adversely affect our margins and revenue.

A significant portion of our business depends upon the adequate supply of steel and other raw materials at
competitive prices and a small number of suppliers fulfill a substantial amount of our requirements. The cost of
steel and all other materials used in the production of our railcars represents more than half of our direct
manufacturing costs per railcar and in the production of our marine barges represents more than 30% of our
direct manufacturing costs per marine barge. Our cost of acquiring steel, components and other raw materials to
manufacture our railcars and marine barges are impacted by tariffs. If we are not able to purchase these materials
at competitive prices, our ability to produce and sell our products on a cost effective basis could be adversely
impacted which, in turn, could adversely affect our revenue and profitability.

Our businesses also depend upon an adequate supply of energy. Increases in the price of energy to us adversely
impacts our operating costs and could have an adverse effect on our ability to conduct our businesses on a cost-
effective basis. We cannot be assured that we will continue to have access to energy or supplies of necessary
components for manufacturing railcars and marine barges. Our ability to meet demand for our products could be
adversely affected by the loss of access to any of these supplies, the inability to arrange alternative access to any
materials, or suppliers limiting allocation of materials to us.

In some instances, we have fixed-price contracts that 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 on which 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 in material 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 or their inability to meet our price,
quality, quantity and delivery requirements could have an adverse effect on our ability to manufacture and sell
our products on a cost-effective basis.

Decreases in the price of scrap adversely impact our Wheels, Repair & Parts margins and revenue and the
residual value and future depreciation of our leased assets. A portion of our Wheels, Repair & Parts businesses
involve scrapping steel parts and the resulting revenue from such scrap steel increases our margins and revenues.
When the price of scrap steel declines, our revenues and margins in such businesses would decrease.

We rely on limited suppliers for certain components and services needed in our production. If we are not able
to procure specialty components or services on commercially reasonable 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, components
and services in acceptable quantities and quality from our suppliers and our ability to retain good relations with
our suppliers. In 2019, the top ten suppliers for all inventory purchases accounted for approximately 52% of total
purchases. The top two suppliers accounted for 28% of total inventory purchases in 2019. No other suppliers
accounted for more than 10% of total inventory purchases. Certain components of our products, particularly
specialized components like castings, bolsters, trucks, wheels and axels, and certain services, such as lining
capabilities, are currently only available from a limited number of suppliers. Increases in the number of railcars

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manufactured could increase the demand for such components and services and strong demand may cause
industry-wide shortages if suppliers 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 of our components or services in a timely manner or on terms acceptable to us, or cease to provide
services or manufacture components of acceptable quality, we could incur disruptions or be limited in our
production of our products and we could have to seek alternative sources for these components or services. We
could also incur delays while we attempt to locate and engage alternative qualified suppliers and we might be
unable to engage acceptable alternative suppliers on favorable terms, if at all. In addition, we are increasing the
number of components and services we manufacture or provide ourselves, directly or through joint ventures. If
we are not successful at manufacturing such components or providing such services or have production problems
after transitioning to self-produced supplies, we may not be able to replace such components or services from
third party suppliers in a timely manner. Any such disruption in our supply of specialized components and
services or increased costs of those components or services could harm our business and adversely affect our
results of operations.

We have indebtedness, which could have negative consequences to our business or results of operations.

As of August 31, 2019, our total consolidated indebtedness was approximately $860.5 million (excluding
$27.1 million of debt discount and $10.6 million of debt issuance costs). As of August 31, 2019, approximately
$521.5 million (excluding $5.2 million of debt issuance costs) of our consolidated indebtedness was secured. Our
indebtedness consists of convertible notes, a senior secured revolving credit facility and term loans. Our level of
indebtedness could have a material adverse effect on our business and make it more difficult for us to satisfy our
obligations under our outstanding indebtedness and the notes. As a result of our debt and debt service obligations,
we face increased risks regarding, among other things, the following:
•

our ability to borrow additional amounts or refinance existing indebtedness in the future for working capital,
capital expenditures, acquisitions, debt service requirements, investments, stock repurchases, execution of our
growth strategy, or other purposes may be limited or such financing may be more costly;
our availability of cash flow to fund working capital requirements, capital expenditures,
investments,
acquisitions or other strategic initiatives and other general corporate purposes because a portion of our cash
flow is needed to pay principal and interest on our debt;
our vulnerability to competitive pressures and to general adverse economic or industry conditions, including
fluctuations in market interest rates or a downturn in our business;
our being at a competitive disadvantage relative to our competitors that have greater financial resources than
us or more flexible capital structures than us;
our ability to satisfy our financial obligations related to our consolidated indebtedness;
our additional exposure to the risk of increased interest rates as certain of our borrowings are at variable rates
of interest, which could result in higher interest expense in the event of an increase in interest rates;
our restrictions under the restrictive covenants in our North American senior secured credit facility, our
secured term loan, our other credit agreements, and any of the agreements governing our future indebtedness
adversely restricting our financial and operating flexibility and subjecting us to other risks; and
the possibility we may suffer a material adverse effect on our business and financial condition if we are
unable to service our debt or obtain additional financing, as needed.

•

•
•

•

Despite our current indebtedness levels and the restrictive covenants set forth in the agreements governing our
indebtedness, if we, our subsidiaries and our joint ventures are in compliance with the covenants, we, our
subsidiaries and our joint ventures may be able to incur substantially more indebtedness, including secured
indebtedness, and other obligations and liabilities that do not constitute indebtedness. This could increase the
risks associated with our indebtedness. As of August 31, 2019, after giving effect to issued but undrawn letters of
credit, we had approximately $233.2 million of availability under our North American senior secured credit
facility (based on our borrowing base as of such date) and approximately $78.3 million of availability under our
European and Mexican joint venture senior secured credit facilities.

Some of our credit facilities and existing indebtedness use the London Interbank Offered Rates (LIBOR) as a
benchmark for establishing interest rates. LIBOR is the subject of recent proposals for reform. These reforms

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may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these
developments with respect to LIBOR cannot be entirely predicted at this time, but could result in an increase in
the cost of our variable rate debt.

Train derailments or other accidents or claims could subject us to legal claims that adversely impact our
business, financial condition and our results of operations.

We provide a number of services which include the manufacture and supply of new railcars, wheels, components
and parts and the lease and repair of railcars for our customers that transport a variety of commodities, including
tank railcars that transport hazardous materials such as crude oil, ethanol and other products. In addition, we have
a Regulatory Services Group which offers regulatory, engineering, process consulting and advocacy support to
the tank car and petrochemical rail shipper community, among other services. We could be subject to various
legal claims, including claims of negligence, personal injury, physical damage and product or service liability, or
in some cases strict liability, as well as potential penalties and liability under environmental laws and regulations,
in the event of a derailment or other accident involving railcars, including tank railcars. Additionally, the severity
of injury or property damage arising from an incident may influence the causation responsibility analysis
exposing us to potentially greater liability. If we become subject to any such claims and are unable successfully
to resolve them or maintain inadequate insurance for such claims, our business, financial condition and results of
operations could be materially adversely affected.

Changes in or failure to comply with legal and regulatory requirements applicable to the industries in which
we operate may adversely impact our business, financial condition and results of operations.

Our operations and the industry we serve, including our customers, and our suppliers are subject to extensive
regulation by governmental, regulatory and industry authorities and by federal, state, local and foreign agencies.
These organizations establish, interpret, and enforce rules and regulations for the railcar industry, including
construction specifications and standards for the design and manufacture of railcars;
the certification of
manufacturing facilities, mechanical, maintenance and related standards; and railroad safety. New rules and
regulations, new legislation and new interpretations of the foregoing; actions or failures to act by regulatory
agencies (including changing tank car or other rail car regulations); our inability and cost to maintain and renew
operating permits, as well as enforcement actions by regulators could increase our operating costs and the
operating costs of our customers and impact our financial results, demand for our products and the economic
value of our assets. In addition, if we or our suppliers fail to comply with the requirements and regulations of
these entities, we could face sanctions and penalties that could negatively affect our financial results.

The risks of substantial costs and liabilities related to compliance with these laws and regulations are an inherent
part of our business. Despite our intention to comply with these laws and regulations, we cannot guarantee that
we or our suppliers will be able to do so at all times and compliance may prove to be more costly and limiting
than we currently anticipate and compliance requirements could increase in future years. These laws and
regulations are complex, change frequently, are subject to evolving interpretations, and may become more
stringent over time, which could impact our business, financial condition and results of operations.

In North America, regulatory changes, along with prevailing market conditions, could materially affect new tank
railcar manufacturing and retrofitting activities industry-wide, including negative impacts to customer demand
for our products and services. In North America additional laws and regulations have been proposed or adopted
that will potentially have a significant impact on railroad operations, including the implementation of “positive
train control” (PTC) requirements. PTC is a collision avoidance technology intended to override engineer
controlled locomotives and stop certain types of train accidents. While certain of these legal and regulatory
changes could result
in increased levels of railcar repair or refurbishment work and/or new tank car
manufacturing activity, if we are unable to manage to adapt our business successfully to changing regulations,
our business and results of operations could be adversely affected.

In Europe, changes to the process for obtaining regulatory approval for the operation of new or modified railcars
may make it more difficult for us to deliver products to our customers in a timely manner. The EU approval

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regime has recently been modified to replace country specific approvals with a single, harmonized EU process.
While the changes are expected to streamline the process over time, the switch could result in short term delays
in wagon certification, when compared to the current system, which may have an adverse effect on our business
and results of operations.

An adverse outcome in any pending or future litigation or investigation 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 operations could be adversely affected. In addition, future claims that may
arise relating to any pending or new matters, whether brought against us or initiated by us against third parties,
could distract management’s attention from business operations and increase our legal and related costs, which
could also negatively impact our business and results of operations.

In connection with the acquisition of the manufacturing business of ARI, we agreed to assume potential legacy
liabilities (known and unknown) related to railcars manufactured by ARI. Among these potential liabilities are
certain retrofit and repair obligations arising from regulatory actions by the Federal Railroad Administration and
the Association of American Railroads. In some cases, ARI shares with us the costs of these retrofit and repair
obligations. We currently are not able to determine if any of these liabilities will have a material adverse impact
on our results of operations.

Risks related to potential misconduct by employees may adversely impact us.

Our employees may engage in misconduct, fraud or other improper activities, including noncompliance with our
policies or regulatory standards and requirements, which could subject us to regulatory sanctions and reputational
damage and materially harm our business. It is not always possible to deter employee misconduct, and the
precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged
risks or losses, including risks associated with harassment, as well as whistleblower complaints and litigation.
There can be no assurance that we will succeed in preventing misconduct by employees in the future. In addition,
the investigation of alleged misconduct disrupts our operations and may harm the public’s perception of our
company, which may be costly. Any such events in the future may have a material adverse impact on our
financial condition or results of operations.

Some of our employees belong to labor unions and strikes or work stoppages could adversely affect our
operations.

We are a party to collective bargaining agreements with various labor unions at some of our operations. Disputes
with regard to the terms and conditions of these agreements or our potential inability to negotiate acceptable
contracts with these unions in the future could result in, among other things, strikes, work stoppages or other
slowdowns by the affected workers. We cannot be assured that our relations with our workforce will remain
positive. Union organizers are actively working to organize employees at some of our other facilities. If our
workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become
unionized or the terms and conditions in future labor agreements were renegotiated, or if union representation 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 could experience a significant disruption of our operations and incur higher
ongoing labor costs. In addition, we could face higher labor costs in the future 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 the
difficulties of restarting our operations that have been temporarily suspended.

Our stock price has been volatile and may continue to experience large fluctuations.

The price of our common stock has experienced rapid and significant price fluctuations. Our stock price ranged
from a low of $21.30 per share to a high of $64.87 per share for the year ended August 31, 2019 and a low of

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$41.95 per share to a high of $60.90 per share for the year ended August 31, 2018. The price for our common
stock is likely to continue to be volatile and subject to price and volume fluctuations in response to market and
other factors, including the factors discussed elsewhere in these risk factors and the following:
•
•
•

quarter-to-quarter variations in our operating results;
the depth and liquidity of the market for our common stock;
shortfalls in revenue or earnings from levels expected by securities analysts and investors, including the level
of our backlog and number of orders received during the period;
changes in securities analysts’ estimates of our future performance;
shareholder activism;
dissemination of false or misleading statements through the use of social and other media to discredit us,
disparage our products or to harm our reputation;
any developments that materially impact investors’ or customers’ perceptions of our business prospects;
dilution resulting from our sale of additional shares of common stock or from the conversion of convertible
notes;
changes in governmental regulation;
significant railcar industry announcements or developments;
the introduction of new products or technologies by us or our competitors;
actual or anticipated variations in our or our competitors’ quarterly or annual financial results;
the general health and outlook of our industry;
general financial and other market conditions; and
domestic and international economic conditions.

•
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•

•
•

•
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•
•
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•
•

In addition, public stock markets have experienced, and may in the future experience, extreme price and trading
volume volatility. This volatility has significantly affected the market prices of securities of many companies for
reasons frequently unrelated to, or that disproportionately impact, the operating performance of these companies
and may adversely affect the price of our common stock. These broad market fluctuations may adversely affect
the market price of our common stock in the future.

A material decline in the price of our common stock may result in the assertion of certain claims against us, and/
or the commencement of inquiries and/or investigations against us. A prolonged decline in the price of our
common stock could result in a reduction in the liquidity of our common stock, a reduction in our ability to raise
capital, and the inability of investors to obtain a favorable selling price for their shares. Any reduction in our
ability to raise equity capital in the future may force us to reallocate funds from other planned uses and could
have a significant negative effect on our business plans and operations.

Following periods of volatility in the market price of their stock, historically many companies have been the
subject of securities class action litigation. If we became involved in securities class action litigation in the
future, it could result in substantial costs and diversion of our management’s attention and our resources and
could harm our stock price, business, prospects, financial condition and results of operations.

Our product and 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 processes, claims for which the cost of repairing the defective part is
highly disproportionate to the original cost of the part or defects in railcars or services which we discover in the
future resulting in increased warranty costs or litigation. Additionally, warranty and product support terms may
expand beyond those which have traditionally prevailed in the rail supply industry. These types of warranty
claims could result in costly product recalls, customers seeking monetary damages, 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 or other reasons, we could be liable for warranty claims and other
risks for using these materials in our products.

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Many of our products are sold to third parties who may misuse, improperly install or improperly or
inadequately maintain or repair such products thereby potentially exposing us to claims that could increase
our costs and weaken our financial condition.

The products we manufacture are designed to work optimally when properly operated, installed, repaired,
maintained and used to transport the intended cargo. When this does not occur, we may be subjected to claims or
litigation associated with product damage, injuries or property damage that could increase our costs and weaken
our financial condition.

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 determined that the carrying value of the asset is in excess of the fair value.
We perform a goodwill impairment test annually during our third quarter. Goodwill is also tested more
frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists.

When we have continued underperforming operations or changes in circumstances, such as a decline in the
market price of our common stock, changes in demand or in the numerous variables associated with the
judgments, assumptions and estimates made in assessing the appropriate 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 and increased cash flows over time. If actual operating results were to differ from these
assumptions, it may result in an impairment of goodwill. As of August 31, 2019, we had $86.6 million of
goodwill in our Manufacturing segment and $43.3 million in our Wheels, Repair & Parts segment. Impairment
charges to our goodwill or our indefinite lived assets would impact our results of operations. Future write-downs
of goodwill and intangibles could affect certain of the financial covenants under debt instruments and could
restrict our financial flexibility. In the event of goodwill impairment, we may have to test other assets for
impairment.

The conversion of our outstanding convertible notes could result in substantial dilution to our current
stockholders.

We have the option to settle outstanding convertible notes in cash, although if we opt not to or do not have the
ability to settle outstanding convertible notes in cash, the conversion of some or all of our convertible notes may
dilute the ownership interests of existing stockholders. Any sales in the public market of the common stock
issuable upon the conversion of the notes could adversely affect prevailing market prices of our common stock.
In addition, the existence of the notes may encourage short selling by market participants, because the conversion
of the notes could depress the price of our common stock.

We are a holding company with no independent operations. Our ability to meet our obligations depends upon
the performance of our subsidiaries and our joint ventures and their ability to make distributions to us.

As a holding company, we are dependent on the earnings and cash flows of, and dividends, distributions, loans or
advances from, our subsidiaries and joint ventures to generate the funds necessary to meet certain of our
obligations including the payment of principal, of premium, if any, and interest on debt obligations. Any payment
of dividends, distributions, loans or advances to us by our subsidiaries could be subject to statutory restrictions
on dividends or repatriation of earnings under applicable local law and monetary transfer restrictions in the
jurisdictions in which our subsidiaries operate. In addition, many of our subsidiaries and our joint ventures are
parties to credit facilities that contain restrictions on the timing and amount of any payment of dividends,
distributions, loans or advances that our subsidiaries may make to us. Under certain circumstances, some or all of
our subsidiaries may be prohibited from making any such payments.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Our governing documents, the terms of our 2.875% Convertible Notes, 2.25% Convertible Notes and Oregon
law contain certain provisions that could prevent or make more difficult an attempt to acquire us.

Our Articles of Incorporation and Bylaws, as currently in effect, contain certain provisions that may have anti-
takeover effects, including:
•

a classified Board of Directors, with each class containing as nearly as possible one-third of the total number
of members of the Board of Directors and the members of each class serving for staggered three-year terms;
a vote of at least 55% of our voting securities to amend, repeal or adopt an inconsistent provision of certain
provisions of our Articles of Incorporation;
no less than 120 days’ advance notice with respect to nominations of directors or other matters to be voted on
by stockholders other than by or at the direction of the Board of Directors;
removal of directors only for cause;
the calling of special meetings of stockholders only by the president, a majority of the Board of Directors or
the holders of not less than 25% of all votes entitled to be cast on the matters to be considered at such
meeting;
the issuance of preferred stock by our board without further action by the shareholders; and
the availability under the Articles of Series A participating preferred stock that may be issuable.

•

•
•

The provisions discussed above could have anti-takeover effects because they may delay, defer or prevent an
unsolicited acquisition proposal that some, or a majority, of our stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their common stock over the then-prevailing
market price.

The Oregon Control Share Act and business combination law could limit parties who acquire a significant
amount of voting shares from exercising control over us for specific periods of time. These acts could lengthen
the period for a proxy contest or for a stockholder to vote their shares to elect the majority of our Board and
change management. Additionally, the terms of our 2.875% Convertible Notes provide for the acceleration, at the
lenders option, of all outstanding principal and interest owed on the notes upon a change of control of our
company. The rights afforded to our creditors under this indenture could increase the cost of any potential
acquisition of our company and have a resulting chilling effect on interest in acquiring our company.

These restrictions and provisions could have the effect of dissuading other stockholders or third parties from
contesting director elections or attempting certain transactions with us,
limitation,
acquisitions, which could cause investors to view our securities as less attractive investments and reduce the
market price of our common stock and the notes.

including, without

Payments of cash dividends on our common stock may be made only at the discretion of our Board of
Directors and may be restricted by Oregon law.

Any decision to pay dividends will be at the discretion of our Board of Directors and will depend upon our
operating results, strategic plans, capital requirements, financial condition, provisions of our borrowing
arrangements and other factors our Board of Directors considers relevant. Furthermore, Oregon law imposes
restrictions on our ability to pay dividends. Accordingly, we may not be able to continue to pay dividends in any
given amount in the future, or at all.

Fluctuations in foreign currency exchange rates could lead to increased costs and lower profitability.

Outside of the U.S., we primarily conduct business in Mexico and Europe and our non-U.S. businesses conduct
their operations in local currencies and other regional currencies. We also source materials worldwide.
Fluctuations in exchange rates may affect demand for our products in foreign markets or our cost
competitiveness and may adversely affect our profitability. Although we attempt to mitigate a portion of our
exposure to changes in currency rates through currency rate hedge contracts and other activities, these efforts
cannot fully eliminate the risks associated with the foreign currencies. In addition, some of our borrowings are in
foreign currency, giving rise to risk from fluctuations in exchange rates. A material or adverse change in
exchange rates could result in significant deterioration of profits or in losses for us.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

We may need to raise additional capital to operate our business and achieve our business objectives, which
could result in dilution to investors.

We require substantial working capital to fund our business. If additional funds are raised through the issuance of
equity securities, the percentage ownership held by our stockholders would be reduced and these equity securities
may have rights, preferences or privileges senior to those of our common stock. We evaluate opportunities to
access the capital markets taking into account our financial condition and other relevant considerations.
Additional financing may not be available when needed, on terms favorable to us or at all. If adequate funds are
not available or are not available on acceptable terms, we may be unable to develop or enhance our business, take
advantage of future opportunities or respond to competitive pressures, which would harm our business, financial
condition and results of operations.

Our business and operations could be negatively affected if we become subject to shareholder activism, which
could cause us to incur significant expense, hinder execution of our business strategy and impact our stock
price.

Shareholder activism, which could take many forms and arise in a variety of situations, has been increasing in
publicly traded companies recently. Shareholder activism, including potential proxy contests, could result in
substantial costs and divert management’s and our Board of Directors’ attention and resources from our business.
Additionally, such shareholder activism could give rise to perceived uncertainties as to our future, adversely
affect our relationships with service providers and make it more difficult to attract and retain qualified personnel.
Also, we may be required to incur significant legal fees and other expenses related to activist shareholder
matters. Our stock price could be subject to significant fluctuation or otherwise be adversely affected by the
events, risks and uncertainties of any shareholder activism.

We are subject to cybersecurity risks and may incur increasing costs in an effort to minimize those risks.

job applicants and other parties,

information regarding our customers, employees,

Our business employs systems and websites that allow for the storage and transmission of proprietary or
including
confidential
financial information, intellectual property and personal identification information. Security breaches and other
disruptions could compromise our information, expose us to liability and harm our reputation and business. The
steps we take to deter and mitigate these risks may not be successful. We may not have the resources or technical
sophistication to anticipate or prevent current or rapidly evolving types of cyber-attacks. Attacks may be targeted
at us, our customers, or others who have entrusted us with information. Actual or anticipated attacks may cause
us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train
employees, and engage third-party experts or consultants. Advances in computer capabilities, or other
technological developments may result in the technology and security measures used by us to protect transaction
or other data being breached or compromised. In addition, data and security breaches can also occur as a result of
non-technical issues, including intentional or inadvertent breach by our employees or by persons with whom we
have commercial relationships. Any compromise or breach of our security could result in a violation of
applicable privacy and other laws, legal and financial exposure, negative impacts on our customers’ willingness
to transact business 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.

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 the operation of our businesses. We continue to evaluate and implement
upgrades and changes to information technology systems that support substantially all of our operating and
financial functions. We could experience problems in connection with such implementations,
including
compatibility issues, training requirements, higher than expected implementation costs and other integration

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

challenges and delays. A significant problem with an implementation, integration with other systems or ongoing
management and operation of our systems could negatively impact our business by disrupting operations. Such a
problem could 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.

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 or services infringe their intellectual property rights, our ability to compete in
the market may be harmed, and our business and financial condition may 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 to protect our intellectual property. However, these protections might be
inadequate. Our pending or future trademark, copyright and patent applications might not be approved or, if
allowed, might not be sufficiently broad. If our intellectual property rights are not adequately protected we may
not be able to commercialize our technologies, products or services and our competitors could commercialize our
technologies, which could result in a decrease in our sales and market share and could materially adversely affect
our business, financial condition and results of operations. Conversely, third parties might assert that our
products, services, or other business activities infringe their patents or other intellectual property rights.
Infringement and other intellectual property claims and proceedings brought against us, whether successful or
not, could result in substantial costs and harm our reputation. Such claims and proceedings can also distract and
divert our management and key personnel from other tasks important to the success of our business. In addition,
intellectual property litigation or claims could force us to cease selling or using products that incorporate the
asserted intellectual property, which would adversely affect our revenues, or cause us to pay substantial damages
for past use of the asserted intellectual property or to pay substantial fees to obtain a license from the holder of
the asserted intellectual property, which license may not be available on reasonable terms, if at all. In the event of
an adverse determination in an intellectual property suit or proceeding, or our failure to license essential
technology or redesign our products so as not to infringe third party intellectual property rights, our sales could
be harmed and our costs could increase, which could materially adversely affect our business, financial condition
and results of operations.

We could be liable for physical damage, business interruption or product liability claims that exceed our
insurance coverage.

The nature of our business subjects us to physical damage, business interruption and product liability claims,
especially in connection with the repair and manufacture of products that carry hazardous or volatile materials.
Although we maintain liability insurance coverage at commercially reasonable levels compared to similarly sized
heavy equipment manufacturers, an unusually large physical damage, business interruption or product liability
claim or a series of claims based on a failure repeated throughout our production process could exceed our
insurance coverage or result in damage to our reputation, which could materially adversely impact our financial
condition and results of operations.

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 this insurance 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 assure that our insurance
carriers will be able to pay current or future claims.

Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting
policies could adversely affect our financial results.

Our accounting policies and methods are fundamental to how we record and report our financial condition and
results of operations. Some of these policies require use of estimates and assumptions that may affect the

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

reported value of our assets or liabilities and financial results and are critical because they require management to
make difficult, subjective, and complex judgments about matters that are inherently uncertain. Accounting
standard setters and those who interpret the accounting standards (such as the Financial Accounting Standards
Board, the SEC, and our independent registered public accounting firm) may amend 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 new or revised standard retrospectively, resulting in the revision of prior period financial
statements. Changes in accounting standards can be hard to predict and can materially impact how we record and
report our financial condition and results of operations.

Fires, natural disasters, severe weather conditions or public health crises could disrupt our business and result
in loss of revenue or higher expenses.

Any serious disruption at any of our facilities due to fire, hurricane, earthquake, flood, other severe weather
events or any other natural disaster, or an epidemic or other public health crisis, or a panic reaction to a perceived
health risk, could impair our ability to use our facilities and 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 our facilities,
particularly at any of our Mexican or Arkansas facilities, it could impair our ability to adequately supply our
customers, cause a significant disruption to our operations, cause us to incur significant costs to relocate or
reestablish these functions and negatively impact our operating results. While we insure against certain business
interruption risks, such insurance may not adequately compensate us for any losses incurred as a result of natural
or other disasters.

Unusual weather conditions may reduce demand for our wheel-related parts and repair services.

Performing railcar wheel repair and replacing railcar wheels represents a portion of our business. Seasonal
fluctuations in weather conditions may lead to greater variation in our quarterly operating results as unusually
mild weather conditions will generally lead to lower demand for our wheel-related products and services. In
addition, unusually mild weather conditions throughout the year may reduce overall demand for our wheel-
related products and repair services. If occurring for prolonged periods, such weather could have an adverse
effect on our business, results of operations and financial condition.

Business, regulatory, and legal developments regarding climate change may affect the demand for our
products or the ability of our critical suppliers to meet our needs.

Scientific studies have suggested that emissions of certain gases, commonly referred to as greenhouse gases
(GHGs) including carbon dioxide and methane, may be contributing to warming of the Earth’s atmosphere and
other climate changes. Legislation and new rules to regulate emission of GHGs have been introduced in
numerous state legislatures, the U.S. Congress, and by the EPA. Some of these proposals would require
industries to meet stringent new standards that may require substantial reporting of GHGs and other carbon
intensive activities in addition to potentially mandating reductions in our carbon emissions. While we cannot
assess the direct impact of these or other potential regulations, we recognize that new climate change reporting or
compliance protocols could affect our operating costs, the demand for our products and/or affect the price of
materials, input factors and manufactured components which could impact our margins. Potential opportunities
could include greater demand for certain types of railcars, while potential challenges could include decreased
demand for certain types of railcars or other products and higher energy costs. Other adverse consequences of
climate change could include an increased frequency of severe weather events and rising sea levels that could
affect operations at our manufacturing facilities, the price of insuring company assets, or other unforeseen
disruptions of our operations, systems, property or equipment.

Repercussions from terrorist activities or armed conflict could harm our business.

Terrorist activities, anti-terrorist efforts, civil unrest, crime and other armed conflict involving the U.S. or its
interests abroad may adversely affect the U.S. and global economies, potentially preventing us from meeting our

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

financial and other obligations. In particular, the negative impacts of these events may affect the industries in
which we operate. This could result in delays in or cancellations of the purchase of our products or shortages in
raw materials, parts, or components. Any of these occurrences could have a material adverse impact on our
financial results.

Unanticipated changes in our tax provisions or exposure to additional income tax liabilities could affect our
financial condition and profitability and we may take tax positions that the Internal Revenue Service or other
tax authorities may contest.

We are subject to income taxes in both the United States and foreign jurisdictions. Significant judgments and
estimates are required to be made in determining our worldwide provision for income taxes. Changes in
estimates of projected future operating results, loss of deductibility of items, recapture of prior deductions
(including related to interest on convertible notes), limitations on our ability to utilize tax net operating losses in
the future or changes in assumptions regarding our ability to generate future taxable income could result in
significant increases to our tax expense and liabilities that could adversely affect our financial condition and
profitability.

We have in the past and may in the future take tax positions that the Internal Revenue Service (IRS) or other tax
authorities may contest. We are required by an IRS regulation to disclose particular tax positions to the IRS as
part of our tax returns for that year and future years. If the IRS or other tax authorities 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 operations and financial position.

Some of our customers place orders for our products in reliance on their ability to utilize tax benefits or tax
credits any of which benefits or credits could be discontinued thereby reducing incentives for our customers to
purchase our rail products.

There is no assurance that tax authorities will reauthorize, modify, or prevent the expiration of tax benefits, tax
credits, or other policies aimed to incentivize the purchase of our products. If such incentives are discontinued or
diminished, the demand for our products could decrease, thereby creating the potential for a material adverse
effect on our financial condition or results of operations.

Our share repurchase program is intended to enhance long-term shareholder value although we cannot
guarantee this will occur and this program may be suspended or terminated at any time.

The Board of Directors has authorized our company to repurchase our common stock through a share repurchase
program. Our share repurchase program may be modified, suspended or discontinued at any time without prior
notice. Although the share repurchase program is intended to enhance long-term shareholder value, we cannot
provide assurance that this will occur.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

We operate at the following primary facilities as of August 31, 2019:

Description

Manufacturing Segment

Operating facilities:

Location

Status

6 locations in the United States
3 locations in Mexico

3 locations in Poland
3 locations in Romania
1 location in Turkey

Owned
Owned – 2 locations
Leased – 1 location
Owned
Owned
Owned

Administrative offices:

2 locations in the United States

Leased

Wheels, Repair & Parts Segment

Operating facilities:

21 locations in the United States

Leased – 11 locations
Owned – 9 locations
Customer premises – 1 location

Administrative offices:

Birmingham, Alabama

Leased

Leasing & Services Segment

Corporate offices, railcar marketing
and leasing activities:

Lake Oswego, Oregon

Leased

We believe that our facilities are in good condition and that the facilities, together with anticipated capital
improvements and additions, are adequate to meet our operating needs for the foreseeable future. We continually
evaluate our facilities in order to remain competitive and to take advantage of market opportunities.

Item 3. LEGAL PROCEEDINGS

There is hereby incorporated by reference the information disclosed in Note 23 – Commitments and
Contingencies to Consolidated Financial Statements, Part II, Item 8 of this Form 10-K.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Information about our Executive Officers

Current information regarding our executive officers is presented below.

William A. Furman, 75, is Chief Executive Officer and Chairman of the Board of Directors. Mr. Furman has
served as Chief Executive Officer since 1994, and as Chairman of the Board of Directors since January 2014.
Mr. Furman was Vice President of the Company, or its predecessor company, from 1974 to 1994 and President
of the Company from 1994 to 2019.

Martin R. Baker, 63, is Senior Vice President, General Counsel and Chief Compliance Officer, a position he has
held since joining the Company in May 2008. Prior to joining the Company, Mr. Baker was Corporate Vice
President, General Counsel and Secretary of Lattice Semiconductor Corporation.

the Company and President of Greenbrier
Alejandro Centurion, 63,
Manufacturing Operations, a position he has held since January 2015. Mr. Centurion has served in various
management positions for
recently as President of North American
Manufacturing Operations.

the Company since 2005, most

is Executive Vice President of

Brian J. Comstock, 57, is Executive Vice President, Sales and Marketing, a position he has held since April 2018.
Mr. Comstock has served in various management positions for the Company since 1998, most recently as Senior
Vice President and General Manager of Commercial, Americas.

is Senior Vice President, Chief Financial Officer and Chief Accounting Officer.
Adrian J. Downes, 56,
Mr. Downes has served as Senior Vice President and Chief Accounting Officer since joining the Company in
March 2013. Mr. Downes was promoted to Acting Chief Financial Officer in August 2018 and was promoted to
Chief Financial Officer in May 2019.

Anne T. Manning, 56, is Vice President and Corporate Controller, a position she has held since November 2007.
Ms. Manning has served in various financial management positions for the Company since 1995.

Mark J. Rittenbaum, 62, is Executive Vice President, Chief Commercial and Leasing Officer, a position he has
held since February 2016. Mr. Rittenbaum has served in various management positions for the Company since
1990, most recently as Executive Vice President and Chief Financial Officer.

Lorie L. Tekorius, 52, is President and Chief Operating Officer. Ms. Tekorius has served as Chief Operating
Officer since August 2018 and was promoted to President in August 2019. Ms. Tekorius has served in various
management positions for the Company since 1995, most recently as Executive Vice President and Chief
Operating Officer and prior to that, as Executive Vice President and Chief Financial Officer.

Executive officers are designated by the Board of Directors. There are no family relationships among any of the
executive officers of the Company.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

Our common stock has been traded on the New York Stock Exchange under the symbol GBX since July 14,
1994. There were approximately 533 holders of record of common stock as of October 22, 2019.

Issuer Purchases of Equity Securities

The Board of Directors has authorized the Company to repurchase shares of the Company’s common stock. The
share repurchase program has an expiration date of March 31, 2021 and the amount remaining for repurchase is
$100 million. Under the share repurchase program, shares of common stock may be purchased on the open
market or through privately negotiated transactions from time to time. The timing and amount of purchases will
be based upon market conditions, securities law limitations and other factors. The program may be modified,
suspended or discontinued at any time without prior notice. The share repurchase program does not obligate the
Company to acquire any specific number of shares in any period.

There were no shares repurchased under the share repurchase program during the quarter ended August 31, 2019.

Period

June 1, 2019 – June 30, 2019
July 1, 2019 – July 31, 2019
August 1, 2019 – August 31, 2019

Average Price
Paid Per Share
(Including
Commissions)

Total Number of
Shares Purchased
as Part of Publically
Announced Plans
or Programs

Total Number of
Shares Purchased

–
–
–

–

–
–
–

–

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans
or Programs

$100,000,000
$100,000,000
$100,000,000

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Performance Graph

The following graph demonstrates a comparison of cumulative total returns for the Company’s Common Stock,
the Dow Jones U.S. Industrial Transportation Index and the Standard & Poor’s (S&P) 500 Index. The graph
assumes an investment of $100 on August 31, 2014 in each of the Company’s Common Stock and the stocks
comprising the indices. Each of the indices assumes that all dividends were reinvested and that the investment
was maintained to and including August 31, 2019, the end of the Company’s 2019 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 our Common Stock.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among The Greenbrier Companies, Inc., the S&P 500 Index
and the Dow Jones US Industrial Transportation Index

$180

$160

$140

$120

$100

$80

$60

$40

$20

8/14

8/15

8/16

8/17

8/18

8/19

The Greenbrier Companies, Inc.
S&P 500
Dow Jones US Industrial Transportation

*$100 invested on 8/31/14 in stock or index, including reinvestment of dividends.
Fiscal year ending August 31.

Equity Compensation Plan Information

Equity Compensation Plan Information is hereby incorporated by reference to the “Equity Compensation Plan
Information” table in Registrant’s definitive Proxy Statement to be filed pursuant to Regulation 14A, which
Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after
the end of the Registrant’s year ended August 31, 2019.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 6. SELECTED FINANCIAL DATA

(In thousands, except unit and per share data)
Statement of Operations Data
Revenue:

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Earnings from operations

Net earnings attributable to Greenbrier
Basic earnings per common share

attributable to Greenbrier:

Diluted earnings per common share

attributable to Greenbrier:

Weighted average common shares outstanding:

Basic
Diluted

Cash dividends paid per share
Balance Sheet Data
Total assets
Revolving notes and notes payable, net
Total equity
Other Operating Data
New railcar units delivered
New railcar backlog (units)
New railcar backlog
Lease fleet:

Units managed
Units owned
Cash Flow Data
Capital expenditures:
Manufacturing
Wheels, Repair & Parts
Leasing & Services

Proceeds from sale of assets

Depreciation and amortization:

Manufacturing
Wheels, Repair & Parts
Leasing & Services

2019

2018

2017

2016

2015

YEARS ENDED AUGUST 31,

$2,431,499
444,502
157,590

$2,044,586
347,023
127,855

$1,725,188
312,679
131,297

$2,096,331
322,395
260,798

$2,136,051
371,237
97,990

$3,033,591

$2,519,464

$2,169,164

$2,679,524

$2,605,278

$ 184,116

$ 252,985

$ 408,552
71,076(1) $ 151,781(2) $ 116,067(2) $ 183,213

$ 260,432

2.18

2.14

32,615
33,165
1.00

4.92

4.68

30,857
32,835
0.96

3.97

3.65

29,225
32,562
0.86

6.28

5.73

29,156
32,468
0.81

$ 386,892
$ 192,832

6.85

5.93

28,151
33,328
0.60

$2,990,637
$ 850,000
$1,441,697

$2,465,464
$ 463,930
$1,384,215

$2,397,705
$ 562,552
$1,178,893

$1,835,774
$ 301,853
$1,016,827

$1,787,452
$ 374,258
$ 863,489

22,500
30,300
$3,280,000

19,000
27,400
$2,740,000

15,700
28,600
$2,800,000

20,300
27,500
$3,190,000

21,100
41,300
$4,710,000

380,000
9,400

357,000
8,100

336,000
8,300

264,000
8,900

260,000
9,300

85,155
13,291
99,787

59,707
5,204
111,937

$ 198,233

$ 176,848

$ 125,427

$ 153,224

49,240
13,024
21,467

44,225
10,771
19,360

54,973
3,129
27,963

86,065

24,149

33,807
11,143
20,179

51,294
10,190
77,529

84,354
9,381
12,254

$ 139,013

$ 105,989

$ 103,715

27,137
11,971
24,237

5,295

20,668
11,748
12,740

83,731

74,356

65,129

63,345

45,156

(1)

(2)

2019 includes a non-cash goodwill impairment charge of $10.0 million related to the Company’s repair operations.
2018 and 2017 includes the Company’s portion of non-cash goodwill impairment charges taken by GBW. As the
Company accounted for GBW under the equity method of accounting, its 50% share of the non-cash goodwill
impairment losses recognized by GBW was $9.5 million after-tax in 2018 and $3.5 million after-tax in 2017.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Executive Summary

We operate in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing & Services. Our
segments are operationally integrated. The Manufacturing segment, which currently operates from facilities in
the U.S., Mexico, Poland, Romania and Turkey, produces double-stack intermodal
tank cars,
conventional railcars, automotive railcar products and marine vessels. The Wheels, Repair & Parts segment
performs wheel and axle servicing; railcar repair, refurbishment and maintenance; as well as production of a
variety of parts for the rail industry in North America. The Leasing & Services segment owns approximately
9,400 railcars and provides management services for approximately 380,000 railcars for railroads, shippers,
carriers, institutional investors and other leasing and transportation companies in North America as of August 31,
2019. Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake
in a railcar manufacturer in Brazil and a lease financing warehouse.

railcars,

Our total manufacturing backlog of railcar units as of August 31, 2019 was approximately 30,300 units with an
estimated value of $3.28 billion. Approximately 3% of backlog units and 2% of estimated backlog value as of
August 31, 2019 was associated with our Brazilian manufacturing operations which is accounted for under the
equity method. Backlog as of August 31, 2019 reflects the transfer of 10,600 units from ARI and the removal of
3,500 small cube covered hoppers for sand service for which we realized negotiated economic benefits.
Remaining backlog does not include any other orders for the sand market. Backlog units for lease may be
syndicated to third parties or held in our own fleet depending on a variety of factors. Multi-year supply
agreements are a part of rail industry practice. A portion of the orders included in backlog reflects an assumed
product mix. Under terms of the orders, the exact mix and pricing will be determined in the future, which may
impact backlog. Marine backlog as of August 31, 2019 was $100 million.

On July 26, 2019 we completed our acquisition of the manufacturing business of ARI. In connection with the
acquisition, we acquired two railcar manufacturing facilities in Arkansas, as well as manufacturing and
administrative employees in Missouri. We also acquired other facilities which produce a range of railcar
components and parts, creating enhanced vertical integration for our manufacturing operations.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Overview

Revenue, Cost of revenue, Margin and Earnings from operations presented below, include amounts from external
parties and exclude intersegment activity that is eliminated in consolidation.

(In thousands)

Revenue:

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Cost of revenue:
Manufacturing
Wheels, Repair & Parts
Leasing & Services

Margin:

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Selling and administrative
Net gain on disposition of equipment
Goodwill impairment

Earnings from operations
Interest and foreign exchange

Earnings before income tax and loss from unconsolidated affiliates
Income tax expense

Earnings before loss from unconsolidated affiliates
Loss from unconsolidated affiliates

Net earnings
Net earnings attributable to noncontrolling interest

Net earnings attributable to Greenbrier

Diluted earnings per common share

Years ended August 31,
2018

2017

2019

$2,431,499
444,502
157,590

$2,044,586
347,023
127,855

$1,725,188
312,679
131,297

3,033,591

2,519,464

2,169,164

2,137,625
420,890
108,590

1,727,407
318,330
64,672

1,373,967
288,336
85,562

2,667,105

2,110,409

1,747,865

293,874
23,612
49,000

366,486
213,308
(40,963)
10,025

184,116
30,912

153,204
(41,588)

111,616
(5,805)

105,811
(34,735)

317,179
28,693
63,183

409,055
200,439
(44,369)
—

252,985
29,368

223,617
(32,893)

190,724
(18,661)

172,063
(20,282)

351,221
24,343
45,735

421,299
170,607
(9,740)
—

260,432
24,192

236,240
(64,014)

172,226
(11,764)

160,462
(44,395)

71,076

$ 151,781

$ 116,067

2.14

4.68

3.65

Performance for our segments is evaluated based on Earnings from operations (operating profit). Corporate
includes selling and administrative costs not directly related to goods and services and certain costs that are
intertwined among segments due to our integrated business model. Management does not allocate Interest and
foreign exchange or Income tax expense for either external or internal reporting purposes.

(In thousands)

Operating profit (loss):

Manufacturing
Wheels, Repair & Parts
Leasing & Services
Corporate

Years ended August 31,
2018

2017

2019

$217,583
(2,941)
64,763
(95,289)

$240,901
16,731
88,481
(93,128)

$295,334
14,984
31,904
(81,790)

$184,116

$252,985

$260,432

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Consolidated Results

(In thousands)

2019

2018

2017

Increase
(Decrease)

%
Change

Increase
(Decrease)

%
Change

Years ended August 31,

2019 vs 2018

2018 vs 2017

Revenue
Cost of revenue
Margin (%)
Net earnings attributable to

Greenbrier
* Not meaningful

$3,033,591
$2,667,105
12.1%

$2,519,464
$2,110,409
16.2%

$2,169,164
$1,747,865
19.4%

$514,127
$556,696
(4.1%)

20.4% $350,300
26.4% $362,544
(3.2%)

16.1%
20.7%
*

71,076

$ 151,781

$ 116,067

$ (80,705)

(53.2%)

$ 35,714

30.8%

Through our integrated business model, we provide a broad range of custom products and services in each of our
segments, which have various average selling prices and margins. The demand for and mix of products and
services delivered changes from period to period, which causes fluctuations in our results of operations.

The 20.4% increase in revenue in 2019 compared to 2018 was primarily due to an 18.9% increase in
Manufacturing revenue. The increase in Manufacturing revenue was primarily attributed to an 18.4% increase in
the volume of railcar deliveries and a change in product mix. The increase in revenue was also due to a 28.1%
increase in Wheels, Repair & Parts revenue primarily due to 2019 including $87.5 million in revenue associated
with the repair shops returned to us after discontinuing the GBW joint venture in August 2018. The 16.1%
increase in 2018 as compared to 2017 was primarily due to an 18.5% increase in Manufacturing revenue. The
increase in Manufacturing revenue was primarily due to a 21.0% increase in the volume of railcar deliveries and
a change in product mix. The increase was also attributed to an 11.0% increase in Wheels, Repair & Parts
revenue primarily as a result of higher wheel set and component volumes due to an increase in demand and an
increase in scrap metal pricing.

The 26.4% increase in cost of revenue in 2019 compared to 2018 was primarily due to a 23.7% increase in
Manufacturing cost of revenue. The increase in Manufacturing cost of revenue was primarily attributed to an
18.4% increase in the volume of railcar deliveries and operating inefficiencies at some of our manufacturing
facilities. The increase in cost of revenue was also due to a 32.2% increase in Wheels, Repair & Parts cost of
revenue primarily due to 2019 including $97.3 million in costs associated with the repair shops returned to us
after discontinuing the GBW joint venture in August 2018. The 20.7% increase in cost of revenue for 2018 as
compared to 2017 was primarily due to a 25.7% increase in Manufacturing cost of revenue. The increase in
Manufacturing cost of revenue was primarily due to a 21.0% increase in the volume of railcar deliveries and a
change in product mix. The increase was also attributed to a 10.4% increase in Wheels, Repair & Parts cost of
revenue primarily due to higher wheel set and component costs associated with increased volumes.

Margin as a percentage of revenue was 12.1% in 2019 and 16.2% in 2018. The overall margin as a percentage of
revenue was negatively impacted by a decrease in Manufacturing margin to 12.1% from 15.5% primarily
attributed to a change in product mix and operating inefficiencies at some of our manufacturing facilities. The
decrease was also due to a decrease in Leasing & Services margin to 31.1% from 49.4%. Margin for 2019 was
negatively impacted from higher sales of railcars that we purchased from third parties which have lower margin
percentages. Overall margin as a percentage of revenue was 16.2% for 2018 and 19.4% for 2017. The overall
margin as a percentage of revenue was negatively impacted by a decrease in Manufacturing margin to 15.5%
from 20.4% primarily attributed to a change in product mix. This was partially offset by an increase in Leasing &
Services margin to 49.4% from 34.8%. Leasing & Services margin percentage in 2018 benefited from fewer sales
of railcars that we purchased from third parties which have lower margin percentages, lower maintenance costs, a
higher average volume of rent-producing leased railcars for syndication and lower transportation costs.

The $80.7 million decrease in net earnings attributable to Greenbrier in 2019 compared to 2018 was primarily
attributable to a decrease in margin, costs associated with the acquisition of the manufacturing business of ARI
and a $10.0 million goodwill impairment charge for which there was no tax benefit related to our repair
operations. The $35.7 million increase in net earnings attributable to Greenbrier in 2018 compared to 2017 was
primarily attributable to a higher Net gain on disposition of equipment and a reduction in the tax rate due to the
Tax Cuts and Jobs Act (Tax Act).

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Manufacturing Segment

(In thousands)

Revenue
Cost of revenue
Margin (%)
Operating profit ($)
Operating profit (%)
Deliveries
* Not meaningful

Years ended August 31,

2019 vs 2018

2018 vs 2017

2019

2018

2017

Increase
(Decrease)

%
Change

Increase
(Decrease)

%
Change

$2,431,499
$2,137,625
12.1%
$ 217,583
8.9%
22,500

$2,044,586
$1,727,407
15.5%
$ 240,901
11.8%
19,000

$1,725,188
$1,373,967
20.4%
$ 295,334
17.1%
15,700

$386,913
$410,218
(3.4%)
$ (23,318)
(2.9%)
3,500

18.9% $319,398
23.7% $353,440
(4.9%)
$ (54,433)
(5.3%)
3,300

*
(9.7%)
*
18.4%

18.5%
25.7%
*
(18.4%)
*
21.0%

As of July 26, 2019, the Manufacturing segment included the results of the manufacturing business of ARI which
is consolidated for financial reporting purposes. This partially contributed to the increase in Manufacturing
revenue and cost of revenue in 2019 compared to 2018.

Manufacturing revenue increased $386.9 million or 18.9% in 2019 compared to 2018, of which $43 million
related to the addition of the manufacturing business of ARI. The increase in revenue was primarily attributed to
an 18.4% increase in the volume of railcar deliveries and a change in product mix. Manufacturing revenue
increased $319.4 million or 18.5% in 2018 compared to 2017. The increase in revenue was primarily attributed to
a 21.0% increase in the volume of railcar deliveries and a change in product mix.

Manufacturing cost of revenue increased $410.2 million or 23.7% in 2019 compared to 2018. The increase in
cost of revenue was primarily attributed to an 18.4% increase in the volume of railcar deliveries and operating
inefficiencies at some of our manufacturing facilities. Operating inefficiencies include poor manufacturing
execution at some of our manufacturing facilities and supplier delivery failures at our European operations.
Manufacturing cost of revenue increased $353.4 million or 25.7% in 2018 compared to 2017. The increase in
cost of revenue was primarily attributed to a 21.0% increase in the volume of railcar deliveries and a change in
product mix.

Manufacturing margin as a percentage of revenue decreased 3.4% in 2019 compared to 2018. The decrease was
primarily attributed to a change in product mix and operating inefficiencies at some of our manufacturing
facilities. Operating inefficiencies include poor manufacturing execution at some of our manufacturing facilities
and supplier delivery failures at our European operations. These were partially offset by higher volumes of new
railcar sales with leases attached which typically result in enhanced sales prices and margins. Manufacturing
margin as a percentage of revenue decreased 4.9% in 2018 compared to 2017 primarily due to a change in
product mix.

Manufacturing operating profit decreased $23.3 million or 9.7% in 2019 compared to 2018. The decrease was
primarily attributed to a lower margin percentage from a change in product mix and operating inefficiencies at
some of our manufacturing facilities. Manufacturing operating profit decreased $54.4 million or 18.4% in 2018
compared to 2017 primarily attributed to a lower margin percentage from a change in product mix and increased
costs associated with expanded international operations. This was partially offset by an increase in the volume of
railcar deliveries.

Wheels, Repair & Parts Segment

(In thousands)

Revenue
Cost of revenue
Margin (%)
Operating profit ($)
Operating profit (%)
* Not meaningful

Years ended August 31,

2019 vs 2018

2018 vs 2017

2019

2018

2017

Increase
(Decrease)

%
Change

Increase
(Decrease)

%
Change

$444,502
$420,890
5.3%

$347,023
$318,330
8.3%
$ (2,941) $ 16,731
4.8%

(0.7%)

$312,679
$288,336
7.8%
$ 14,984
4.8%

$ 97,479
$102,560
(3.0%)
$ (19,672)
(5.5%)

28.1% $34,344
32.2% $29,994
0.5%
(117.6%) $ 1,747
0.0%

11.0%
10.4%
*
11.7%
*

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

On August 20, 2018, 12 repair shops were returned to us as a result of discontinuing our GBW railcar repair joint
venture, of which four shops were closed during 2019. Beginning on August 20, 2018, the results of operations
from these repair shops were included in the Wheels, Repair & Parts segment as they are now consolidated for
financial reporting purposes. The addition of these repair shops contributed to the increase in Wheels, Repair &
Parts revenue and cost of revenue during 2019 compared to 2018.

Wheels, Repair & Parts revenue increased $97.5 million or 28.1% in 2019 compared to 2018. The increase was
primarily due to 2019 including $87.5 million in revenue associated with the repair shops returned to us after
discontinuing the GBW joint venture in August 2018. The increase was also due to higher parts revenue due to
an increase in demand. Wheels, Repair & Parts revenue increased $34.3 million or 11.0% in 2018 compared to
2017 primarily as a result of higher wheel set and component volumes due to an increase in demand and an
increase in scrap metal pricing.

Wheels, Repair & Parts cost of revenue increased $102.6 million or 32.2% in 2019 compared to 2018. The
increase was primarily due to 2019 including $97.3 million in cost of revenue associated with the repair shops
returned to us after discontinuing the GBW joint venture in August 2018. The increase was also due to increased
parts volumes and costs associated with closing sites in our repair network. Wheels, Repair & Parts cost of
revenue increased $30.0 million or 10.4% in 2018 compared to 2017 primarily due to higher wheel set and
component costs associated with increased volumes.

Wheels, Repair & Parts margin as a percentage of revenue decreased 3.0% in 2019 compared to 2018. The
decrease was primarily attributed to inefficiencies at our repair operations and costs associated with closing sites
in our repair network. This was partially offset by a favorable parts product mix. Wheels, Repair & Parts margin
as a percentage of revenue increased 0.5% in 2018 compared to 2017 due to efficiencies from operating at higher
wheel set and component volumes and an increase in scrap metal pricing. This was partially offset by a less
favorable parts product mix.

Wheels, Repair & Parts operating profit decreased $19.7 million in 2019 compared to 2018. The decrease was
primarily attributed to a $10.0 million goodwill impairment charge recognized in 2019 due to challenges at our
repair operations and costs associated with closing sites in our repair network. This was partially offset by higher
parts revenue and a more favorable parts product mix. Wheels, Repair & Parts operating profit increased
$1.7 million or 11.7% in 2018 compared to 2017 primarily attributable to higher margins due to an increase in
wheelset and component volumes and an increase in efficiencies.

Leasing & Services Segment

(In thousands)

Revenue
Cost of revenue
Margin (%)
Operating profit ($)
Operating profit (%)
* Not meaningful

Years ended August 31,

2019 vs 2018

2018 vs 2017

2019

2018

2017

Increase
(Decrease)

%
Change

Increase
(Decrease)

%
Change

$157,590
$108,590
31.1%
$ 64,763
41.1%

$127,855
$ 64,672
49.4%
$ 88,481
69.2%

$131,297
$ 85,562
34.8%
$ 31,904
24.3%

$ 29,735
$ 43,918
(18.3%)
$ (23,718)
(28.1%)

23.3% $ (3,442)
67.9% $(20,890)
14.6%
$ 56,577
44.9%

(26.8%)

(2.6%)
(24.4%)
*
177.3%
*

The Leasing & Services segment generates revenue from leasing railcars from its lease fleet, providing various
management services, interim rent on leased railcars for syndication, and the sale of railcars purchased from third
parties with the intent to resell them. The gross proceeds from the sale of these railcars are recorded in revenue
and the costs of purchasing these railcars are recorded in cost of revenue.

Leasing & Services revenue increased $29.7 million or 23.3% in 2019 compared to 2018. The increase was
primarily attributed to an increase in the sale of railcars which we had purchased from third parties with the
intent to resell them. This was partially offset by a lower average volume of rent-producing leased railcars for
syndication. Leasing & Services revenue decreased $3.4 million or 2.6% in 2018 compared to 2017. The change

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

in revenue was primarily attributed to a decrease in the sale of railcars which we had purchased from third parties
with the intent to resell them and a decline in leasing revenue due to fewer railcars on operating leases as we
were rebalancing our lease portfolio. This was partially offset by higher management services revenue from new
service agreements and a higher average volume of rent-producing leased railcars for syndication.

Leasing & Services cost of revenue increased $43.9 million or 67.9% in 2019 compared to 2018. The increase
was primarily due to an increase in the volume of railcars sold that we purchased from third parties and higher
transportation costs. Leasing & Services cost of revenue decreased $20.9 million or 24.4% in 2018 compared to
2017 primarily due to a decline in the volume of railcars sold that we purchased from third parties, lower
maintenance and transportation costs and fewer railcars on operating leases as we rebalance our lease portfolio.

Leasing & Services margin as a percentage of revenue decreased 18.3% in 2019 compared to 2018. Margin for
2019 was negatively impacted from higher sales of railcars that we purchased from third parties which have
lower margin percentages. The decrease in margin was also due to higher transportation costs. Leasing &
Services margin as a percentage of revenue increased 14.6% in 2018 compared to 2017. Margin percentage for
2018 benefited from fewer sales of railcars that we purchased from third parties which have lower margin
percentages. The increase in margin was also due to lower maintenance costs, a higher average volume of rent-
producing leased railcars for syndication and lower transportation costs.

Leasing & Services operating profit decreased $23.7 million or 26.8% in 2019 compared to 2018. The decrease
was attributed to a $14.2 million decrease in margin primarily due to higher transportation costs and a lower
average volume of rent-producing leased railcars for syndication. The decrease was also attributed to a
$6.8 million decrease in net gain on disposition of equipment. Leasing & Services operating profit increased
$56.6 million or 177.3% in 2018 compared to 2017 primarily attributed to a $40.8 million increase in net gain on
disposition of equipment and an $17.4 million increase in margin. The net gain on disposition of equipment for
2018 related to higher volumes of equipment sales as we were rebalancing our lease portfolio.

The percentage of owned units on lease was 93.3% at August 31, 2019, 94.4% at August 31, 2018 and 92.1% at
August 31, 2017.

Selling and Administrative

(In thousands)

2019

2018

2017

Years ended August 31,

2019 vs 2018
%
Change

Increase
(Decrease)

2018 vs 2017
%
Change

Increase
(Decrease)

Selling and Administrative

$213,308

$200,439

$170,607

$12,869

6.4% $29,832

17.5%

Selling and administrative expense was $213.3 million or 7.0% of revenue for the year ended August 31, 2019,
$200.4 million or 8.0% of revenue for the year ended August 31, 2018 and $170.6 million or 7.9% of revenue for
the year ended August 31, 2017.

The $12.9 million increase in 2019 compared to 2018 was primarily attributed to $18.7 million in costs
associated with the acquisition of the manufacturing business of ARI and the addition of the selling and
administrative costs from the repair shops returned to us after discontinuing the GBW joint venture and the
manufacturing business of ARI. These increases in selling and administrative costs were partially offset by a
$7.6 million decrease in employee costs primarily related to a decrease in incentive compensation.

The $29.8 million increase in 2018 compared to 2017 was primarily attributed to a $10.1 million increase in
professional fees, consulting and related costs associated with strategic business development, litigation and IT
initiatives, $8.8 million from the addition of Astra Rail’s selling and administrative costs and a $6.0 million
increase in employee costs.

Net Gain on Disposition of Equipment

Net gain on disposition of equipment was $41.0 million, $44.4 million and $9.7 million for the years ended
August 31, 2019, 2018 and 2017, respectively. Net gain on disposition of equipment primarily includes the sale

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

of assets from our lease fleet (Equipment on operating leases, net) that are periodically sold in the normal course
of business in order to take advantage of market conditions and to manage risk and liquidity; disposition of
property, plant and equipment; and insurance proceeds received for business interruption and assets destroyed in
a fire.

Goodwill Impairment

Based on the results of our annual impairment test, a non-cash impairment charge of $10.0 million was recorded
during 2019 related to our repair operations.

Interest and Foreign Exchange

Interest and foreign exchange expense was composed of the following:

(In thousands)

Interest and foreign exchange:
Interest and other expense
Foreign exchange (gain) loss

Years ended August 31,
2018

2019

2017

Increase (decrease)

2019 vs 2018

2018 vs 2017

$32,260
(1,348)

$30,946
(1,578)

$23,519
673

$30,912

$29,368

$24,192

$1,314
230

$1,544

$ 7,427
(2,251)

$ 5,176

Interest and foreign exchange increased $1.5 million in 2019 from 2018 primarily due to interest expense
associated with our $225 million senior term debt issued in September 2018. Interest and foreign exchange
increased $5.2 million in 2018 from 2017 primarily due to interest expense associated with our $275 million
convertible senior notes issued in February 2017. This was partially offset by a foreign exchange gain in 2018.
The change in foreign exchange (gain) loss was primarily attributed to the change in the Mexican Peso relative to
the U.S. Dollar and the change in the Polish Zloty exchange rates relative to the Euro.

Income Tax

In 2019 our income tax expense was $41.6 million on $153.2 million of pre-tax earnings for an effective tax rate
of 27.1%. The 2019 tax rate was impacted by a goodwill impairment charge for which there was no tax benefit.
Excluding the impact of the goodwill impairment charge, the tax rate for 2019 was 25.5%. In 2018 our income
tax expense was $32.9 million on $223.6 million of pre-tax earnings for an effective tax rate of 14.7%. In 2017
our income tax expense was $64.0 million on $236.2 million of pre-tax earnings for an effective tax rate of
27.1%.

The reduction in the 2018 tax rate was primarily due to the enactment of the Tax Act on December 22, 2017. The
Tax Act made significant changes to U.S. federal income tax laws, including, but not limited to, a reduction of
the corporate tax rate from 35% to 21% and a transition tax on foreign earnings not previously subject to U.S.
taxation. As a result, deferred income taxes were remeasured as a result of the new statutory rate which resulted
in a one-time tax benefit of $33.6 million offset, in part, by the accrual of the transition tax of $8.9 million.

The effective tax rate can fluctuate year-to-year due to changes in the mix of foreign and domestic pre-tax
earnings. It can also fluctuate with changes in the proportion of pre-tax earnings attributable to our Mexican
railcar manufacturing joint venture. The joint venture is treated as a partnership for tax purposes and, as a result,
the partnership’s entire pre-tax earnings are included in Earnings before income taxes and earnings from
unconsolidated affiliates, whereas only our 50% share of the tax is included in Income tax expense.

Loss From Unconsolidated Affiliates

Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a
railcar manufacturer in Brazil and a lease financing warehouse. In addition, in 2017 and 2018 we had an
investment in the GBW joint venture. We record the after-tax results from these unconsolidated affiliates.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Loss from unconsolidated affiliates was $5.8 million for the year ended August 31, 2019 and primarily related to
losses at our operations in Brazil. Loss from unconsolidated affiliates was $18.7 million and $11.8 million for the
years ended August 31, 2018 and 2017, respectively and primarily related to the results of the GBW joint
venture. In addition in 2018, a pre-tax goodwill impairment loss of $26.4 million was recognized related to
GBW. As we accounted for GBW under the equity method of accounting, our 50% share of the non-cash
goodwill impairment loss recognized by GBW was $9.5 million after-tax in 2018, which were included as part of
Loss from unconsolidated affiliates on our Consolidated Statement of Income.

Net Earnings Attributable to Noncontrolling Interest

Net earnings attributable to noncontrolling interest was $34.7 million, $20.3 million and $44.4 million for the
years ended August 31, 2019, 2018 and 2017, respectively, which primarily represents our joint venture partner’s
share in the results of operations of our Mexican railcar manufacturing joint venture, adjusted for intercompany
sales, and our European partner’s share of the results of our European operations.

Liquidity and Capital Resources

(In thousands)

Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes

Net increase (decrease) in cash and cash equivalents

Years Ended August 31,
2018

2017

2019

$ (21,241) $103,341
(80,292)
(443,981)
(89,267)
276,901
(14,666)
(12,666)

$ 285,604
(129,125)
204,422
12,499

$(200,987) $ (80,884) $ 373,400

We have been financed through cash generated from operations and borrowings. At August 31, 2019 cash and
cash equivalents and restricted cash were $338.5 million, a decrease of $201.0 million from $539.5 million at the
prior year end.

The change in cash provided by (used in) operating activities in 2019 compared to 2018 was primarily due to
lower earnings and a net change in working capital due to an increase in production. The change in cash provided
by operating activities in 2018 compared to 2017 was primarily due to a net change in working capital, a change
in cash flows associated with leased railcars for syndication, a change in deferred revenue, an increase in net gain
on disposition of equipment and a change in deferred income taxes as a result of the Tax Act.

The change in cash used in investing activities in 2019 compared to 2018 was primarily attributable to the
acquisition of the manufacturing business of ARI. The change in cash used in investing activities in 2018
compared to 2017 was primarily attributable to higher proceeds from the sale of assets partially offset by an
increase in capital expenditures.

Capital expenditures totaled $198.2 million, $176.8 million and $86.1 million for the years ended August 31,
2019, 2018 and 2017, respectively. Manufacturing capital expenditures were approximately $85.1 million,
$59.7 million and $55.0 million for the years ended August 31, 2019, 2018 and 2017, respectively. Capital
expenditures for Manufacturing are expected to be approximately $95 million in 2020 and primarily relate to
enhancements of our existing manufacturing facilities. Wheels, Repair & Parts capital expenditures were
approximately $13.3 million, $5.2 million and $3.1 million for the years ended August 31, 2019, 2018 and 2017,
respectively. Capital expenditures for Wheels, Repair & Parts are expected to be approximately $15 million in
2020 for enhancements of our existing facilities. Leasing & Services and corporate capital expenditures were
approximately $99.8 million, $111.9 million and $28.0 million for the years ended August 31, 2019, 2018 and
2017, respectively. Leasing & Services and corporate capital expenditures for 2020 are expected to be
approximately $30 million. Proceeds from sales of leased railcar equipment are expected to be approximately
$95 million for 2020. Assets from our lease fleet are periodically sold in the normal course of business in order to
take advantage of market conditions and to manage risk and liquidity.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Proceeds from the sale of assets, which primarily related to sales of railcars from our lease fleet within Leasing &
Services, were approximately $125.4 million, $153.2 million and $24.1 million for the years ended August 31,
2019, 2018 and 2017, respectively. These proceeds included approximately $7.7 million of equipment sold
pursuant to sale leaseback transactions for the year ended August 31, 2017. The gain resulting from the sale
leaseback transaction was deferred and is being recognized over the lease term in Net gain on disposition of
equipment. In addition, proceeds from the sale of assets for the years ended August 31, 2017 included
$6.2 million of insurance proceeds associated with our Manufacturing segment in 2017.

The change in cash provided by (used in) financing activities in 2019 compared to 2018 was primarily attributed
to proceeds from the issuance of notes payable and a change in the net activities with joint venture partners. The
change in cash provided by (used in) financing activities in 2018 compared to 2017 was primarily attributed to a
decrease in the proceeds of debt, net of repayments and a change in the net activities with joint venture partners.

A quarterly dividend of $0.25 per share was declared on October 23, 2019.

The Board of Directors has authorized our company to repurchase shares of our common stock. In January 2019,
the expiration date of this share repurchase program was extended from March 31, 2019 to March 31, 2021 and
the amount remaining for repurchase was increased from $88 million to $100 million. Under the share
repurchase program, shares of common stock may be purchased on the open market or through privately
negotiated transactions from time to time. The timing and amount of purchases will be based upon market
conditions, securities law limitations and other factors. The program may be modified, suspended or discontinued
at any time without prior notice. The share repurchase program does not obligate us to acquire any specific
number of shares in any period.

In July 2019, as part of the acquisition of the manufacturing business of ARI, we entered into new $300 million
senior term debt. The maturity date is June 2024 unless the 2.875% Convertible senior notes due July 2024 are
outstanding as of November 1, 2023, in which case the debt matures on that date. The debt bears a floating
interest rate of LIBOR plus 1.5% with principal of $3.75 million paid quarterly in arrears and a balloon payment
of $232.5 million due at maturity. An interest rate swap agreement was entered into on 50% of the initial balance
to swap the floating interest rate of LIBOR plus 1.5% to a fixed rate of 3.19%.

In July 2019, as part of the acquisition of the manufacturing business of ARI, we issued $50 million in
convertible senior notes, due 2024. The convertible senior note bears interest at a fixed rate of 2.25%, paid semi-
annually in arrears on February 1st and August 1st. The convertible notes mature on July 26, 2024, unless earlier
repurchased by us or converted in accordance with their terms. Upon the satisfaction of certain conditions,
holders may convert at their option at any time prior to the business day immediately preceding the stated
maturity date.

In September 2018, we refinanced approximately $170 million of existing senior term debt, due in March 2020,
secured by a pool of leased railcars with new 5-year $225 million senior term debt also secured by a pool of
leased railcars. The new debt bears a floating interest rate of LIBOR plus 1.50% or Prime plus 0.50%. The term
loan is to be repaid in equal quarterly installments of $1.97 million with the remaining outstanding amounts, plus
accrued interest, to be paid on the maturity date in September 2023. An interest rate swap agreement was entered
into on 50% of the initial balance to swap the floating interest rate to a fixed rate of 4.49%.

Our 3.5% convertible senior notes due 2018 matured on April 1, 2018. The conversion of these notes resulted in
the issuance of an additional 3.4 million shares of our common stock. These additional shares have historically
been included in the calculation of diluted earnings per share.

In February 2017, we issued $275 million of convertible senior notes due 2024. The notes are senior unsecured
obligations and rank equally with other senior unsecured debt. The notes bear interest at an annual rate of 2.875%
payable semiannually in arrears on February 1 and August 1 of each year, commencing August 1, 2017. The
notes will mature on February 1, 2024, unless earlier repurchased or converted in accordance with their terms.

Senior secured credit facilities, consisting of three components, aggregated to $705.4 million as of August 31,
2019. We had an aggregate of $311.5 million available to draw down under committed credit facilities as of

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

August 31, 2019. This amount consists of $233.2 million available on the North American credit facility,
$28.3 million on the European credit facilities and $50.0 million on the Mexican railcar manufacturing joint
venture credit facilities.

As of August 31, 2019, a $600.0 million revolving line of credit, maturing June 2024, secured by substantially all
our assets in the U.S. not otherwise pledged as security for term loans, was available to provide working capital
and interim financing of equipment, principally for our U.S. and Mexican operations. Advances under this
facility bear interest at LIBOR plus 1.50% or Prime plus 0.50% depending on the type of borrowing. Available
borrowings under the credit facility are generally based on defined levels of inventory, receivables, property,
plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges
coverage ratios.

As of August 31, 2019, lines of credit totaling $55.4 million secured by certain of our European assets, with
variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.1% to WIBOR plus 1.5% and
Euro Interbank Offered Rate (EURIBOR) plus 1.1% to EURIBOR plus 1.5%, were available for working capital
needs of the European manufacturing operations. European credit facilities are continually being renewed.
Currently, these European credit facilities have maturities that range from December 2019 through November
2021.

As of August 31, 2019, our Mexican railcar manufacturing joint venture has two lines of credit totaling
$50.0 million. The first line of credit provides up to $30.0 million. Advances under this facility bear interest at
LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this facility
through March 2024. The second line of credit provides up to $20.0 million, of which the Company and its joint
venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus 2.0%. The
Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility through
June 2021.

As of August 31, 2019, outstanding commitments under the senior secured credit facilities consisted of
$24.4 million in letters of credit under the North American credit facility and $27.1 million outstanding under the
European 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 of which, among other things, limit our ability to: incur additional
indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases; create liens; sell assets;
engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not
limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of
substantially all our assets; and enter into new lines of business. The covenants also require certain maximum
ratios of debt to total capitalization and minimum levels of fixed charges (interest plus rent) coverage. As of
August 31, 2019, we were in compliance with all such restrictive covenants.

From time to time, we may seek to repurchase or otherwise retire or exchange securities, including outstanding
notes, borrowings and equity securities, and take other steps to reduce our debt or otherwise improve our balance
sheet. These actions may include open market repurchases, unsolicited or solicited privately negotiated
transactions or other retirements, repurchases or exchanges. Such retirements, 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. The amounts involved in any such
transactions may, individually or in the aggregate, be material and may involve all or a portion of a particular
series of notes or other indebtedness which may reduce the float and impact the trading market of notes or other
indebtedness which remain outstanding.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

As of August 31, 2019, we had a $10.0 million note receivable from Amsted-Maxion, our unconsolidated
Brazilian castings and components manufacturer and an $18.4 million note receivable balance from Greenbrier-
Maxion, our unconsolidated Brazilian railcar manufacturer. These note receivables are included on the
Consolidated Balance Sheet in Accounts receivable, net. In the future, we may make loans to or provide
guarantees for Amsted-Maxion Cruzeiro or Greenbrier-Maxion.

We expect existing funds and cash generated from operations, together with proceeds from financing activities
including borrowings under existing credit facilities and long-term financings, to be sufficient to fund expected
debt
investments in our
unconsolidated affiliates and dividends during the next twelve months.

repayments, working capital needs, planned capital expenditures, additional

The following table shows our estimated future contractual cash obligations as of August 31, 2019:

(In thousands)

Notes payable
Interest (1)
Railcar leases
Operating leases
Revolving notes
Other

Total

2020

$ 860,545 $ 29,084
30,287
6,200
8,099
27,115
133

127,545
14,478
33,170
27,115
177

Years Ending August 31,
2022
2021

2023

2024

Thereafter

$30,921
28,035
2,965
5,781
—
44

$23,258
26,941
1,762
3,965
—
—

$22,907
26,054
1,762
3,395
—
—

$754,375
16,228
1,413
2,109
—
—

$ —
—
376
9,821
—
—

$1,063,030

$100,918

$67,746

$55,926

$54,118

$774,125

$10,197

(1) 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, 2019, we are unable to estimate the period of cash settlement with the respective taxing authority.
Therefore, approximately $2.2 million in uncertain tax positions, including interest, have been excluded from the
contractual table above. See Note 19 to the Consolidated Financial Statements for a discussion on income taxes.

Off Balance Sheet Arrangements

We do not currently have off balance sheet arrangements that have or are likely to have a material current or
future effect on our Consolidated Financial Statements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.
requires judgment on 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 the
financial statements. Estimates and assumptions are periodically evaluated and may be adjusted in future periods.
Actual results could differ from those estimates.

Income taxes - The asset and liability method is used to account for income taxes. We are required to estimate the
timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of
deferred tax assets and assess deferred tax liabilities based on enacted law and tax rates for each tax jurisdiction
to determine the amount of deferred tax assets and liabilities. Deferred income taxes are provided for the
temporary effects of differences between assets and liabilities recognized for financial statement and income tax
reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not
be realized. We recognize liabilities for uncertain tax positions based on whether evidence indicates that it is
more likely than 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 the probability of various possible outcomes. We
reevaluate these uncertain tax positions on a quarterly basis. Changes in tax law or court interpretations may
result in the recognition of a tax benefit or an additional charge to the tax provision.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Warranty accruals - Warranty costs to cover a defined warranty period are estimated and charged to operations.
The estimated warranty cost is based on historical warranty claims for each particular product type. For new
product types without a warranty history, preliminary estimates are based on historical information for similar
product types. These estimates are inherently uncertain as they are based on historical data for existing products
and judgment for new products. 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 into consideration in establishing the accrual
or if claims for issues already considered in establishing the accrual exceed expectations, warranty expense may
exceed the accrual for that particular product. Conversely, there is the possibility that claims may be lower than
estimates. The warranty accrual is periodically reviewed and updated based on warranty trends. However, as we
cannot predict future claims, the potential exists for the difference in any one reporting period to be material.

Environmental costs - At times we may be involved in various proceedings related to environmental matters. We
estimate future costs for known environmental remediation requirements and accrue for them when it is probable
that we have incurred a liability and the related costs can be reasonably estimated based on currently available
information. If further developments in or resolution of an environmental matter result in facts and circumstances
that are significantly different than the assumptions used to develop these reserves, the accrual for environmental
remediation could be materially understated or overstated. Adjustments to these liabilities are made when
additional information becomes available that affects the estimated costs to study or remediate any environmental
issues or when expenditures for which reserves are established are made. Due to the uncertain nature of
environmental matters, 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 in any litigation or proceeding, that such costs would
not be material to us.

Revenue recognition - We measure revenue at the amounts that reflect the consideration to which we expect to be
entitled in exchange for transferring control of goods and services to customers. We recognize revenue either at
the point in time or over the period of time that performance obligations to customers are satisfied. Payment
terms vary by segment and product type and are generally due within normal commercial terms. Our contracts
with customers may include multiple performance obligations (e.g. railcars, maintenance, management services,
etc.). For such arrangements, we allocate revenues to each performance obligation based on its relative
standalone selling price. We have disaggregated revenue from contracts with customers into categories which
describe the principal activities from which we generate our revenues.

Manufacturing

Railcars are manufactured in accordance with contracts with customers. We recognize revenue upon our
customers’ acceptance of the completed railcars at a specified delivery point. From time to time, we enter into
multi-year supply agreements. Each railcar delivery is considered a distinct performance obligation, such that the
amounts that are recognized as revenue following railcar delivery are generally not subject to change.

We typically recognize marine vessel manufacturing revenue over time using the cost input method, based on
progress toward contract completion measured by actual costs incurred to date in relation to the estimate of total
expected costs. This method best depicts our performance in completing the construction of the marine vessel for
the customer and is consistent with the percentage of completion method used prior to the adoption of the new
revenue standard.

Wheels, Repair & Parts

We operate a network of wheel, repair and parts shops in North America that provide complete wheelset
reconditioning and railcar repair services.

Wheels revenue is recognized when wheelsets are shipped to the customer or when consumed by customers in
the case of consignment arrangements. Parts revenue is recognized upon shipment of the parts to the customers.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

method best depicts our performance in repairing the railcars for the customer. Repair services are typically
completed in less than 90 days.

Leasing & Services

We own a fleet of new and used cars which are leased to third-party customers. Lease revenue is recognized over
the lease-term in the period in which it is earned in accordance with ASC 840 Leases.

Syndication transactions represent new and used railcars which have been placed on lease to a customer and
which we intend to sell to an investor with the lease attached. At the time of such sale, revenue and cost of
revenue associated with railcars that we have manufactured are recognized in the Manufacturing segment; while
revenue and cost of revenue associated with railcars which were obtained from a third-party with the intent to
resell them and subsequently sold, are recognized in the Leasing & Services segment in accordance with ASC
840 Leases.

We enter into multi-year contracts to provide management and maintenance services to customers for which
revenue is generally recognized on a straight-line basis over the contract term as a stand-ready obligation. Costs
to fulfill these contracts are recognized as incurred.

Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-
lived assets may not be recoverable, the assets are evaluated for impairment. If the forecast of undiscounted
future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying
value of the assets to fair value would be recognized in the current period. These estimates are based on the best
information available at the time of the impairment and could be materially different if circumstances change. If
the forecast of undiscounted future cash flows exceeds the carrying amount of the assets 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 may result in the recognition of goodwill and other intangible assets. The
determination of the value of such intangible assets requires management to make estimates 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. The
provisions of ASC 350 Intangibles – Goodwill and Other, require that we perform this test by comparing the fair
value of each reporting unit with its carrying value. We determine the fair value of our reporting units based on a
weighting of income and market approaches. Under the income approach, we calculate the fair value of a
reporting unit based on the present value of estimated future cash flows which incorporates expected revenue and
margins and the use of discount rates. Under the market approach, we estimate the fair value based on observed
market multiples for comparable businesses. An impairment loss is recorded to the extent that the reporting unit’s
carrying amount exceeds the reporting unit’s fair value. An impairment loss cannot exceed the total amount of
goodwill allocated to the reporting unit. Goodwill and indefinite-lived intangible assets are also tested more
frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists.
When changes in circumstances, such as a decline in the market price of our common stock, changes in demand
or in the numerous variables associated with the judgments, assumptions and estimates made in assessing the
appropriate valuation of goodwill indicate the carrying amount of certain indefinite lived assets may not be
recoverable, the assets are evaluated for impairment. If actual operating results were to differ from these
assumptions, it may result in an impairment of our goodwill.

Based on the results of our annual impairment test, a non-cash impairment charge of $10.0 million was recorded
during the third quarter of 2019 related to our repair operations. As of August 31, 2019 our goodwill balance was
$129.9 million of which $86.6 million related to our Manufacturing segment and $43.3 million related to our
Wheels, Repair & Parts segment.

New Accounting Pronouncements

See Note 2 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on
Form 10-K.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

Foreign Currency Exchange Risk

We have global operations that conduct business in their local currencies as well as other currencies. To mitigate
the exposure to transactions denominated in currencies other than the functional currency of each entity, we enter
into foreign currency forward exchange contracts to protect revenue or margin on a portion of forecast foreign
currency sales and expenses. At August 31, 2019 exchange rates, forward exchange contracts for the purchase of
Polish Zlotys and the sale of Euros and Pound Sterling aggregated to $71.6 million. Because of the variety of
currencies in which purchases and sales are transacted and the interaction between currency rates, it is not
possible to predict 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 foreign subsidiaries. At August 31, 2019, net assets of foreign subsidiaries
aggregated $163.9 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would
result in a decrease in equity of $16.4 million, or 1.3% of Total equity – Greenbrier. This calculation assumes
that each exchange rate would change in the same direction relative to the U.S. Dollar.

Interest Rate Risk

We have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting
$259.5 million of variable rate debt to fixed rate debt. 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, 2019, 64% of our
outstanding debt had fixed rates and 36% had variable rates. At August 31, 2019, a uniform 10% increase in
variable interest rates would result in approximately $0.8 million of additional annual interest expense.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
The Greenbrier Companies, Inc. and subsidiaries:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of The Greenbrier Companies,
Inc.
and subsidiaries (the Company) as of August 31, 2019 and 2018, the related consolidated statements of income,
comprehensive income, equity, and cash flows for each of the years in the three-year period ended August 31,
2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company as of August 31,
2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period
ended August 31, 2019, 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) (PCAOB), the Company’s internal control over financial reporting as of August 31, 2019, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated October 29, 2019 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of
accounting for revenue recognition as of September 1, 2018, due to the adoption of Accounting Standards Update
2014-09, Revenue from Contracts with Customers, and related amendments.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the
consolidated financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical
audit matters or on the accounts or disclosures to which they relate.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Assessment of the fair value of the European Manufacturing reporting unit and Greenbrier-Astra Rail

As discussed in Notes 2 and 9 to the consolidated financial statements, the Company performs goodwill
impairment testing on an annual basis, or more frequently if an event occurs or circumstances change that would
indicate a potential impairment exists. The goodwill balance as of August 31, 2019 was $129.9 million, or 4.3%
of total assets. Of this amount, $29.9 million was allocated to the European Manufacturing reporting unit. The
European Manufacturing goodwill represents 34% of the goodwill for the manufacturing segment. As discussed
in Note 4 to the consolidated financial statements, the Company established Greenbrier-Astra Rail (GAR) in
June 2017 through a transaction with Astra Holding GmbH (Astra). In connection with that transaction, the
Company provided Astra an option to put its entire non-controlling interest in GAR, which is a subset of the
European Manufacturing reporting unit, to the Company at an exercise price equal to the higher of fair value or a
stated formula measured on the exercise date. The Company recorded this contingently redeemable non-
controlling interest of $31.6 million as of August 31, 2019 in the mezzanine section of the consolidated balance
sheet. The fair value of GAR, which was determined as part of the Step 1 goodwill impairment evaluation of the
European Manufacturing reporting unit, is considered in the measurement of the contingently redeemable non-
controlling interest amount at the balance sheet date.

We identified the assessment of the fair value of the European Manufacturing reporting unit and GAR as a
critical audit matter. The discounted cash flow model used to calculate the fair value of the European
Manufacturing reporting unit and GAR was challenging to test due to the sensitivity of the fair value
determinations to changes to certain assumptions. Specifically, changes to the following assumptions had a
significant effect on the Company’s assessment of the carrying value of the goodwill and contingently
redeemable non-controlling interest:

Forecasted revenues, terminal growth rates, and gross margin percentages; and

•
• The discount rates applied to the forecasted cash flows.

The primary procedures we performed to address this critical audit matter included the following. We tested
certain internal controls over the Company’s process to determine the fair value of the European Manufacturing
reporting unit and GAR, including controls over the development of the forecasted revenues, terminal growth
rates, and gross margin percentages and selection of discount rates used. We evaluated the Company’s forecasted
revenues and gross margin percentages by comparing them to the Company’s historical results, as well as
external market and industry data. We performed sensitivity analyses over the above key assumptions to assess
their impact on the Company’s determination of the fair value of the European Manufacturing reporting unit and
GAR. In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in:

• Evaluating each of the discount rates used by comparing it against an independently developed range using

publically available market data;

• Developing an estimate of the fair value of the European Manufacturing reporting unit and GAR, using the
Company’s cash flow forecast for the reporting unit and GAR, respectively, and independently developed
discount rates; and

• Evaluating the terminal growth rates by comparing them against publicly available relevant geographic

market data.

Evaluation of the sufficiency of audit evidence obtained over the preliminary allocation of the purchase price to
the tangible assets acquired and liabilities assumed associated with the acquisition of the manufacturing
business of American Railcar Industries, Inc.

As discussed in Note 4 to the consolidated financial statements, the Company acquired the manufacturing
business of American Railcar Industries, Inc. (ARI) on July 26, 2019, for consideration of $418.3 million. Based
on the preliminary allocation of the purchase price, the acquisition resulted in the recognition of $93.6 million of
intangible assets, including goodwill, and $324.7 million related to tangible assets, net of liabilities assumed. The
purchase price allocation to the assets acquired and liabilities assumed, including the residual amount allocated to
goodwill, is based on preliminary information. This preliminary information is subject to change as additional
facts are obtained by the Company related to the assets acquired and liabilities assumed. The information that
was available to the Company to allocate consideration to the tangible assets acquired and liabilities assumed was

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

affected by the proximity of the acquisition date to the Company’s fiscal year-end date of August 31, 2019. In
addition, the Company did not acquire 100% of ARI, and therefore there is increased complexity around the
determination of the specific tangible assets that were acquired and liabilities that were assumed by the
Company, versus those retained by the previous owner. During the measurement period, the Company will adjust
the values attributed to the tangible assets acquired and liabilities assumed if new information is obtained about
facts and circumstances that existed as of the acquisition date.

We identified the evaluation of the sufficiency of audit evidence obtained over the preliminary allocation of the
purchase price to the tangible assets acquired and liabilities assumed associated with the acquisition of the
manufacturing business of ARI as a critical audit matter. Complex auditor judgment was required to evaluate
which tangible assets were acquired and which liabilities were assumed, based on the information available as of
the end of the reporting period.

The primary procedures we performed to address this critical audit matter included the following. We tested
certain internal controls over the Company’s purchase price allocation process, including controls over the
identification of the tangible assets acquired and liabilities assumed, as well as the determination of the
preliminary allocation of the purchase price. We tested the Company’s identification of the tangible assets
acquired and liabilities assumed by reading the acquisition agreement, and comparing the categories of such
tangible assets and liabilities which were recorded in the preliminary purchase price allocation to the acquisition
agreement. Additionally, to determine the ownership of the tangible asset or obligation of the liability, we
selected a sample from the Company’s detailed listing of the tangible assets acquired and liabilities assumed, and
agreed the items selected to underlying source documentation. We also inspected a sample of payments made by
the Company subsequent to the acquisition date, to assess if the payment related to a tangible asset or liability
that should have been recorded as of the acquisition date.

/s/ KPMG LLP

We have served as the Company’s auditor since 2011.

Portland, Oregon
October 29, 2019

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Balance Sheets
AS OF AUGUST 31,

(In thousands)

Assets

Cash and cash equivalents
Restricted cash
Accounts receivable, net
Inventories
Leased railcars for syndication
Equipment on operating leases, net
Property, plant and equipment, net
Investment in unconsolidated affiliates
Intangibles and other assets, net
Goodwill

Liabilities and Equity
Revolving notes
Accounts payable and accrued liabilities
Deferred income taxes
Deferred revenue
Notes payable, net

Commitments and contingencies (Notes 22 & 23)

Contingently redeemable noncontrolling interest

Equity:
Greenbrier

2019

2018

$ 329,684
8,803
373,383
664,693
182,269
366,688
717,973
91,818
125,379
129,947

$ 530,655
8,819
348,406
432,314
130,926
322,855
457,196
61,414
94,668
78,211

$2,990,637

$2,465,464

27,115
568,360
13,946
85,070
822,885

27,725
449,857
31,740
105,954
436,205

31,564

29,768

Preferred stock – without par value; 25,000 shares authorized; none outstanding
Common stock – without par value; 50,000 shares authorized; 32,488 and 32,191

–

outstanding at August 31, 2019 and 2018

Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss

Total equity – Greenbrier
Noncontrolling interest

Total equity

–
453,943
867,602
(44,815)

–
442,569
830,898
(23,366)

1,276,730
164,967

1,250,101
134,114

1,441,697

1,384,215

$2,990,637

$2,465,464

The accompanying notes are an integral part of these financial statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Consolidated Statements of Income
YEARS ENDED AUGUST 31,

(In thousands, except per share amounts)
Revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Cost of revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Margin
Selling and administrative
Net gain on disposition of equipment
Goodwill impairment

Earnings from operations

Other costs

Interest and foreign exchange

Earnings before income tax and loss from unconsolidated affiliates
Income tax expense

Earnings before loss from unconsolidated affiliates
Loss from unconsolidated affiliates

Net earnings
Net earnings attributable to noncontrolling interest

Net earnings attributable to Greenbrier

Basic earnings per common share

Diluted earnings per common share

Weighted average common shares:
Basic
Diluted
Dividends declared per common share

2019

2018

2017

$2,431,499
444,502
157,590

$2,044,586
347,023
127,855

$1,725,188
312,679
131,297

3,033,591

2,519,464

2,169,164

2,137,625
420,890
108,590

2,667,105
366,486
213,308
(40,963)
10,025

1,727,407
318,330
64,672

2,110,409
409,055
200,439
(44,369)
–

1,373,967
288,336
85,562

1,747,865
421,299
170,607
(9,740)
–

184,116

252,985

260,432

30,912

29,368

24,192

153,204
(41,588)

111,616
(5,805)

105,811
(34,735)

223,617
(32,893)

190,724
(18,661)

172,063
(20,282)

236,240
(64,014)

172,226
(11,764)

160,462
(44,395)

71,076

$ 151,781

$ 116,067

2.18

2.14

32,615
33,165
1.00

4.92

4.68

30,857
32,835
0.96

3.97

3.65

29,225
32,562
0.86

The accompanying notes are an integral part of these financial statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Consolidated Statements of Comprehensive Income
YEARS ENDED AUGUST 31,

(In thousands)

Net earnings
Other comprehensive income (loss)

Translation adjustment
Reclassification of derivative financial instruments recognized in net

earnings 1

Unrealized gain (loss) on derivative financial instruments 2
Other (net of tax effect)

Comprehensive income
Comprehensive income attributable to noncontrolling interest

2019

2018

2017

$105,811

$172,063

$160,462

(12,725)

(16,159)

15,488

1,854
(10,264)
(351)

(415)
(197)
(335)

3,729
1,944
(665)

(21,486)

(17,106)

20,496

84,325
(34,698)

154,957
(20,263)

180,958
(44,417)

Comprehensive income attributable to Greenbrier

$ 49,627

$134,694

$136,541

1 Net of tax effect of $0.5 million, $nil and $1.0 million for the years ended August 31, 2019, 2018 and 2017
2 Net of tax effect of ($2.9 million), ($0.1 million) and $0.8 million for the years ended August 31, 2019, 2018 and 2017

The accompanying notes are an integral part of these financial statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Consolidated Statements of Equity

Attributable to Greenbrier

Additional
Paid-in
Capital

Retained
Earnings
$282,886 $618,178
116,067
–
–

–
–
–

Common
Stock
Shares
28,205
–
–
–

–
–

–

–
–

–

298
–
–

5,520
(10,734)
19,826

–
–

–

(2,339)
–

–
(25,142)

20,818

(671)

–

Accumulated
Other
Comprehensive
Loss
$(26,753)
–
20,474
–

Total
Equity -
Greenbrier
$ 874,311
116,067
20,474
–

Noncontrolling
Interest
$142,516
46,535
22
(677)

Total
Equity
$1,016,827
162,602
20,496
(677)

Contingently
Redeemable
Noncontrolling
Interest
–
$
(2,140)
–
–

–
–

–

–
–
–

–
–

–

–
–

–

5,520
(10,734)
19,826

(2,339)
(25,142)

20,818

(671)

(28,027)
394

–
–

–

–
–
–

–
–

–

38,288

5,520
(10,734)
19,826

(2,339)
(25,142)

20,818

(671)

–
–
–

–
–

–

28,503
–
–
–

$315,306 $709,103
151,781
–
–

–
–
–

$ (6,279)
–
(17,087)
–

$1,018,130
151,781
(17,087)
–

$160,763
26,662
(19)
2,864

$1,178,893
178,443
(17,106)
2,864

$36,148
(6,380)
–
–

–
–
–

336
–
–
–

–
–
–

7,334
(15,058)
16,100
–

–
–
–
(29,986)

3,352

118,887

–

–
–
–

–
–
–
–

–

–
–
–

(62,649)
6,500
(7)

7,334
(15,058)
16,100
(29,986)

118,887

–
–
–
–

–

(62,649)
6,500
(7)

7,334
(15,058)
16,100
(29,986)

118,887

–
–
–

–
–
–
–

–

–
–
–
–

–
–

–
–
–
–

–
–

297
–
–
–

12,077
(16,801)
12,321
–

–
–
–
(33,174)

–

3,777

–

5,461
71,076
–
(6,659)

–
–
(21,449)
–

5,461
71,076
(21,449)
(6,659)

–
39,598
(37)
7,402

–
–

–
–
–
–

–

–
–

(18,025)
1,915

12,077
(16,801)
12,321
(33,174)

3,777

–
–
–
–

–

5,461
110,674
(21,486)
743

(18,025)
1,915

12,077
(16,801)
12,321
(33,174)

3,777

–
(4,863)
–
6,659

–
–

–
–
–
–

–

–
–

–

–
–
–

–
–

(In thousands)
Balance August 31, 2016
Net earnings
Other comprehensive income, net
Noncontrolling interest adjustments
Joint venture partner distribution

declared

Noncontrolling interest acquired
Contingently redeemable
noncontrolling interest

Restricted stock awards (net of

cancellations)

Unamortized restricted stock
Restricted stock amortization
Tax deficiency from restricted stock

awards

Cash dividends ($0.86 per share)
2.875% Convertible Senior Notes,

due 2024 – equity component, net
of tax

2.875% Convertible Senior Notes,

due 2024, issuance costs – equity
component, net of tax

Balance August 31, 2017
Net earnings
Other comprehensive loss, net
Noncontrolling interest adjustments
Joint venture partner distribution

declared

Investment by joint venture partner
Noncontrolling interest acquired
Restricted stock awards (net of

cancellations)

Unamortized restricted stock
Restricted stock amortization
Cash dividends ($0.96 per share)
Conversion of 3.5% 2018

Convertible Senior Notes

Cumulative effect adjustment due to
adoption of ASU 2014-09 (See
Note 2)
Net earnings
Other comprehensive loss, net
Noncontrolling interest adjustments
Joint venture partner distribution

declared

Noncontrolling interest acquired
Restricted stock awards (net of

cancellations)

Unamortized restricted stock
Restricted stock amortization
Cash dividends ($1.00 per share)
2.25% Convertible Senior Notes,

due 2024 – equity component, net
of tax

Balance August 31, 2018

32,191

$442,569 $830,898

$(23,366)

$1,250,101

$134,114

$1,384,215

$29,768

Balance August 31, 2019

32,488

$453,943 $867,602

$(44,815)

$1,276,730

$164,967

$1,441,697

$31,564

The accompanying notes are an integral part of these financial statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Consolidated Statements of Cash Flows
YEARS ENDED AUGUST 31,

(In thousands)

Cash flows from operating activities:

Net earnings
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Deferred income taxes
Depreciation and amortization
Net gain on disposition of equipment
Stock based compensation expense
Accretion of debt discount
Noncontrolling interest adjustments
Goodwill impairment
Other
Decrease (increase) in assets:
Accounts receivable, net
Inventories
Leased railcars for syndication
Other

Increase (decrease) in liabilities:

Accounts payable and accrued liabilities
Deferred revenue

Net cash provided by (used in) operating activities

Cash flows from investing activities:
Acquisitions, net of cash acquired
Proceeds from sales of assets
Capital expenditures
Investment in and advances to unconsolidated affiliates
Cash distribution from joint ventures

Net cash used in investing activities

Cash flows from financing activities:

Net changes in revolving notes with maturities of 90 days or less
Proceeds from issuance of notes payable
Repayments of notes payable
Debt issuance costs
Dividends
Cash distribution to joint venture partner
Investment by joint venture partner
Tax payments for net share settlement of restricted stock

Net cash provided by (used in) financing activities

Effect of exchange rate changes

Increase (decrease) in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash
Beginning of period

End of period

Balance Sheet Reconciliation:
Cash and cash equivalents
Restricted Cash

Total cash and cash equivalents and restricted cash as presented above

Cash paid during the period for:
Interest
Income taxes, net
Non-cash activity

2019

2018

2017

$ 105,811

$ 172,063

$ 160,462

(20,225)
83,731
(40,963)
11,153
4,458
7,402
10,025
145

13,022
(143,168)
(96,110)
6,843

(40,496)
74,356
(44,369)
29,314
4,171
2,864
–
1,688

(83,551)
(26,592)
(54,023)
34,115

4,377
65,129
(9,740)
26,427
2,340
(677)
–
(845)

(25,272)
(2,787)
41,015
17,558

55,910
(19,275)

54,032
(20,231)

(25,422)
33,039

(21,241)

103,341

285,604

(361,878)
125,427
(198,233)
(11,393)
2,096

(34,874)
153,224
(176,848)
(26,455)
4,661

(27,127)
24,149
(86,065)
(40,632)
550

(443,981)

(80,292)

(129,125)

(105)
525,000
(182,971)
(8,630)
(33,193)
(16,879)
–
(6,321)

23,401
13,771
(22,269)
–
(29,914)
(73,033)
6,500
(7,723)

4,324
276,093
(8,297)
(9,082)
(24,890)
(28,511)
–
(5,215)

276,901

(89,267)

204,422

(12,666)
(200,987)

(14,666)
(80,884)

12,499
373,400

539,474

620,358

246,958

$ 338,487

$ 539,474

$ 620,358

$ 329,684
8,803

$ 530,655
8,819
$

$ 611,466
8,892
$

$ 338,487

$ 539,474

$ 620,358

$ 18,330
$ 62,084

$ 18,878
$ 66,423

$ 13,962
$ 45,280

Issuance of 2.25% Convertible notes in connection with the acquisition of the manufacturing

business of ARI

$ 50,000

–

Transfer from Leased railcars for syndication and Inventories to Equipment on operating leases,

net

Capital expenditures accrued in Accounts payable and accrued liabilities
Change in Accounts payable and accrued liabilities associated with dividends declared
Change in Accounts payable and accrued liabilities associated with cash distributions to joint

$ 43,845
$ 19,385
19
$

$ 20,945
$ 13,534
$

(72) $

$
8,668
$ 16,145
(252)

venture partner

Conversion of 3.5% Convertible notes

$ (1,146) $
$

14
$ 118,887

–

$
$

484
–

The accompanying notes are an integral part of these financial statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Notes to Consolidated Financial Statements

Note 1 - Nature of Operations

The Company operates in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing &
Services. The segments are operationally integrated. The Manufacturing segment, which currently operates from
facilities in the U.S., Mexico, Poland, Romania and Turkey, produces double-stack intermodal railcars, tank cars,
conventional railcars, automotive railcar products and marine vessels. The Wheels, Repair & Parts segment
performs wheel and axle servicing; railcar repair, refurbishment and maintenance; as well as production of a
variety of parts for the rail industry in North America. The Leasing & Services segment owns approximately
9,400 railcars and provides management services for approximately 380,000 railcars for railroads, shippers,
carriers, institutional investors and other leasing and transportation companies in North America as of August 31,
2019. Through unconsolidated affiliates the Company produces rail and industrial components and has an
ownership stake in a railcar manufacturer in Brazil and a lease financing warehouse.

Note 2 - Summary of Significant Accounting Policies

Principles of consolidation - The financial statements include the accounts of the Company and its subsidiaries in
which it has a controlling interest. All intercompany 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 which the current or non-current distinction is not relevant. In addition,
the activities of the Manufacturing; Wheels, Repair & Parts; and Leasing & Services segments are so intertwined
that in the opinion of management, any attempt to separate the respective balance sheet categories would not be
meaningful and may lead to the development of misleading conclusions by the reader.

Foreign currency translation - Certain operations outside the U.S., primarily in Europe, prepare financial
statements in currencies other than the U.S. Dollar. Revenues and expenses are translated at monthly average
exchange rates during the year, while assets and liabilities are translated at year-end exchange rates. Translation
adjustments are accumulated as a separate component of equity in other comprehensive income (loss). The net
foreign currency translation adjustment balances were $34.2 million, $21.5 million and $5.4 million as of
August 31, 2019, 2018 and 2017, respectively.

Cash and cash equivalents - Cash may temporarily be invested primarily in money market funds. All highly-
liquid investments with a maturity of three months or less at the date of acquisition are considered cash
equivalents.

Restricted cash - Restricted cash primarily relates to amounts held to support a target minimum rate of return on
certain agreements and a pass through account for activity related to management services provided for certain
third party customers.

Accounts receivable - Accounts receivable includes receivables from related parties (see Note 18 – Related Party
Transactions) and is stated net of allowance for doubtful accounts of $2.2 million and $2.7 million as of
August 31, 2019 and 2018, respectively.

(In thousands)

Allowance for doubtful accounts
Balance at beginning of period
Additions, net of reversals
Usage
Currency translation effect

Balance at end of period

As of August 31,
2018

2019

2017

$ 2,701
773
(1,311)
13

$1,768
938
(54)
49

$2,215
370
(891)
74

$ 2,176

$2,701

$1,768

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Inventories - Inventories are valued at the lower of cost or net realizable value using the first-in first-out method.
Work-in-process includes material, labor and overhead. Finished goods includes completed wheels, parts and
railcars not on lease or in transit.

Leased railcars for syndication - Leased railcars for syndication consist of newly-built railcars manufactured at
one of the Company’s facilities or railcars purchased from third parties, which have been placed on lease to a
customer and which the Company intends to sell to an investor with the lease attached. These railcars are
generally anticipated to be sold within six months of delivery of the last railcar in a group or six months from
when the Company acquires the railcar from a third party and are typically not depreciated during that period as
the Company does not believe any economic value of a railcar is lost in the first six months. In the event the
railcars are not sold in the first six months, the railcars are either held in Leased railcars for syndication and are
depreciated or are transferred to Equipment on operating leases and are depreciated. As of August 31, 2019,
Leased railcars for syndication was $182.3 million compared to $130.9 million as of August 31, 2018.

Equipment on operating leases, net - Equipment on operating leases is stated net of accumulated depreciation.
Depreciation to estimated salvage value is provided on the straight-line method over the estimated useful lives of
up to thirty-five years. Management periodically reviews salvage value estimates based on current scrap prices
and what the Company expects to receive upon disposal.

Investment in unconsolidated affiliates - Investment in unconsolidated affiliates includes the Company’s interests
which are accounted for under the equity method of accounting. See Note 8 – Investments In Unconsolidated
Affiliates for additional information.

Property, plant and equipment - Property, plant and equipment is stated at cost, net of accumulated depreciation.
Depreciation is provided on the straight-line method over estimated useful lives which primarily are as follows:

Buildings and improvements
Machinery and equipment
Other

Depreciable Life

10 – 30 years
3 – 20 years
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 amortized and is tested for impairment at least annually and more frequently
if material changes in events or circumstances arise. The provisions of ASC 350 Intangibles – Goodwill and
Other, require the Company to perform an annual impairment test on goodwill. The Company reviews goodwill
for impairment annually using either a qualitative assessment or a quantitative goodwill impairment test. If the
qualitative assessment is selected and determines that fair value of each reporting unit more likely than not
exceeds its carrying value, no further assessment is necessary. For reporting units where we perform the
quantitative goodwill impairment test an impairment loss is recorded to the extent that the reporting unit’s
carrying amount exceeds the reporting unit’s fair value. An impairment loss cannot exceed the total amount of
goodwill allocated to the reporting unit. See Note 9 – Goodwill for additional information.

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 customer contracts and relationships and trade names. Intangible assets
with finite lives are amortized using the straight line method over their estimated useful lives which are up to 20
years. Other assets include revolving note fees 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 assets are evaluated for impairment. If the forecasted undiscounted
future cash flows are less than the carrying amount of the assets, an impairment charge to reduce the carrying
value of the assets to estimated realizable value is recognized in the current period. No impairment of long-lived
assets was recorded in the years ended August 31, 2019, 2018 and 2017.

Warranty accruals - Warranty costs are estimated and charged to operations to cover a defined warranty period.
The estimated warranty cost is based on history of warranty claims for each particular product type. For new

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

product types without a warranty history, preliminary estimates are based on historical information for similar
product types. The warranty accruals, included in Accounts payable and accrued liabilities, are reviewed
periodically and updated based on warranty trends.

Income taxes - The asset and liability method is used to account for income taxes. Deferred income taxes are
provided for the temporary effects of differences between assets and liabilities recognized for financial statement
and income tax reporting purposes. Valuation allowances reduce deferred tax assets to an amount that will more
likely than not be realized. The Company recognizes liabilities for uncertain tax positions based on whether
evidence indicates that it is more likely than not that the position will be sustained on audit. The Company
reevaluates these uncertain tax positions on a quarterly basis. Changes in tax law or court interpretations may
result in the recognition of a tax benefit or an additional charge to the tax provision.

Deferred revenue - Cash payments received prior to meeting revenue recognition criteria are recorded in
Deferred revenue. Amounts are reclassified out of Deferred revenue once the revenue recognition criteria have
been met. Deferred revenue primarily consists of customer prepayments and the unrecognized portion of the
$40 million upfront fee from MUL. The Company also has a 40% interest in the common equity of an entity that
buys and sells railcar assets that are leased to third parties. Deferred revenue includes 40% of the revenue and
margin of railcars sold to this entity until the railcars are ultimately sold to a third party.

Noncontrolling interest and Contingently redeemable noncontrolling interest - The Company has a joint venture
with Grupo Industrial Monclova, S.A. (GIMSA) that manufactures new railroad freight cars for the 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 the right 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 related to the partner’s 50% interest in the joint venture is included in
Noncontrolling interest in the equity section of the Company’s Consolidated Balance Sheet.

Greenbrier-Astra Rail was formed in 2017 between the Company’s existing European operations headquartered
in Swidnica, Poland and Astra Rail, based in Arad, Romania. Greenbrier-Astra Rail is controlled by the
Company with an approximate 75% interest. The Company consolidates Greenbrier-Astra Rail for financial
reporting purposes and includes the noncontrolling interest in the mezzanine section of the Consolidated Balance
Sheet in Contingently redeemable noncontrolling interest (see Note 4 – Acquisitions).

In August 2018, Greenbrier-Astra Rail entered into an agreement to take an approximately 68% ownership stake
in Rayvag, a railcar manufacturing company based in Adana, Turkey. Rayvag is controlled by the Company. The
Company consolidates Rayvag for financial reporting purposes. The noncontrolling interest related to the
partner’s interest is included in Noncontrolling interest in the equity section of the Company’s Consolidated
Balance Sheet.

The Company has a joint venture with Summit Railroad Products, Inc. to provide axle services. 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 has the power to direct the activities which most significantly impact the economic
performance of the entity. The noncontrolling interest related to the partner’s 50% interest in the joint venture is
included in Noncontrolling interest in the equity section of the Company’s Consolidated Balance Sheet.

Net earnings attributable to noncontrolling interest on the Company’s Consolidated Statement of Income
represents the Company’s partners’ share of results from operations.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Accumulated other comprehensive loss - Accumulated other comprehensive loss, net of tax as appropriate,
consisted of the following:

(In thousands)

Balance, August 31, 2018
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other

comprehensive loss

Balance, August 31, 2019

Unrealized
Gain (Loss)
on Derivative
Financial
Instruments

Foreign
Currency
Translation
Adjustment

Accumulated
Other
Comprehensive
Loss

Other

(431)
(10,264)

$(21,506)
(12,688)

$(1,429)
(351)

$(23,366)
$(23,303)

1,854

–

$ 1,854

$ (8,841)

$(34,194)

$(1,780)

$(44,815)

The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of
Income, with the financial statement caption, were as follows:

(In thousands)

(Gain) loss on derivative financial instruments:

Foreign exchange contracts
Interest rate swap contracts

Year Ended August 31,

2019

2018

Financial Statement
Caption

$1,794
545

2,339
(485)

$(716)
298

(418)
3

Revenue and Cost of revenue
Interest and foreign exchange

Total before tax
Tax benefit (expense)

$1,854

$(415)

Net of tax

Revenue recognition - The Company measures revenue at the amounts that reflect the consideration to which it
expects to be entitled in exchange for transferring control of goods and services to customers. The Company
recognizes revenue either at the point in time or over the period of time that performance obligations to
customers are satisfied. Payment terms vary by segment and product type and are generally due within normal
commercial terms. The Company’s contracts with customers may include multiple performance obligations (e.g.
railcars, maintenance, management services, etc.). For such arrangements, the Company allocates revenues to
each performance obligation based on its relative standalone selling price. The Company has disaggregated
revenue from contracts with customers into categories which describe the principal activities from which it
generates revenues.

Manufacturing

Railcars are manufactured in accordance with contracts with customers. The Company recognizes revenue upon
its customers’ acceptance of the completed railcars at a specified delivery point. From time to time, the Company
enters into multi-year supply agreements. Each railcar delivery is considered a distinct performance obligation,
such that the amounts that are recognized as revenue following railcar delivery are generally not subject to
change.

The Company typically recognizes marine vessel manufacturing revenue over time using the cost input method,
based on progress toward contract completion measured by actual costs incurred to date in relation to the
estimate of total expected costs. This method best depicts the Company’s performance in completing the
construction of the marine vessel for the customer and is consistent with the percentage of completion method
used prior to the adoption of the new revenue standard.

Wheels, Repair & Parts

The Company operates a network of wheel, repair and parts shops in North America that provide complete
wheelset reconditioning and railcar repair services.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Repair revenue is typically recognized over time using the cost input method, based on progress toward contract
completion measured by actual costs incurred to date in relation to the estimate of total expected costs. This
method best depicts the Company’s performance in repairing the railcars for the customer. Repair services are
typically completed in less than 90 days.

Leasing & Services

The Company owns a fleet of new and used cars which are leased to third-party customers. Lease revenue is
recognized over the lease-term in the period in which it is earned in accordance with ASC 840 Leases.

Syndication transactions represent new and used railcars which have been placed on lease to a customer and
which the Company intends to sell to an investor with the lease attached. At the time of such sale, revenue and
cost of revenue associated with railcars that the Company has manufactured are recognized in the Manufacturing
segment; while revenue and cost of revenue associated with railcars which were obtained from a third-party with
the intent to resell them and subsequently sold, are recognized in Leasing & Services. In addition the Company
will often perform management or maintenance services at market rates for these railcars. The Company
evaluates the terms of any remarketing agreements and any contractual provisions that represent retained risk and
the level of retained risk based on those provisions. The Company applies a 10% threshold to determine whether
the level of retained risk exceeds 10% of the individual fair value of the rail cars delivered. If retained risk
exceeded 10%, the transaction would not be recognized as a sale until such time as the retained risk declined to
10% or less.

The Company enters into multi-year contracts to provide management and maintenance services to customers for
which revenue is generally recognized on a straight-line basis over the contract term as a stand-ready obligation.
Costs to fulfill these contracts are recognized as incurred.

Interest and foreign exchange - Interest and foreign exchange includes foreign exchange transaction gains and
losses, amortization of loan fee expense, accretion of debt discounts and external interest expense.

(In thousands)

Interest and foreign exchange:
Interest and other expense
Foreign exchange (gain) loss

Years ended August 31,
2018

2017

2019

$32,260
(1,348)

$30,946
(1,578)

$23,519
673

$30,912

$29,368

$24,192

Forward exchange contracts - Foreign operations give rise to risks from changes in foreign currency exchange
rates. Forward exchange contracts with established financial institutions are used to hedge a portion of such risk.
Realized and unrealized gains and losses on effective hedges are deferred in other comprehensive income (loss)
and recognized in earnings concurrent with the hedged transaction or when the occurrence of the hedged
transaction is no longer considered probable. Ineffectiveness is measured and any gain or loss is recognized in
foreign exchange (gain) loss. Even though forward exchange contracts are entered into to mitigate the impact of
currency fluctuations, certain exposure remains, which may affect operating results. In addition, there is risk for
counterparty non-performance.

Interest rate instruments - Interest rate swap agreements are used to reduce the impact of changes in interest rates
on certain debt. The net cash amounts paid or received under the agreements are recognized as an adjustment to
interest expense.

Research and development - Research and development costs are expensed as incurred. Research and
development costs incurred for new product development during the years ended August 31, 2019, 2018 and
2017 were $5.4 million, $6.0 million and $4.2 million, respectively, included in Selling and administrative
expenses.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Net earnings per share - Basic earnings per common share (EPS) includes restricted stock grants and restricted
stock units that are considered participating securities, including some grants subject to certain performance
criteria, in weighted average basic common shares outstanding when calculating 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, using the treasury stock method, associated with shares underlying the 2.875% Convertible notes, 2.25%
Convertible notes, restricted stock units that are not considered participating securities and performance-based
restricted stock units subject to performance criteria, for which actual levels of performance above target have
been achieved. The second approach supplements the first by including the “if converted” effect of the 3.5%
Convertible notes during the periods in which they were outstanding. Under the “if converted” method, debt
issuance 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 shares underlying the convertible notes. The 3.5% Convertible notes are
included in the calculation of both approaches using the treasury stock method when the average stock price is
greater than the applicable conversion price.

Stock-based compensation - The value of stock based compensation awards is amortized as compensation
expense from the date of grant through the earlier of the vesting period or in some instances the recipient’s
eligible retirement date. Stock based compensation expense consists of restricted stock units, restricted stock and
phantom stock units awards. Stock based compensation expense for the years ended August 31, 2019, 2018 and
2017 was $11.2 million, $29.3 million and $26.4 million, respectively and was recorded in Selling and
administrative on the Consolidated Statements of Income.

Restricted stock units and restricted stock awards are accounted for as equity based awards (see Note 16 –
Equity). Phantom stock units are accounted for as liability based awards.

Phantom Stock Units

The Company began granting phantom stock units during the year ended August 31, 2016. Every phantom stock
unit entitles the participant to receive a cash payment equal to the value of a single share of the Company’s
common stock upon vesting. The holders of unvested phantom stock units are entitled to participate in dividend
equivalents.

There were no phantom stock units awarded during the years ended August 31, 2019 and 2018. During the year
ended August 31, 2017, the Company awarded 151,634 phantom stock units which include performance-based
grants. As of August 31, 2019, there were a total of 72,144 phantom stock units associated with unvested
performance-based grants. The actual number of phantom stock units that will vest associated with performance-
based phantom stock units will vary depending on the Company’s performance. An additional 72,144 phantom
stock units, associated with awards granted in 2017, may be granted if performance-based phantom stock units
vest at stretch levels of performance. The grant date fair value of phantom stock awards was $6.7 million for the
year ended August 31, 2017.

Our phantom stock unit grants are considered liability based awards and therefore are re-measured at the end of
each reporting period. Compensation expense is recognized through the earlier of the vesting period or the
recipient’s eligible retirement date. Time-based awards to employees are expensed upon grant when the
recipient’s eligible retirement date precedes the grant date or during the vesting period if the grantee becomes
retirement eligible before the vesting period is complete. Compensation expense related to phantom stock unit
grants is recorded in Selling and administrative expense and Cost of revenue on the Company’s Consolidated
Statements of Income. For the year ended August 31, 2019, a $1.2 million benefit was recognized in
compensation expense for the re-measurement of phantom stock units due to a lower stock price. Compensation
expense recognized related to phantom stock units for the years ended August 31, 2018 and 2017 was
$12.1 million and $6.2 million, respectively. Unamortized compensation cost related to phantom stock unit
grants was $0.3 million, $5.9 million and $10.9 million as of August 31, 2019, 2018 and 2017, respectively.

Management estimates - The preparation of financial statements in conformity with accounting principles
to arrive at estimates and
generally accepted in the U.S. requires judgment on the part of management

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

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 the financial statements. Estimates and assumptions are periodically evaluated and
may be adjusted in future periods. Actual results could differ from those estimates.

Reclassifications - Certain immaterial reclassifications have been made to the accompanying prior year
Consolidated Financial Statements to conform to the current year presentation.

Initial Adoption of Accounting Policies

Revenue Recognition

In the first quarter of 2019, the Company adopted Accounting Standard Update 2014-09, Revenue from Contracts with
Customers (ASU 2014-09). This standard was issued to provide a common revenue recognition model for entities to
recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. The new
standard also requires additional disclosures to sufficiently describe the nature, amount, timing, and uncertainty of
revenue and cash flow arising from contracts with customers. As a result of adopting the new standard, the majority of
the Company’s revenue recognition timing remained unchanged, while certain minor changes have occurred related to
maintenance and repair services. Costs incurred while fulfilling maintenance contracts are now recognized as incurred
while the related revenue continues to be recognized over time. Additionally, repair and rail retrofit service revenue,
while previously recognized upon completion of an order, is now recognized as costs are incurred. This standard was
adopted using a modified retrospective approach through a cumulative effect adjustment, which increased retained
earnings by $5.5 million at September 1, 2018. Other adjustments recorded to the September 1, 2018 opening balance
sheet were not material. The adoption of the new revenue standard did not have a material effect on the Condensed
Consolidated Balance Sheet or Statement of Income.

Restricted Cash

In the first quarter of 2019, the Company adopted Accounting Standard Update 2016-18, Restricted Cash (ASU
2016-18). This update requires additional disclosure and that the Statement of Cash Flow explain the change
during the period in the total cash, cash equivalents and amounts generally described as restricted cash.
Therefore, amounts generally described as restricted cash should be included with cash & cash equivalents when
reconciling the beginning-of-period and end-of-period total amounts shown on the Statement of Cash Flows. The
guidance requires retrospective presentation to each period presented. The adoption of ASU 2016-18 did not
have an impact on the Condensed Consolidated Balance Sheet and Statement of Income, but did result in
revisions to the Condensed Consolidated Statement of Cash Flows as well as other revised disclosures.

Prospective Accounting Changes

Lease Accounting

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (ASU 2016-02). The new guidance
supersedes existing guidance on accounting for leases in Topic 840 and is intended to increase the transparency and
comparability of accounting for lease transactions. ASU 2016-02 requires most leases to be recognized on the balance
sheet by recording a right-of-use asset and a lease liability. The liability will be equal to the present value of lease
payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income
statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance.
Lessor accounting remains similar to the current model, but updated to align with certain changes to the lessee model
and the new revenue recognition standard. The ASU will require both quantitative and qualitative disclosures regarding
key information about leasing arrangements. The standard is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2018 and the Company plans to adopt this standard on September 1, 2019.
ASU 2016-02 initially required entities to adopt the standard using a modified retrospective transition method. In July
2018, the FASB issued certain updates including ASU 2018-11, Leases (Topic 842): Targeted Improvements, which
provide optional transition practical expedients allowing companies to adopt the new standard with a cumulative effect
adjustment as of the beginning of the year of adoption with prior year comparative financial information and
disclosures remaining as previously reported. The Company plans to elect this optional practical expedient.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

The Company evaluated the transition and presentation approaches available as well as the impact of the new
guidance on its consolidated financial statements and related disclosures, including the increase in the assets and
liabilities on its balance sheet, and the impact on its current lease portfolio from both a lessor and lessee
perspective. To facilitate this, the Company utilized a comprehensive approach to review its lease portfolio, as
well as assessed system requirements and control implications. The new guidance provides a number of optional
practical expedients in transition. The Company elected the “package of practical expedients,” which allows it
not to reassess under the new guidance their prior conclusions about lease identification and initial direct costs.
The Company did not elect the use-of-hindsight practical expedient. In addition, the new guidance provides
practical expedients for an entity’s ongoing lessee accounting. The Company elected to not separate lease and
non-lease components for the majority of its asset classes. The Company elected the short-term lease recognition
exemption for all leases that qualify which means it will not recognize right-of-use assets or lease liabilities for
these leases.

The most significant effects of adoption relate to the recognition of a right-of-use asset and lease liability on the
Company’s balance sheet for operating leases and providing new disclosures about its leasing activities. The
Company currently expect the right-of-use asset and lease liability as of September 1, 2019 will be between $40
and $45 million. The adoption of this new standard also requires the Company to eliminate deferred gains
associated with certain sale-leaseback transactions and upon implementation the Company will record an
the Company will derecognize
increase to retained earnings of approximately $5 million. In addition,
approximately $9 million of existing assets and approximately $13 million of deferred revenue for railcar
transactions previously not qualifying as sales due to continuing involvement,
that now qualify for sale
accounting under the new guidance upon adoption. The gain associated with this change in accounting, will be
offset by the recognition of a new guarantee liability, resulting in an immaterial net adjustment to retained
earnings as of September 1, 2019. The Company does not expect the new guidance to have a material impact on
its results of operations.

Derivatives and Hedging

In August 2017, the FASB issued Accounting Standards Update 2017-12, Derivatives and Hedging: Targeted
Improvements to Accounting for Hedging Activities (ASU 2017-12). This update improves the financial reporting
of hedging relationships to better portray the economic results of an entity’s risk management activities in its
financial statements and make certain targeted improvements to simplify the application of the hedge accounting
guidance. The guidance expands the ability to qualify for hedge accounting for non-financial and financial risk
components, reduces complexity in fair value hedges of interest rate risk and eliminates the requirement to
separately measure and report hedge ineffectiveness, as well as eases certain hedge effectiveness assessment
requirements. The new guidance is effective for reporting periods beginning after December 15, 2018, with early
adoption permitted. The Company plans to adopt this guidance beginning September 1, 2019. We do not expect
the new guidance to have a material impact on our results of operations.

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued Accounting Standard Update 2016-13, Financial Instruments – Credit Losses
(ASU 2016-13). This update introduces a new model for recognizing credit losses on financial instruments based
on an estimate of current expected credit losses. The new guidance will apply to loans, accounts receivable, trade
receivables, other financial assets measured at amortized cost, loan commitments and other off-balance sheet
credit exposures. The new guidance will also apply to debt securities and other financial assets measured at fair
value through other comprehensive income. The new guidance is effective for reporting periods beginning after
December 15, 2019, with early adoption permitted. The Company plans to adopt this guidance beginning
September 1, 2020. The Company is currently evaluating the impact of this standard on its consolidated financial
statements and disclosures.

Note 3 - Revenue Recognition

Contract balances

Contract assets primarily consist of unbilled receivables related to marine vessel construction and repair services,
for which the respective contracts do not yet permit billing at the reporting date. Contract liabilities primarily

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

consist of customer prepayments for manufacturing, maintenance, and other management-type services, for
which the Company has not yet satisfied the related performance obligations.

The opening and closing balances of the Company’s contract balances are as follows:

(in thousands)

Balance sheet
classification

September 1,
2018

August 31,
2019

Contract assets
Contract liabilities 1
1 Contract liabilities balance includes deferred revenue within the scope of the new revenue standard.

Inventories
Deferred revenue

$ 7,228
$41,250

$10,196
$39,203

$ change

$ 2,968
$(2,047)

For the year ended August 31, 2019, the Company recognized $11.3 million of revenue that was included in
Contract liabilities as of September 1, 2018.

Performance obligations

As of August 31, 2019, the Company has entered into contracts with customers for which revenue has not yet
been recognized. The following table outlines estimated revenue related to performance obligations wholly or
partially unsatisfied, that the Company anticipates will be recognized in future periods.

(in millions)

Revenue type:
Manufacturing – Railcar sales
Manufacturing – Marine
Services
Other

Manufacturing – Railcars intended for syndication 1
1 Not a performance obligation as defined in the new revenue standard and therefore not subject to audit

August 31,
2019

$2,897.9
$ 100.2
$ 153.0
42.1
$

$ 317.2

Based on current production and delivery schedules and existing contracts, approximately $1.9 billion of the
Railcar Sales amount is expected to be recognized in 2020 while the remaining amount is expected in future
periods. The table above excludes estimated revenue to be recognized at the Company’s Brazilian manufacturing
operation, as they are accounted for under the equity method.

Revenue amounts reflected in Railcars intended for syndication may be syndicated to third parties or held in the
Company’s fleet depending on a variety of factors.

Marine revenue is expected to be recognized through 2021 as vessel construction is completed.

Services includes management and maintenance services of which approximately 51% are expected to be
performed through 2024 and the remaining amount ratably through 2037.

Note 4 - Acquisitions

Manufacturing business of American Railcar Industries, Inc. (ARI)

On July 26, 2019, the Company completed its acquisition of the manufacturing business of ARI for a purchase
price of approximately $418.3 million. In connection with the acquisition, the Company acquired two railcar
manufacturing facilities in Arkansas, as well as other facilities which produce a range of railcar components and
parts and create enhanced vertical integration for our manufacturing operations. The purchase price includes
approximately $8.0 million for capital expenditures on railcar lining operations and other facility improvements.
Included in the acquisition were equity interests in two railcar component manufacturing businesses which
Greenbrier will account for under the equity method of accounting and recognize at their respective fair value as
investments in unconsolidated affiliates.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

The purchase price was funded by, and consisted of, a combination of cash on hand, the proceeds of a
$300 million secured term loan, the issuance to the seller of a $50 million senior convertible note and a payable
to the seller for a working capital true-up amount (See Note 14 – Notes Payable, net).

For the year ended August 31, 2019, the operations contributed by ARI’s manufacturing business generated
revenues of $43.0 million and a loss from operations of $1.6 million, which are reported in the Company’s
consolidated financial statements as part of the Manufacturing segment.

The preliminary purchase price of the net assets acquired from ARI was allocated as follows:

(in thousands)
Accounts receivable, net
Inventories
Property, plant and equipment, net
Investments in unconsolidated affiliates
Intangibles and other assets, net
Goodwill

Total assets acquired

Total liabilities assumed

Net assets acquired

$ 28,257
98,227
225,045
40,314
36,785
56,816

485,444

67,174

$418,270

The above purchase price allocation,
including the residual amount allocated to goodwill, are based on
preliminary information and is subject to change as additional information is obtained related to the amounts
allocated to the assets acquired and liabilities assumed. As a result of the proximity of the acquisition date to
August 31, 2019 and as we did not acquire 100% of ARI, the amounts of all assets acquired and liabilities
assumed are preliminary. During the measurement period, which may extend up to 12 months after the date of
acquisition, the Company will adjust these assets and liabilities if new information is obtained about the facts and
circumstances that existed as of the acquisition date and revised amounts will be recorded as of that date. The
effect of measurement period adjustments to the estimated amounts will be reflected on a prospective basis.

The identified intangible assets assumed in the acquisition were recognized as follows:

(In thousands)
Trademarks and patents
Customer and supplier relationships

Identified intangible assets subject to amortization
Other identified intangible assets not subject to amortization

Total identified intangible assets

Weighted average
estimated useful life
(in years)
9
7

Fair value
$19,500
16,071

35,571
860

$36,431

In accordance with ASC 805, the following unaudited pro forma financial information summarizes the combined
operating results of Greenbrier and ARI’s manufacturing business as if the acquisition of ARI’s manufacturing
business occurred on September 1, 2017. In addition, this pro forma financial information includes acquisition-related
adjustments including depreciation expense to reflect the increased fair value of property, plant and equipment,
amortization expense related to identified intangible assets, interest expense on the $50 million convertible senior note
and $300 million senior term debt issued, and the related income tax effects. This pro forma financial information is
presented for informational purposes only and does not include adjustments relating to the Company’s expected cost-
savings and other synergies, and as such, is not indicative of the results of operations that would have been achieved if
the acquisition had occurred on September 1, 2017 or of results that may occur in the future.

(In thousands, except per share amounts)
Revenue
Net earnings attributable to Greenbrier
Basic earnings per common share
Diluted earnings per common share

As of August 31,
2018
2019
$2,893,400
$3,462,255
$ 137,399
57,284
$
4.45
$
1.76
$
4.25
$
1.73
$

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

GBW

On August 20, 2018, the Company entered into a dissolution agreement with Watco Companies, LLC, its
previous joint venture partner, to discontinue their GBW Railcar Services railcar repair joint venture. Pursuant to
the dissolution agreement, previously operated Greenbrier repair shops and associated employees returned to the
Company. Additionally, the dissolution agreement provides that certain agreements entered into in connection
with the original creation of GBW in 2014 were terminated as of the transaction date, including the leases of real
and personal property, service agreements, and certain employment-related agreements.

As the assets received and liabilities assumed from GBW meet the definition of a business, the Company has
accounted for this transaction as a business combination. The total net assets acquired were approximately
$57.6 million. Additionally, the Company removed the book value of its remaining equity method investment in,
and note receivable due from, the joint venture.

For the year ended August 31, 2019, the Repair operations generated consolidated revenues of $87.5 million and
a loss from operations of $24.9 million, which are reported in the Company’s consolidated financial statements
as part of the Wheels, Repair & Parts segment. This loss from operations includes $10.0 million of non-cash
impairment loss from goodwill. See Note 9 – Goodwill.

Greenbrier Astra Rail

On June 1, 2017, Greenbrier and Astra Holding GmbH (Astra) contributed its European operations to a newly
formed company, Greenbrier-Astra Rail (GAR), a Europe-based freight railcar manufacturing, engineering and
repair business. As consideration for an approximate 75% controlling interest, Greenbrier agreed to pay Astra
€30 million at closing, an additional €30 million which was paid on June 1, 2018 and issue an approximate 25%
noncontrolling interest
in the new company. The total net assets acquired of $115.8 million includes
$38.3 million representing the fair value of the noncontrolling interest at the acquisition date.

Astra also received a put option to sell its entire noncontrolling interest to Greenbrier at an exercise price equal to
the higher of fair value or a defined EBITDA multiple as measured on the exercise date. The option is exercisable
30 days prior to and up until June 1, 2022. Due to Astra’s redemption right under the put option, the noncontrolling
interest has been classified as a Contingently redeemable noncontrolling interest in the mezzanine section of the
Consolidated Balance Sheets. The carrying value of the noncontrolling interest cannot be less than the maximum
redemption amount, which is the amount Greenbrier will settle the put option for if exercised. Adjustments to
reconcile the carrying value to the maximum redemption amount are recorded to retained earnings.

For the year ended August 31, 2019 and 2018, the European operations contributed by Astra generated revenues
of $150.3 million and $136.8 million, respectively, and a loss from operations of $19.4 million and $11.5 million,
respectively, which are reported in the Company’s consolidated financial statements as part of the Manufacturing
segment.

The purchase price of the net assets acquired from Astra was allocated as follows:

(in thousands)
Cash and cash equivalents
Accounts receivable, net
Inventories
Property, plant and equipment, net
Intangibles and other assets, net
Goodwill
Total assets acquired
Accounts payable and accrued liabilities
Deferred income taxes
Deferred revenue
Notes payable, net
Total liabilities assumed
Net assets acquired

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

6,562
10,984
30,454
75,296
17,300
25,746
166,342
17,879
7,292
964
24,382
50,517
$115,825

On August 2, 2018, GAR entered in to an agreement with Rayvag Vagon Sanavi ve Ticaret A.S. (Rayvag) to take
an approximately 68% ownership stake in Rayvag. Rayvag is a railcar manufacturer and provider of railcar repair
and parts services based in Adana, Turkey. The amount paid to acquire the 68% ownership stake in Rayvag was
not material to the Company’s consolidated financial statements.

Note 5 - Inventories

(In thousands)
Manufacturing supplies and raw materials
Work-in-process
Finished goods
Excess and obsolete adjustment

(In thousands)
Excess and obsolete adjustment
Balance at beginning of period
Charge to cost of revenue
Disposition of inventory
Currency translation effect
Balance at end of period

As of August 31,
2018
2019
$274,938
$387,015
105,021
156,614
57,969
130,576
(5,614)
(9,512)
$432,314
$664,693

As of August 31,
2018

2017

2019

$ 5,614
9,734
(5,651)
(185)
$ 9,512

$ 4,136
4,023
(2,455)
(90)
$ 5,614

$ 3,257
2,781
(2,003)
101
$ 4,136

Note 6 - Equipment on Operating Leases, net

Equipment on operating leases is reported net of accumulated depreciation of $44.2 million and $64.9 million as
of August 31, 2019 and 2018, respectively. Depreciation expense was $13.3 million, $11.2 million and
$12.1 million as of August 31, 2019, 2018 and 2017, respectively. In addition, certain railcar equipment leased-in
by the Company on operating leases (see Note 22 – Lease Commitments) is subleased to customers under
non-cancelable operating leases. Aggregate minimum future amounts receivable under all non-cancelable
operating leases and subleases are as follows:

(In thousands)
Year ending August 31,
2020
2021
2022
2023
2024
Thereafter

$23,490
20,076
17,949
13,717
9,450
5,583
$90,265

Certain equipment is also operated under daily, monthly or car hire utilization arrangements. Associated revenue
amounted to $14.0 million, $12.8 million and $13.0 million for the years ended August 31, 2019, 2018 and 2017,
respectively.

Note 7 - Property, Plant and Equipment, net

(In thousands)
Land and improvements
Machinery and equipment
Buildings and improvements
Construction in progress
Other

Accumulated depreciation

As of August 31,
2018
2019
$ 84,432
87,872
414,865
539,952
202,973
338,639
48,406
66,744
68,452
90,822
819,128
1,124,029
(361,932)
(406,056)
$ 457,196
$ 717,973

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Depreciation expense was $62.3 million, $54.5 million and $45.5 million for the years ended August 31, 2019,
2018 and 2017, respectively.

Note 8 - Investments In Unconsolidated Affiliates

GBW

The Company had a 50% ownership interest in GBW which performed railcar repair, refurbishment and
maintenance until August 20, 2018, on which date the Company entered into a dissolution agreement (See
Note 4 – Acquisitions). The Company accounted for its interest in GBW under the equity method of accounting.

The assets and liabilities shown below as of August 31, 2019 primarily represent remaining cash and a payable to
its owners, while the summarized income statement for the year ended August 31, 2019 is for GBW’s full year of
activity.

Summarized financial data for GBW is as follows:

(In thousands)

Current assets
Total assets
Current liabilities
Total liabilities

(In thousands)

Revenue
Margin
Net loss (1)
(1)

As of August 31,
2018
2019

$1,248
$1,248
$1,248
$1,248

$ 8,531
$ 8,531
$23,283
$23,283

Years ended August 31,
2018

2017

2019

879

$
$253,436
$238,033
$(1,126) $ (6,047) $ (4,058)
$(4,104) $ (51,679) $ (36,947)

In 2018 and 2017, GBW recorded a pre-tax goodwill impairment loss of $26.4 million and $11.2 million, respectively.

Greenbrier-Maxion

The Company has a 60% ownership interest in Greenbrier-Maxion, a railcar manufacturer in Brazil. Greenbrier-
Maxion also assembles bogies and offers a range of aftermarket services including railcar overhaul and
refurbishment. The Company does not consolidate Greenbrier-Maxion for financial reporting purposes and
accounts for its interest under the equity method of accounting as the entity’s governance provisions require that
all significant decisions of Greenbrier-Maxion are subject to shared consent of its shareholders.

Summarized financial data for Greenbrier-Maxion is as follows:

(In thousands)

Current assets
Total assets
Current liabilities
Total liabilities

(In thousands)

Revenue
Margin
Net income (loss)

As of August 31,
2018
2019

$39,768
$85,167
$62,541
$74,261

$41,619
$61,034
$38,027
$41,539

Years ended August 31,
2018

2017

2019

$99,547
$ 2,017
$ (9,144) $ (3,006) $

$187,664
$ 10,086

$228,510
$ 24,372
1,378

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Amsted-Maxion

The Company has a 24.5% ownership interest in Amsted-Maxion, a manufacturer of castings and components for
railcars and other heavy equipment. The Company retains an option to increase its ownership to 29.5% subject to
certain conditions. Amsted-Maxion has a 40% ownership position in Greenbrier-Maxion. The Company accounts
for its interest in Amsted-Maxion under the equity method of accounting.

Summarized financial data for Amsted-Maxion is as follows:

(In thousands)

Current assets
Total assets
Current liabilities
Total liabilities

(In thousands)

Revenue
Margin
Net loss

As of August 31,
2018
2019

$ 25,220
$107,451
$ 54,445
$ 88,016

$ 21,463
$111,589
$ 27,981
$ 83,407

Years ended August 31,
2018

2017

2019

$ 90,114
$96,490
$86,421
$ 4,949
$ 5,983
$ 8,001
$ (9,268) $ (9,590) $(20,114)

Other Unconsolidated Affiliates

The Company has nine other unconsolidated affiliates which are accounted for under the equity method of
accounting. For the year ended August 31, 2019, the Company recognized net earnings of $3.7 million from
these other unconsolidated affiliates.

Summarized financial information, shown as 100% of these other unconsolidated affiliates in aggregate are as
follows:

(In thousands)

Current assets
Total assets
Current liabilities
Total liabilities

(In thousands)

Revenue
Margin
Net income

Note 9 - Goodwill

As of August 31,
2018
2019

$ 45,287
$255,549
$
9,836
$ 49,747

$ 32,168
$239,535
$
3,647
$ 52,852

Years ended August 31,
2018

2017

2019

$50,423
$19,877
$12,751

$25,549
$11,360
$ 6,988

$39,161
$ 8,015
$ 5,202

Changes in the carrying value of goodwill are as follows:

(In thousands)

Balance August 31, 2018
Additions (1)
Translation
Goodwill Impairment

Balance August 31, 2019

Manufacturing

Wheels,
Repair & Parts

Leasing
& Services

$27,083
61,408
(1,809)
–

$86,682

$ 51,128
2,162
–
(10,025)

$ 43,265

–
–
–
–

–

Total

$ 78,211
63,570
(1,809)
(10,025)

$129,947

(1) Additions to goodwill relate to purchase price adjustments for the GBW repair shop transaction (Wheels, Repair & Parts) and the Rayvag

acquisition (Manufacturing) and the acquisition of ARI (Manufacturing). See Note 4 – Acquisitions.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

(In thousands)

Gross goodwill balance before accumulated goodwill impairment losses and other reductions
Accumulated goodwill impairment losses
Accumulated other reductions

Balance August 31, 2019

Goodwill

$ 292,497
(138,234)
(24,316)

$ 129,947

The Company performed its annual goodwill impairment test during the third quarter. The Company utilized
both the qualitative assessment and the quantitative goodwill impairment test as part of its annual goodwill
impairment test. For reporting units requiring a quantitative goodwill impairment test, the Company determined
the fair value of the reporting units while considering both the income and market approaches. Under the income
approach, the Company calculates the fair value of a reporting unit based on the present value of estimated future
cash flows. Under the market approach, the Company estimates the fair value based on observed market
multiples for comparable businesses, when appropriate.

Based on the results of the Company’s annual impairment test, the fair values of its reporting units exceeded their
carrying values except for the repair reporting unit. The Company initially recorded the repair goodwill following
the GBW repair shop transaction in 2018. As a result of near-term operational challenges and updated estimated
future cash flows, a non-cash impairment charge of $10.0 million was recorded during the year ended August 31,
2019.

Note 10 - Intangibles and Other Assets, net

Intangible assets that are determined to have finite lives are amortized over their useful lives. Intangible assets
with indefinite useful lives are not amortized and are periodically evaluated for impairment.

The following table summarizes the Company’s identifiable intangible and other assets balance:

(In thousands)

Intangible assets subject to amortization:
Customer and supplier relationships

Accumulated amortization

Other intangibles

Accumulated amortization

Intangible assets not subject to amortization
Prepaid and other assets
Nonqualified savings plan investments
Debt issuance costs, net
Assets held for sale

As of August 31,
2018
2019

$ 89,722
(48,850)
34,031
(6,908)

$ 73,601
(44,656)
15,219
(5,319)

67,995

5,450
15,749
27,967
4,568
3,650

38,845

5,115
18,935
26,299
1,824
3,650

$125,379

$ 94,668

Amortization expense for the years ended August 31, 2019, 2018 and 2017 was $6.3 million, $5.3 million and
$4.8 million, respectively. Amortization expense for the years ending August 31, 2020, 2021, 2022, 2023 and
2024 is expected to be $10.9 million, $10.9 million, $7.6 million, $6.3 million and $6.3 million, respectively.

Note 11 - Revolving Notes

Senior secured credit facilities, consisting of three components, aggregated to $705.4 million as of August 31,
2019.

As of August 31, 2019, a $600.0 million revolving line of credit, maturing June 2024, secured by substantially all
the Company’s assets in the U.S. not otherwise pledged as security for term loans, was available to provide

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

working capital and interim financing of equipment, principally for the U.S. and Mexican operations. Advances
under this facility bear interest at LIBOR plus 1.50% or Prime plus 0.50% depending on the type of
borrowing. Available borrowings under the credit facility are generally based on defined levels of inventory,
receivables, property, plant and equipment and leased equipment, as well as total debt
to consolidated
capitalization and fixed charges coverage ratios.

As of August 31, 2019, lines of credit totaling $55.4 million secured by certain of the Company’s European
assets, with variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.1% to WIBOR plus
1.5% and Euro Interbank Offered Rate (EURIBOR) plus 1.1% to EURIBOR plus 1.5%, were available for
working capital needs of the European manufacturing operations. European credit facilities are continually being
renewed. Currently, these European credit facilities have maturities that range from December 2019 through
November 2021.

As of August 31, 2019, the Company’s Mexican railcar manufacturing joint venture has two lines of credit
totaling $50.0 million. The first line of credit provides up to $30.0 million. Advances under this facility bear
interest at LIBOR plus 2.0%. The Mexican railcar manufacturing joint venture will be able to draw against this
facility through March 2024. The second line of credit provides up to $20.0 million, of which the Company and
its joint venture partner have each guaranteed 50%. Advances under this facility bear interest at LIBOR plus
2.0%. The Mexican railcar manufacturing joint venture will be able to draw amounts available under this facility
through June 2021.

As of August 31, 2018, outstanding commitments under the senior secured credit facilities consisted of
$72.2 million in letters of credit under the North American credit facility and $27.7 million outstanding under the
European credit facilities.

Note 12 - Accounts Payable and Accrued Liabilities

(In thousands)

Trade payables
Other accrued liabilities
Accrued payroll and related liabilities
Accrued warranty
Income taxes payable

Note 13 - Warranty Accrual

(In thousands)

Balance at beginning of period
Charged to cost of revenue
Acquisition
Payments
Currency translation effect

Balance at end of period

As of August 31,
2018
2019

$302,009
108,939
106,669
46,678
4,065

$226,405
86,175
105,111
27,395
4,771

$568,360

$449,857

As of August 31,
2018

2017

2019

$27,395
5,014
23,895
(8,594)
(1,032)

$20,737
12,323
–
(5,217)
(448)

$12,159
6,872
3,526
(2,649)
829

$46,678

$27,395

$20,737

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Note 14 - Notes Payable, net

(In thousands)

Term loans
2.875% Convertible senior notes, due 2024
2.25% Convertible senior notes, due 2024
Other notes payable

Debt discount and issuance costs

As of August 31,
2018
2019

$521,544
275,000
50,000
14,001

$179,923
275,000
–
14,798

$860,545
(37,660)

$469,721
(33,516)

$822,885

$436,205

Term loans are primarily composed of:
•

$300 million of senior term debt, with a maturity date of June 2024 unless the Convertible senior notes due
July 2024 are outstanding as of November 1, 2023, in which case the debt matures on that date. The debt
bears a floating interest rate of LIBOR plus 1.5% with principal of $3.75 million paid quarterly in arrears and
a balloon payment of $232.5 million due at maturity. An interest rate swap agreement was entered into on
50% of the initial balance to swap the floating interest rate of LIBOR plus 1.5% to a fixed rate of 3.19%. The
principal balance as of August 31, 2019 was $300.0 million.
$225 million of senior term debt, with a maturity date of September 2023, which is secured by a pool of
leased railcars. The debt bears a floating interest rate of LIBOR plus 1.5% with principal of $1.97 million
paid quarterly in arrears and a balloon payment of $185.6 million due at maturity. An interest rate swap
agreement was entered into on 50% of the initial balance to swap the floating interest rate of LIBOR plus
1.5% to a fixed rate of 4.49%. The principal balance as of August 31, 2019 was $217.1 million.

•

• Other term loans with an aggregate balance of $4.4 million as of August 31, 2019 and maturity dates ranging

from April 2020 to September 2022.

Convertible senior notes, due 2024, bear interest at a fixed rate of 2.875%, paid semi-annually in arrears on
February 1st and August 1st. The convertible notes mature on February 1, 2024, unless earlier repurchased by the
Company or converted in accordance with their terms. Upon the satisfaction of certain conditions, holders may
convert at their option at any time prior to the business day immediately preceding the stated maturity date. The
convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The
convertible notes are convertible into shares of the Company’s common stock, at an initial conversion rate of
16.6234 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $60.16
per share). The initial conversion rate and conversion price are subject to adjustment upon the occurrence of
certain events, such as distributions, dividends or stock splits. There were $33.1 million of initial debt discount
and $8.0 million of original debt issuance costs included in Notes Payable, net on the Company’s Consolidated
Balance Sheet. The debt discount represents the difference between the debt principal and the value of a similar
debt instrument that does not have a conversion feature at issuance. The debt discount is being amortized using
the effective interest rate method through February 2024 and the amortization expense is included in Interest and
Foreign exchange on the Company’s Consolidated Statement of Income. In accordance with ASC 470-20, the
Company separately accounts for the liability component (debt principal net of debt discount) and equity
component. The liability component is recognized as the fair value of a similar instrument that does not have a
conversion feature at issuance. To determine the fair value of the liability component, the Company assumed an
interest rate of approximately 5% which resulted in a fair value of $241.9 million. The equity component, which
is the conversion feature at issuance, is recognized as the difference between the proceeds from the issuance of
the notes ($275 million) and the fair value of the liability component ($241.9 million). As of August 31, 2019
and 2018, the equity component was $33.1 million which was recorded on the Company’s Consolidated Balance
Sheet in Additional paid-in capital, net of tax of $12.3 million. As of August 31, 2019, the Company has reserved
approximately 6.3 million shares for issuance upon conversion of these notes.

Convertible senior notes, due 2024, bear interest at a fixed rate of 2.25%, paid semi-annually in arrears on
February 1st and August 1st. The convertible notes mature on July 26, 2024, unless earlier repurchased by the
Company or converted in accordance with their terms. Upon the satisfaction of certain conditions, holders may
convert at their option at any time prior to the business day immediately preceding the stated maturity date. The

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The
convertible notes are convertible into shares of the Company’s common stock, at an initial conversion rate of
22.1910 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $45.06
per share). The initial conversion rate and conversion price are subject to adjustment upon the occurrence of
certain events, such as distributions, dividends or stock splits. There was $4.9 million of initial debt discount
included in Notes Payable, net on the Company’s Consolidated Balance Sheet. The debt discount represents the
difference between the debt principal and the value of a similar debt instrument that does not have a conversion
feature at issuance. The debt discount is being amortized using the effective interest rate method through July
2024 and the amortization expense is included in Interest and Foreign exchange on the Company’s Consolidated
Statement of Income. In accordance with ASC 470-20, the Company separately accounts for the liability
component (debt principal net of debt discount) and equity component. The liability component is recognized as
the fair value of a similar instrument that does not have a conversion feature at issuance. To determine the fair
value of the liability component, the Company assumed an interest rate of approximately 5% which resulted in a
fair value of $45.1 million. The equity component, which is the conversion feature at issuance, is recognized as
the difference between the proceeds from the issuance of the notes (fair value of $50 million) and the fair value
of the liability component ($45.1 million). As of August 31, 2019, the equity component was $4.9 million which
was recorded on the Company’s Consolidated Balance Sheet in Additional paid-in capital, net of tax of
$1.2 million. As of August 31, 2019, the Company has reserved approximately 1.5 million shares for issuance
upon conversion of these notes.

Other notes payable includes $14.0 million of unsecured debt with maturity dates of November 2019 and
September 2020.

The notes payable, along with the revolving and operating lines of credit, contain certain covenants with respect
to the Company and various subsidiaries, the most restrictive of which, among other things, limit the ability to:
incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into capital leases; create
liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries,
into mergers,
including but not
consolidations or sales of substantially all the Company’s assets; and enter into new lines of business. The
covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed
charges (interest and rent) coverage.

limited to loans, advances, equity investments and guarantees; enter

As of August 31, 2019 principal payments on the notes payable are expected as follows:

(In thousands)
Year ending August 31,
2020
2021
2022
2023
2024 (1)
Thereafter

$ 29,084
30,921
23,258
22,907
754,375
–

$860,545

(1) The repayment of the $275.0 million of Convertible senior notes due February 2024 and the $50.0 million of Convertible senior notes due

July 2024 is assumed to occur at the scheduled maturity in 2024 instead of assuming an earlier conversion by the holders.

Note 15 - Derivative Instruments

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

At August 31, 2019 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish
Zlotys and the sale of Euros and Pound Sterling aggregated to $71.6 million. The fair value of the contracts is
included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when there is a loss, or

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

as Accounts receivable, net when there is a gain. As the contracts mature at various dates through May 2022, any
such gain or loss remaining will be recognized in manufacturing revenue along with the related transactions. In
the event that the underlying transaction does not occur or does not occur in the period designated at the
inception of the hedge, the amount classified in accumulated other comprehensive loss would be reclassified to
the results of operations in Interest and foreign exchange at the time of occurrence. At August 31, 2019 exchange
rates, approximately $0.9 million would be reclassified to revenue or cost of revenue in the next year.

At August 31, 2019, an interest rate swap agreement maturing in September 2023 had a notional amount of
$109.5 million and an interest rate swap agreement maturing in June 2024 had a notional amount of $150.0 million.
The fair value of the contracts are included on the Consolidated Balance Sheets in Accounts payable and accrued
liabilities when there is a loss, or in Accounts receivable, net when there is a gain. As interest expense on the
underlying debt is recognized, amounts corresponding to the interest rate swap are reclassified from Accumulated
other comprehensive loss and charged or credited to interest expense. At August 31, 2019 interest rates,
approximately $0.2 million would be reclassified to interest expense in the next year.

Fair Values of Derivative Instruments

Asset Derivatives

Liability Derivatives

(In thousands)
Derivatives designated as hedging instruments
Foreign forward

Balance sheet
caption

exchange contracts

Interest rate swap

contracts

Accounts receivable,
net
Intangibles and other
assets, net

August 31,

2019

Fair
Value

2018

Fair
Value

$64

$ 700

–
$64

781
$1,481

Balance sheet
caption

Accounts payable and
accrued liabilities
Accounts payable and
accrued liabilities

August 31,

2019

Fair
Value

2018

Fair
Value

437

$1,211

10,255
$10,692

1
$1,212

Derivatives not designated as hedging instruments
Accounts receivable,
Foreign forward
net

exchange contracts

$ –

Accounts payable and
accrued liabilities

587

$ 354

The Effect of Derivative Instruments on the Consolidated Statements of Income

Derivatives in
cash flow
hedging
relationships

Financial statement caption of gain recognized in
income on derivative

Foreign forward exchange contract
Interest rate swap contracts

Interest and foreign exchange
Interest and foreign exchange

Gain (loss) recognized in
income on derivatives
Years ended
August 31,

2019
$213
–
$213

2018
$1,052
(1)
$1,051

Financial
statement
caption of
gain (loss)
reclassified
from
accumulated
OCI into
income

Financial
statement
caption of gain
(loss) in income
on derivative
(ineffective
portion and
amount
excluded from
effectiveness testing)

Gain (loss)
recognized on
derivative
(ineffective
portion and
amount
excluded from
effectiveness
testing)
Years
ended August 31,

2019

2018

Gain (loss)
reclassified from
accumulated OCI
into
income (effective
portion)
Years
ended August 31,

2019

2018

Gain (loss)
recognized in OCI on
derivatives (effective
portion)
Years
ended August 31,

2019

2018

$ (1,261) $ (658) Revenue

$ (764) $1,145 Revenue

$1,346 $ 854

(421)

(1,093) Cost of revenue

(1,030)

(429) Cost of revenue

Interest and
foreign
exchange

(11,582)
1,632
$(13,264) $ (119)

(545)

(298)
$(2,339) $ 418

Interest and
foreign
exchange

935

306

(587)

–
$1,694 $1,160

Derivatives in
cash flow hedging
relationships

Foreign forward
exchange
contracts
Foreign forward
exchange
contracts

Interest rate swap

contracts

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Note 16 - Equity

Stock Incentive Plan

The 2014 Amended and Restated Stock Incentive Plan was amended and restated as the 2017 Amended and
Restated Stock Incentive Plan on October 24, 2017 and approved by stockholders on January 5, 2018. The
stockholders also approved an increase in the total number of shares reserved for issuance by 1,100,000 shares.
As a result, the maximum aggregate number of the Company’s common shares authorized for issuance is
5,425,000. The 2017 Amended and Restated Stock Incentive Plan provides for the grant of incentive stock
options, non-statutory stock options, restricted shares, restricted stock units and stock appreciation rights.

On August 31, 2019 there were 849,522 shares available for grant compared to 1,050,675 and 233,271 shares
available for grant as of the years ended August 31, 2018 and 2017, respectively. There are no stock options or
stock appreciation rights outstanding as of August 31, 2019. The Company currently grants restricted shares and
restricted stock units. Restricted share grants are considered outstanding shares of common stock at the time they
are issued. The holders of unvested restricted shares are entitled to voting rights and participation in dividends.
Shares associated with restricted stock unit awards are not considered legally outstanding shares of common
stock until vested. Restricted stock unit awards, including performance-based awards, are entitled to participate
in dividends and these awards are considered participating securities and are considered outstanding for earnings
per share purposes when the effect is dilutive.

During the years ended August 31, 2019, 2018 and 2017, the Company awarded restricted share and restricted stock
unit grants totaling 313,540, 317,036, and 269,705 shares, respectively, which include performance-based grants.
As of August 31, 2019, there were a total of 397,260 shares associated with unvested performance-based grants.
The actual number of shares that will vest associated with performance-based grants will vary depending on the
Company’s performance. Approximately 397,260 additional shares may be granted if performance-based restricted
stock unit awards vest at stretch levels of performance. These additional shares are associated with restricted stock
unit awards granted during the years ended August 31, 2019, 2018 and 2017. The fair value of awards granted was
$17.4 million, $15.2 million, and $11.3 million for the years ended August 31, 2019, 2018 and 2017, respectively.

The value, at the date of grant, of stock awarded under restricted share grants and restricted stock unit grants is
amortized as compensation expense over the lesser of the vesting period of one to three years or to the recipients
eligible retirement date. Compensation expense recognized related to restricted share grants and restricted stock
unit grants for the years ended August 31, 2019, 2018 and 2017 was $12.4 million, $17.2 million, and
$20.2 million, respectively, and was recorded in Selling and administrative and Cost of revenue on the
Consolidated Statements of Income. Unamortized compensation cost related to restricted stock grants was
$15.0 million as of August 31, 2019.

Total unvested restricted share and restricted stock unit grants were 697,949 and 788,744 as of August 31, 2019
and 2018. The following table summarizes restricted share and restricted stock unit grant transactions for shares,
both vested and unvested, under the 2017 Amended and Restated Stock Incentive Plan:

Balance at August 31, 2016 (1)
Granted
Forfeited
Balance at August 31, 2017 (1)
Granted
Forfeited
Balance at August 31, 2018 (1)
Granted
Forfeited
Balance at August 31, 2019 (1)

(1) Balance represents cumulative grants net of forfeitures.

Share Repurchase Program

Shares
3,848,230
269,705
(26,206)
4,091,729
317,036
(34,440)
4,374,325
313,540
(112,387)
4,575,478

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

$100 million. Under the share repurchase program, shares of common stock may be purchased on the open
market or through privately negotiated transactions from time to time. The timing and amount of purchases will
be based upon market conditions, securities law limitations and other factors. The program may be modified,
suspended or discontinued at any time without prior notice. The share repurchase program does not obligate the
Company to acquire any specific number of shares in any period.

There were no shares repurchased during the years ended August 31, 2019 and 2018. As of August 31, 2019 the
Company had cumulatively repurchased 3,206,226 shares for approximately $137.0 million.

Note 17 - Earnings Per Share

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

(In thousands)

Weighted average basic common shares outstanding (1)
Dilutive effect of 3.5% Convertible notes (2)
Dilutive effect of 2.875% Convertible notes (3)
Dilutive effect of 2.25% Convertible notes (4)
Dilutive effect of restricted stock units (5)

Weighted average diluted common shares outstanding

Years ended August 31,
2017
2018
2019

32,615
n/a
–
–
550

30,857
1,821
–
n/a
157

29,225
3,295
–
n/a
42

33,165

32,835

32,562

(1) Restricted stock grants and restricted stock units that are considered participating securities, including some grants subject to certain
performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position.
No restricted stock and restricted stock units were anti-dilutive for the years ended August 31, 2019, 2018 and 2017.

(2) The dilutive effect of the 3.5% Convertible notes was included as they were considered dilutive under the “if converted” method as

further discussed below for the years ended August 31, 2018 and 2017. The 3.5% Convertible notes matured on April 1, 2018.

(3) The 2.875% Convertible notes were issued in February 2017. The dilutive effect of the 2.875% Convertible notes was excluded for the
years ended August 31, 2019, 2018 and 2017 as the average stock price was less than the applicable conversion price and therefore was
considered anti-dilutive.

(4) The 2.25% Convertible notes were issued in July 2019. The dilutive effect of the 2.25% Convertible notes was excluded for the year
ended August 31, 2019 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive.
(5) Restricted stock units that are not considered participating securities and restricted stock units subject to performance criteria, for which
actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding 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,
using the treasury stock method, associated with shares underlying the 2.875% Convertible notes, 2.25% Convertible
notes, restricted stock units that are not considered participating securities and performance based restricted stock units
subject to performance criteria, for which actual levels of performance above target have been achieved. The second
approach supplements the first by including the “if converted” effect of the 3.5% Convertible notes during the periods
in which they were outstanding. Under the “if converted” method, debt issuance 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 shares
underlying the convertible notes. The 3.5% Convertible notes were included in the calculation of both approaches
using the treasury stock method when the average stock price is greater than the applicable conversion price.

Net earnings attributable to Greenbrier
Add back:
Interest and debt issuance costs on the 3.5% Convertible notes, net of tax
Earnings before interest and debt issuance costs on the 3.5% Convertible notes
Weighted average diluted common shares outstanding
Diluted earnings per share (1)

(1) Diluted earnings per share was calculated as follows:

Earnings before interest and debt issuance costs on the 3.5% Convertible notes

Weighted average diluted common shares outstanding

Years ended August 31,
2018
$151,781

2017
$116,067

2019
$71,076

n/a
$71,076
33,165
2.14

2,031
$153,812
32,835
4.68

2,932
$118,999
32,562
3.65

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Note 18 - Related Party Transactions

In June 2017, the Company purchased a 40% interest in the common equity of an entity that buys and sells railcar
assets that are leased to third parties. The railcars sold to this leasing warehouse are principally built by
Greenbrier. The Company accounts for this leasing warehouse investment under the equity method of
accounting. As of August 31, 2019, the carrying amount of the investment was $5.8 million which is classified in
Investment in unconsolidated affiliates in the Consolidated Balance Sheet. Upon sale of railcars to this entity
from Greenbrier, 60% of the related revenue and margin is recognized and 40% is deferred until the railcars are
ultimately sold by the entity. The Company recognized $18 million, $16 million and $130 million in revenue
associated with railcars sold into the leasing warehouse during the years ended August 31, 2019, 2018 and 2017,
respectively. An additional $6 million and $48 million in revenue was recognized associated with railcars sold
out of the leasing warehouse during the years ended August 31, 2019 and 2018, respectively. The Company also
provides administrative and remarketing services to this entity and earns management fees for these services
which were immaterial for the year ended August 31, 2019, 2018 and 2017.

its
As of August 31, 2019,
unconsolidated Brazilian castings and components manufacturer and an $18.4 million note receivable balance
from Greenbrier-Maxion, its unconsolidated Brazilian railcar manufacturer. These note receivables are included
on the Consolidated Balance Sheet in Accounts receivable, net.

the Company had a $10.0 million note receivable from Amsted-Maxion,

The Company has a 41.9% interest in Axis, LLC (Axis), a joint venture that manufactures and sells axles to its
joint venture partners for use and distribution both domestically and internationally in traditional freight railcar
markets and other railcar markets. The Company obtained its ownership interest in Axis as part of the acquisition
of the manufacturing business of ARI on July 26, 2019. For the year ended August 31, 2019, the Company
purchased $1.6 million of railcar components from Axis.

Mr. Furman is the owner of a private aircraft managed by a private independent management company. From
time to time, the Company’s business requires charter use of privately-owned aircraft. In such instances, it is
possible that charters may be placed on Mr. Furman’s aircraft. The Company placed charters on Mr. Furman’s
aircraft aggregating $1.5 million, $0.5 million and $0.5 million for each of the years ended August 31, 2019,
2018 and 2017, respectively.

In July 2014, the Company and Watco Companies LLC completed the formation of GBW, an unconsolidated
50/50 joint venture. The Company accounted for its interest in GBW under the equity method of accounting. On
August 20, 2018 we entered into an agreement with our joint venture partner to discontinue the GBW railcar
repair joint venture. The Company leased real and personal property to GBW with lease revenue totaling
approximately $5 million for the years ended August 31, 2018 and 2017. The Company sold wheel sets and
components to GBW which totaled $16.5 million and $18.3 million for the years ended August 31, 2018 and
2017, respectively. GBW provided services to the Company which totaled $0.4 million and $1.0 million for the
years ended August 31, 2018 and 2017, respectively.

Note 19 - Income Taxes

Components of income tax expense were as follows:

(In thousands)
Current

Federal
State
Foreign

Deferred
Federal
State
Foreign

Change in valuation allowance

Income tax expense

Years ended August 31,
2018

2019

2017

$ 18,894
4,775
37,391
61,060

$ 28,357
3,244
38,628
70,229

$22,710
305
35,893
58,908

(8,559)
(2,542)
(8,433)
(19,534)
62
$ 41,588

(33,459)
(344)
(3,690)
(37,493)
157
$ 32,893

9,418
(1,467)
(2,732)
5,219
(113)
$64,014

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Income tax expense was computed using different statutory rates for the years presented. Due to the 2017 Tax
Cuts and Jobs Act (Tax Act) enacted on December 22, 2017, the federal statutory rate was reduced from 35% to
21% effective January 1, 2018. The U.S. federal corporate statutory rates presented are 21%, 25.7% and 35% for
fiscal years 2019, 2018 and 2017, respectively.

The Company recognized the income tax effects of the Tax Act in its financial statements in accordance with Staff
Accounting Bulletin No. 118 (SAB 118), which provided guidance for the application of ASC 740 Income Taxes, in
the reporting period in which the Tax Act was signed into law. During the year ended August 31, 2018, deferred
income taxes were remeasured as a result of the new statutory rate resulting in a tax benefit of $33.6 million. The
Tax Act also required the Company to accrue a transition tax on foreign earnings not previously subject to U.S.
taxation, which resulted in $6.9 million of tax expense in 2018. This benefit was partially offset by a one-time
accrual of $8.9 million of tax expense related to the transition tax on foreign earnings not previously subject to U.S.
taxation. During the year ended August 31, 2019 the Company finalized all accounting for the specific income tax
effects of the Tax Act for which the accounting under ASC 740 was previously incomplete.

For the year ended August 31, 2019, the Company has estimated the impacts of the Tax Act which became
effective on January 1, 2018. The most significant item, impacting the Company in the current year, is the global
intangible low-taxed income (GILTI) tax. The Company has made an accounting policy election to treat the
GILTI tax as a current period expense and has included it in the financial statements.

The reconciliation between effective and statutory tax rates on operations is as follows:

Federal statutory rate
State income taxes, net of federal benefit
Foreign operations, excluding transition tax
Transition tax on foreign earnings
Remeasurement of domestic deferred taxes
Change in valuation allowance
Noncontrolling interest in flow-through entity
Permanent differences and other
Effective tax rate

Years ended August 31,
2018
25.7%
0.8
1.8
3.1
(15.0)
0.1
(2.4)
0.6
14.7%

2019
21.0%
1.3
5.8
0.5
–
–
(5.7)
4.2
27.1%

2017
35.0%
0.1
(3.4)
–
–
–
(6.0)
1.4
27.1%

Earnings before income tax and earnings from unconsolidated affiliates for the years ended August 31, 2019,
2018 and 2017 were $75.0 million, $110.8 million and $123.2 million, respectively, for our domestic U.S.
operations and $78.2 million, $112.8 million and $113.0 million, respectively, for our foreign operations.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred
tax liabilities were as follows:

(In thousands)
Deferred tax assets:

Accrued payroll and related liabilities
Deferred revenue
Inventories and other
Maintenance and warranty accruals
Net operating losses
Investment and asset tax credits

Deferred tax liabilities:

Fixed assets
Original issue discount
Intangibles
Other

Valuation allowance
Net deferred tax liability

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

As of August 31,
2018
2019

$21,978
8,296
15,392
3,596
3,182
1,560
54,004

56,760
6,253
2,813
1,432
67,258
692
$13,946

$18,461
10,642
10,518
7,201
2,002
1,439
50,263

70,942
6,099
2,474
1,831
81,346
657
$31,740

As of August 31, 2019, the Company had $1.4 million of state credit carryforwards that will begin to expire in
2021 and $19.6 million of foreign NOL carryforwards that will begin to expire in 2020. The Company has placed
valuation allowances against any deferred tax assets for which no benefit is anticipated, including those for loss
and credit carryforwards not likely to be used before their expiration dates. The net increase in the total valuation
allowance on deferred taxes for which no benefit is anticipated was less than $0.1 million for the year ended
August 31, 2019.

Prior to 2018 no provision had been made for U.S. income taxes on the Company’s cumulative undistributed
earnings from foreign subsidiaries. During fiscal 2018 these earnings were subject to the one-time transition tax
on the deemed repatriation of undistributed foreign earnings. Notwithstanding this deemed inclusion in taxable
income, any actual repatriation would be accompanied by foreign withholding taxes. The Company does not
intend to repatriate these foreign earnings and continues to assert that its foreign earnings are indefinitely
reinvested.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:

(In thousands)

Unrecognized Tax Benefit – Opening Balance
Gross increases – tax positions in prior period
Gross decreases – tax positions in prior period
Settlements
Lapse of statute of limitations

Unrecognized Tax Benefit – Ending Balance

Years ended August 31,
2017
2018
2019

$1,608
–
(3)
–
–

$1,820
237
(449)
–
–

$ 942
1,368
(53)
–
(437)

$1,605

$1,608

$1,820

The Company is subject to taxation in the U.S. and in various states and foreign jurisdictions. The Company is
effectively no longer subject to U.S. Federal examination for fiscal years ending before 2016, to state and local
examinations before 2015, or to foreign examinations before 2014.

Unrecognized tax benefits, excluding interest, at August 31, 2019 were $1.6 million, all of which would affect
the effective tax rate if recognized. The unrecognized tax benefits at August 31, 2018 were $1.6 million. Accrued
interest on unrecognized tax benefits as of August 31, 2019 was $0.6 million and as of August 31, 2018 was
$0.2 million. The Company recorded annual interest expense of approximately $0.4 million for changes in the
reserves during each of the years ended August 31, 2019 and 2018. The Company has not accrued any penalties
on the reserves. Interest and penalties related to income taxes are not classified as a component of income tax
expense. Benefits from the realization of unrecognized tax benefits for deductible differences attributable to
ordinary operations will be recognized as a reduction of income tax expense. The Company does not anticipate a
significant change in the reserves for uncertain tax positions during the next twelve months.

Note 20 - Segment Information

The Company operates in three reportable segments: Manufacturing; Wheels, Repair & Parts; and Leasing &
the Company operated in four reportable segments: Manufacturing;
Services. Prior to August 20, 2018,
Wheels & Parts; Leasing & Services; and GBW Joint Venture. On August 20, 2018 the Company entered into an
agreement with its joint venture partner to discontinue the GBW railcar repair joint venture, which resulted in 12
repair shops returned to the Company. Beginning on August 20, 2018, the GBW Joint Venture was no longer
considered a reportable segment.

The accounting policies of the segments are the same as those described in the summary of significant
accounting policies. Performance is evaluated based on Earnings from operations. Corporate includes selling and
administrative costs not directly related to goods and services and certain costs that are intertwined among
segments due to our integrated business model. The Company does not allocate Interest and foreign exchange or
Income tax expense for either external or internal reporting purposes. Intersegment sales and transfers are valued
as if the sales or transfers were to third parties. Related revenue and margin are eliminated in consolidation and
therefore are not included in consolidated results in the Company’s Consolidated Financial Statements.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

The information in the following table is derived directly from the segments’ internal financial reports used for
corporate management purposes. The results of operations for the GBW Joint Venture are not reflected in the
tables below as the investment was accounted for under the equity method of accounting.

For the year ended August 31, 2019:

Manufacturing
Wheels, Repair & Parts
Leasing & Services
Eliminations
Corporate

External
$2,431,499
444,502
157,590
–
–
$3,033,591

Revenue
Intersegment
$ 97,086
48,266
28,240
(173,592)
–
–

Total
$2,528,585
492,768
185,830
(173,592)
–
$3,033,591

For the year ended August 31, 2018:

Manufacturing
Wheels, Repair & Parts
Leasing & Services
Eliminations
Corporate

External
$2,044,586
347,023
127,855
–
–
$2,519,464

Revenue
Intersegment
$ 118,157
41,494
11,847
(171,498)
–
–

Total
$2,162,743
388,517
139,702
(171,498)
–
$2,519,464

For the year ended August 31, 2017:

Earnings (loss) from operations
Total
Intersegment
$223,953
$ 6,370
(2,039)
902
90,290
25,527
(32,799)
(32,799)
(95,289)
–
$184,116
–

External
$217,583
(2,941)
64,763
–
(95,289)
$184,116

Earnings (loss) from operations
Total
Intersegment
$258,622
$ 17,721
19,479
2,748
98,777
10,296
(30,765)
(30,765)
(93,128)
–
$252,985
–

External
$240,901
16,731
88,481
–
(93,128)
$252,985

Manufacturing
Wheels, Repair & Parts
Leasing & Services
Eliminations
Corporate

(In thousands)
Assets:
Manufacturing
Wheels, Repair & Parts
Leasing & Services
Unallocated

Depreciation and amortization:
Manufacturing
Wheels, Repair & Parts
Leasing & Services

Capital expenditures:
Manufacturing
Wheels, Repair & Parts
Leasing & Services

External
$1,725,188
312,679
131,297
–
–
$2,169,164

Revenue
Intersegment
$ 19,291
30,861
11,812
(61,964)
–
–

Total
$1,744,479
343,540
143,109
(61,964)
–
$2,169,164

Earnings (loss) from operations
Total
Intersegment
$296,356
$ 1,022
17,287
2,303
43,003
11,099
(14,424)
(14,424)
(81,790)
–
$260,432
–

External
$295,334
14,984
31,904
–
(81,790)
$260,432

Years ended August 31,
2018

2017

2019

$1,606,571
306,725
708,799
368,542
$2,990,637

$1,020,757
306,756
578,818
559,133
$2,465,464

$ 914,450
236,315
535,323
711,617
$2,397,705

49,240
13,024
21,467
83,731

44,225
10,771
19,360
74,356

85,155
13,291
99,787
$ 198,233

59,707
5,204
111,937
$ 176,848

33,807
11,143
20,179
65,129

54,973
3,129
27,963
86,065

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

The following table summarizes selected geographic information.

(In thousands)

Revenue (1):
U.S.
Foreign

Assets:
U.S.
Mexico
Europe

Years ended August 31,
2018

2017

2019

$2,115,934
917,657

$1,840,877
678,587

$1,674,517
494,647

$3,033,591

$2,519,464

$2,169,164

$2,110,864
628,511
251,262

$1,677,144
517,543
270,777

$1,307,239
791,974
298,492

$2,990,637

$2,465,464

$2,397,705

(1) Revenue is presented on the basis of geographic location of customers.

Reconciliation of Earnings from operations to Earnings before income tax and loss from unconsolidated
affiliates:

(In thousands)
Earnings from operations
Interest and foreign exchange

Years ended August 31,
2018

2017

2019

$184,116
30,912

$252,985
29,368

$260,432
24,192

Earnings before income tax and loss from unconsolidated affiliates

$153,204

$223,617

$236,240

Note 21 - Customer Concentration

Customer concentration is defined as a single customer that accounts for more than 10% of total revenues or
accounts receivable. In 2019, revenue from one customer represented 26% of total revenue. In 2018, revenue
from two customers represented 20% and 11% of total revenue. In 2017, revenue from one customer represented
20% of total revenue. No other customers accounted for more than 10% of total revenues for the years ended
August 31, 2019, 2018, or 2017. One customer had a balance that individually equaled or exceeded 10% of
accounts receivable and represented 14% of the consolidated accounts receivable balance at August 31, 2019.
One customer had a balance that individually equaled or exceeded 10% of accounts receivable and represented
19% of the consolidated accounts receivable balance at August 31, 2018.

Note 22 - Lease Commitments

Lease expense for railcar equipment leased-in under non-cancelable leases was $7.7 million, $7.5 million and
$7.6 million for the years ended August 31, 2019, 2018 and 2017. Aggregate minimum future amounts payable
under these non-cancelable railcar equipment leases are as follows:

(In thousands)

Year ending August 31,
2020
2021
2022
2023
2024
Thereafter

$ 6,200
2,965
1,762
1,762
1,413
376

$14,478

Operating leases for domestic railcar repair facilities, land, office space and certain manufacturing and office
equipment expire at various dates through September 2098. Rental expense for these leases were $12.2 million,

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

$8.7 million and $9.4 million for the years ended August 31, 2019, 2018 and 2017. Aggregate minimum future
amounts payable under these non-cancelable operating leases are as follows:

(In thousands)

Year ending August 31,
2020
2021
2022
2023
2024
Thereafter

$ 8,099
5,781
3,965
3,395
2,109
9,821

$33,170

Note 23 - Commitments and Contingencies

Portland Harbor Superfund Site

The Company’s Portland, Oregon manufacturing facility is located adjacent to the Willamette River. In December
2000, the U.S. Environmental Protection Agency (EPA) classified portions of the Willamette River bed known as
the Portland Harbor, including the portion fronting the Company’s manufacturing facility, as a federal “National
Priority List” or “Superfund” site due to sediment contamination (the Portland Harbor Site). The Company and
more than 140 other parties have received a “General Notice” of potential liability from the EPA relating to the
Portland Harbor Site. The letter advised the Company that it 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 for
natural resource damages resulting from releases of hazardous substances to the site. Ten private and public entities,
including the Company (the Lower Willamette Group or LWG), signed an Administrative 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 did not sign such consent, but nevertheless contributed money to the effort. The
EPA-mandated RI/FS was produced by the LWG and cost over $110 million during a 17-year period. The Company
bore a percentage of the total costs incurred by the LWG in connection with the investigation. The Company’s
aggregate expenditure during the 17-year period was not material. Some or all of any such outlay may be
recoverable from other responsible parties. The EPA issued its Record of Decision (ROD) for the Portland Harbor
Site on January 6, 2017 and accordingly on October 26, 2017, the AOC was terminated.

Separate from the process described above, which focused on the type of remediation to be performed at the
Portland Harbor Site and the schedule for such remediation, 83 parties, including the State of Oregon and the federal
government, entered into a non-judicial mediation process to try to allocate costs associated with remediation of the
Portland Harbor site. Approximately 110 additional parties 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, U.S. District
Court, District of Oregon, Case #3:09-cv-453-PK. All but 12 of these parties elected to sign tolling agreements and
be dismissed without prejudice, and the case has been stayed by the court until January 16, 2020. The allocation
process is continuing in parallel with the process to define the remediation steps.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

including the Company, have agreed to help fund the additional sampling. The sampling is completed and the
EPA is evaluating possible resulting changes to remediation cost estimates.

The ROD does not address responsibility for the costs of clean-up, nor does it allocate such costs among the
potentially responsible parties. Responsibility for funding and implementing the EPA’s selected cleanup remedy
will be determined at an unspecified later date. Based on the investigation to date, the Company believes that it did
not contribute in any material way to contamination in the river sediments or the damage of natural resources in the
Portland Harbor Site and that the damage in the area of the Portland Harbor Site adjacent to its property precedes its
ownership of the Portland, Oregon manufacturing facility. Because these environmental investigations are still
underway, sufficient information is currently not available to determine the Company’s liability, if any, for the cost
of any required remediation or restoration of the Portland Harbor Site or to estimate a range of potential loss. Based
on the results of the pending investigations and future assessments of natural resource damages, the Company may
be required to incur costs associated with additional phases of investigation, remedial design, or remedial action,
and may be liable for damages to natural resources. In addition, the Company may be required to perform periodic
maintenance dredging in order to continue to launch vessels from its 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 could adversely affect
the Company’s business and
Consolidated Financial Statements, or the value of its Portland property.

On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the
Company as well as the United States and the State of Oregon for costs it incurred in assessing alleged natural
resource damages to the Columbia River from contaminants deposited in Portland Harbor. Confederated Tribes
and Bands of the Yakama Nation v. Air Liquide America Corp., et al., United States Court for the District of
Oregon Case No. 3i17-CV-00164-SB. The complaint does not specify the amount of damages the Plaintiff will
seek. The case has been stayed until January 16, 2020.

Oregon Department of Environmental Quality (DEQ) Regulation of Portland Manufacturing Operations

The Company has entered into a Voluntary Cleanup Agreement with the DEQ in which the Company agreed to
conduct an investigation of whether, and to what extent, past or present operations at the Portland property may
have released hazardous substances into the environment. The Company has also signed an Order on Consent
with the DEQ to finalize the investigation of potential onsite sources of contamination that may have a release
pathway to the Willamette River. Interim precautionary measures are also required in the order and the Company
is discussing with the DEQ potential remedial actions which may be required. The Company’s aggregate
expenditure has not been material, however the Company could incur significant expenses for remediation. Some
or all of any such outlay may be recoverable from other responsible parties.

Other Litigation, Commitments and Contingencies

In connection with the acquisition of the manufacturing business of ARI, the Company agreed to assume
potential legacy liabilities (known and unknown) related to railcars manufactured by ARI. Among these potential
liabilities are certain retrofit and repair obligations arising from regulatory actions by the Federal Railroad
Administration and the Association of American Railroads. In some cases, ARI shares with the Company the
costs of these retrofit and repair obligations. The Company currently is not able to determine if any of these
liabilities will have a material adverse impact on the Company’s results of operations.

From time to time, Greenbrier is involved as a defendant in litigation in the ordinary course of business, the
outcomes of which cannot be predicted with certainty. While the ultimate outcome of such legal proceedings
cannot be determined at this time, the Company believes that the resolution of pending litigation will not have a
material adverse effect on the Company’s Consolidated Financial Statements.

As of August 31, 2019, the Company had outstanding letters of credit aggregating to $24.4 million associated
with performance guarantees, facility leases and workers compensation insurance.

the Company had a $10.0 million note receivable from Amsted-Maxion,

As of August 31, 2019,
its
unconsolidated Brazilian castings and components manufacturer and an $18.4 million note receivable balance
from Greenbrier-Maxion, its unconsolidated Brazilian railcar manufacturer. These note receivables are included
on the Consolidated Balance Sheet in Accounts receivable, net. In the future, the Company may make loans to or
provide guarantees for Amsted-Maxion or Greenbrier-Maxion.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Note 24 - Fair Value of Financial Instruments

The estimated fair values of financial instruments and the methods and assumptions used to estimate such fair
values are as follows:

(In thousands)

Notes payable as of August 31, 2019
Notes payable as of August 31, 2018

Carrying
Amount 1

$860,545
$469,721

Estimated
Fair Value
(Level 2)

$838,728
$517,925

1 Carrying amount disclosed in this table excludes debt discount and debt issuance costs.

The carrying amount of cash and cash equivalents, accounts and notes receivable, revolving notes, accounts
payable and accrued liabilities, foreign currency forward contracts and interest rate swaps is a reasonable
estimate of fair value of these financial instruments. Estimated rates currently available to the Company for debt
with similar terms and remaining maturities and current market data are used to estimate the fair value of notes
payable.

Note 25 - Fair Value Measures

Certain 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 a three-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; and

Level 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, 2019 are:

(In thousands)

Assets:

Derivative financial instruments
Nonqualified savings plan investments
Cash equivalents

Liabilities:

Derivative financial instruments

Total

Level 1

Level 2 (1)

Level 3

64
27,967
68,100

–
27,967
68,100

$96,131

$96,067

64
–
–

$11,279

–

$11,279

–
–
–

–

(1) Level 2 assets include derivative financial instruments which are valued based on significant observable inputs. See Note 15—Derivative

Instruments for further discussion.

Assets and liabilities measured at fair value on a recurring basis as of August 31, 2018 are:

(In thousands)

Assets:

Derivative financial instruments
Nonqualified savings plan investments
Cash equivalents

Liabilities:

Derivative financial instruments

Total

Level 1

Level 2 (1)

Level 3

1,557
26,299
126,430

–
26,299
126,430

$1,557
–
–

$154,286

$152,729

$1,557

1,566

–

$1,566

–
–
–

–

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Quarterly Results of Operations (Unaudited)

(In thousands, except per share amount)
2019
Revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Cost of revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Margin
Selling and administrative
Net gain on disposition of equipment
Goodwill impairment

First

Second

Third

Fourth

Total

$471,789
108,543
24,191

$476,019
125,278
57,374

$681,588
124,980
49,584

$802,103
85,701
26,441

$2,431,499
444,502
157,590

604,523

658,671

856,152

914,245

3,033,591

417,805
100,978
13,207

442,996
118,455
43,376

590,788
119,821
38,971

686,036
81,636
13,036

2,137,625
420,890
108,590

531,990

604,827

749,580

780,708

2,667,105

72,533
50,432
(14,353)
–

53,844
47,892
(12,102)
–

106,572
54,377
(11,019)
10,025

133,537
60,607
(3,489)
–

366,486
213,308
(40,963)
10,025

Earnings from operations

36,454

18,054

53,189

76,419

184,116

Other costs

Interest and foreign exchange

4,404

9,237

9,770

7,501

30,912

Earnings before income tax and earnings (loss) from

unconsolidated affiliates

32,050

8,817

43,419

68,918

153,204

Income tax expense

(9,135)

(2,248)

(13,008)

(17,197)

(41,588)

Earnings (loss) from unconsolidated affiliates

467

(786)

(4,564)

(922)

(5,805)

Net earnings
Net earnings attributable to noncontrolling interest

23,382
(5,426)

5,783
(3,018)

25,847
(10,599)

50,799
(15,692)

Net earnings attributable to Greenbrier
Basic earnings per common share: (1)
Diluted earnings per common share: (1)

$ 17,956

$
$

0.55
0.54

$
$

2,765

$ 15,248

$ 35,107

0.08
0.08

$
$

0.47
0.46

$
$

1.08
1.06

105,811
(34,735)

71,076

2.18
2.14

$
$

(1) Quarterly amounts do not total to the year to date amount as each period is calculated discretely. Diluted EPS is calculated by including
the dilutive effect, using the treasury stock method, associated with shares underlying the 2.875% Convertible notes, 2.25% Convertible
notes, restricted stock units that are not considered participating securities and performance based restricted stock units subject to
performance criteria, for which actual levels of performance above target have been achieved.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Quarterly Results of Operations (Unaudited)

(In thousands, except per share amount)
2018
Revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Cost of revenue

Manufacturing
Wheels, Repair & Parts
Leasing & Services

Margin
Selling and administrative
Net gain on disposition of equipment

First

Second

Third

Fourth

Total

$451,485
78,011
30,039

$511,827
88,710
28,799

$510,099
94,515
36,773

$571,175
85,787
32,244

$2,044,586
347,023
127,855

559,535

629,336

641,387

689,206

2,519,464

380,850
72,506
16,865

429,165
80,708
14,116

427,875
85,850
19,155

489,517
79,266
14,536

1,727,407
318,330
64,672

470,221

523,989

532,880

583,319

2,110,409

89,314
47,043
(19,171)

105,347
50,294
(5,817)

108,507
51,793
(14,825)

105,887
51,309
(4,556)

409,055
200,439
(44,369)

Earnings from operations

61,442

60,870

71,539

59,134

252,985

Other costs

Interest and foreign exchange

7,020

7,029

6,533

8,786

29,368

Earnings before income tax and earnings (loss) from

unconsolidated affiliates

54,422

53,841

65,006

50,348

223,617

Income tax benefit (expense)

(18,135)

11,301

(15,944)

(10,115)

(32,893)

Earnings (loss) from unconsolidated affiliates

Net earnings
Net earnings attributable to noncontrolling interest

(2,910)

33,377
(7,124)

147

(12,823)

(3,075)

(18,661)

65,289
(3,647)

36,239
(3,288)

37,158
(6,223)

172,063
(20,282)

Net earnings attributable to Greenbrier
Basic earnings per common share: (1)
Diluted earnings per common share: (1)

$ 26,253

$ 61,642

$ 32,951

$ 30,935

$ 151,781

$
$

0.90
0.83

$
$

2.10
1.91

$
$

1.03
1.01

$
$

0.95
0.94

$
$

4.92
4.68

(1) Quarterly amounts do not total to the year to date amount as each period is calculated discretely. Diluted EPS is calculated using the more
dilutive of two approaches. The first approach includes the dilutive effect, using the treasury stock method, associated with shares
underlying the 2.875% Convertible notes, restricted stock units that are not considered participating securities and performance based
restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second
approach supplements the first by including the “if converted” effect of the 3.5% Convertible notes during the periods in which they were
outstanding. Under the “if converted” method, debt issuance 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 shares underlying the convertible notes. The 3.5% Convertible notes are
included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable
conversion price.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of our Principal Executive
Officer and Principal Financial Officer, the effectiveness 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 Securities Exchange Act of 1934 (the
Exchange Act). Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have
concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were
effective in ensuring that information required to be disclosed in our Exchange Act reports is (1) recorded,
processed, summarized and reported in a timely manner, and (2) accumulated and communicated to our
management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting during the quarter ended August 31,
2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Our internal control over financial reporting is a process designed under the supervision of our Principal
Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of our financial statements for external reporting purposes in accordance
with accounting principles generally accepted in the United States of America.

As of the end of our 2019 fiscal year, management conducted an assessment of the effectiveness of our internal
control over financial reporting based on the framework established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on
this assessment, management has determined that our internal control over financial reporting as of August 31,
2019 was effective.

On July 26, 2019 we completed our acquisition of the manufacturing business of ARI. Management excluded the
manufacturing business of ARI from our 2019 assessment of the effectiveness of our internal control over
financial reporting as of August 31, 2019. The manufacturing business of ARI accounted for approximately
16.1% of our total assets as of August 31, 2019 and from July 26, 2019 to August 31, 2019 accounted for
approximately 1.4% of our revenues for the year ended August 31, 2019. The manufacturing business of ARI
will be included in our assessment of internal controls over financial reporting in fiscal 2020.

Our independent registered public accounting firm, KPMG LLP, independently assessed the effectiveness of our
internal control over financial reporting, excluding the manufacturing business of ARI, as stated in their
attestation report, which is included at the end of Part II, Item 9A of this Form 10-K.

Inherent Limitations on Effectiveness of Controls

Our management, including the Principal Executive Officer and Principal Financial Officer, does not expect that
our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

error and all fraud. A control system, no matter how well designed and operated, can provide 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 there are resource constraints, and the benefits of controls must be considered relative to their
costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances
of fraud, if any, within the our company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by collusion 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
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of
changes in conditions or deterioration in the degree of compliance with policies or procedures.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
The Greenbrier Companies, Inc. and subsidiaries:

Opinion on Internal Control Over Financial Reporting

We have audited The Greenbrier Companies, Inc. and subsidiaries’ (the Company) internal control over financial
reporting as of August 31, 2019, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the
Company maintained, in all material respects, effective internal control over financial reporting as of August 31,
2019, based on criteria established in Internal Control – Integrated Framework (2013) 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) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2019 and 2018, and
the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the
years in the three-year period ended August 31, 2019, and related notes (collectively, the consolidated financial
statements), and our report dated October 29, 2019 expressed an unqualified opinion on those consolidated
financial statements.

The Company acquired the manufacturing business of American Railcar Industries, Inc. on July 26, 2019, and
management excluded from its assessment of the effectiveness of the Company’s internal control over financial
reporting as of August 31, 2019, the manufacturing business of American Railcar Industries, Inc.’s internal
control over financial reporting associated with total assets of approximately 16.1% and total revenues of
approximately 1.4% included in the consolidated financial statements of the Company as of and for the year
ended August 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an
evaluation of the internal control over financial reporting of the manufacturing business of American Railcar
Industries, Inc.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk. Our audit also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely 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
internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

limitations,

/s/ KPMG LLP

Portland, Oregon
October 29, 2019

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

Item 9B. OTHER INFORMATION

None

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

The information required by this item will be included under the captions “Election of Directors”, “Board
Committees, Meetings and Charters” and “Our Code of Business Conduct and Ethics and FCPA Compliance” in
our definitive Proxy Statement on Schedule 14A for the 2020 Annual Meeting of Shareholders to be filed with
the Securities and Exchange Commission within 120 days after the year ended August 31, 2019 (“2020 Proxy
Statement”) and is incorporated herein by reference. Information on the executive officers of the Company is
found under the caption “Information about our Executive Officers” in Part I of this 10-K.

Item 11. EXECUTIVE COMPENSATION

The information required by this item will be included under the caption “Executive Compensation”,
“Compensation Committee Report”, “2019 Director Compensation”, “Compensation Committee Interlocks and
Insider Participation” and “Risk Oversight” in the 2020 Proxy Statement and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDERS MATTERS

The information required by this item will be included under the captions “Stock Ownership of Certain
Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2020 Proxy Statement
and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND

DIRECTOR INDEPENDENCE

The information required by this item will be included under the captions “Related Party Transactions” and
“Director Independence” in 2020 Proxy Statement and is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item will be included under the caption “Ratification of Appointment of
Independent Auditors” in the 2020 Proxy Statement and is incorporated herein by reference.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1) Financial Statements

See 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 be read 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

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

3.10

3.11

3.12

3.13

3.14

3.15

3.16

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.

Articles of Merger amending the Registrant’s Articles of Incorporation are incorporated herein by
reference to Exhibit 3.2 to the Registrant’s Form 10-Q filed April 5, 2006.

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 April 5, 2006.

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-K filed November 6, 2006.

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-K filed November 8, 2007.

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 filed April 11, 2008.

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 filed April 13, 2009.

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 filed June 10, 2009.

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 filed June 12, 2009.

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-K filed November 5, 2012.

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-K filed January 15, 2013.

Amendment to the Registrant’s Bylaws, dated October 29, 2013, is incorporated herein by
reference to Exhibit 3.1 to the Registrant’s Form 8-K filed October 31, 2013.

Amendment to the Registrant’s Bylaws, dated October 29, 2014, is incorporated herein by
reference to Exhibit 3.1 to the Registrant’s Form 8-K filed November 3, 2014.

Amendment to the Registrant’s Bylaws, dated March 31, 2015, is incorporated herein by reference
to Exhibit 3.1 to the Registrant’s Form 8-K filed April 6, 2015.

Amendment to the Registrant’s Bylaws, dated July 1, 2015, is incorporated herein by reference to
Exhibit 3.1 to the Registrant’s Form 8-K filed July 8, 2015.

Amendment to the Registrant’s Bylaws, dated October 21, 2015, is incorporated herein by
reference to Exhibit 3.1 to the Registrant’s Form 8-K filed October 22, 2015.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

3.17

3.18

3.19

3.20

4.1

4.2

4.3

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9*

Amendment to the Registrant’s Bylaws, dated October 30, 2015, is incorporated herein by
reference to Exhibit 3.1 to the Registrant’s Form 8-K filed November 2, 2015.

Amendment to the Registrant’s Bylaws, dated March 31, 2017, is incorporated herein by reference
to Exhibit 3.1 to the Registrant’s Form 8-K filed March 31, 2017.

Amendment to the Registrant’s Bylaws, dated June 23, 2017, is incorporated herein by reference
to Exhibit 3.1 to the Registrant’s Form 8-K filed June 29, 2017.

Amendment
reference to Exhibit 3.1 to the Registrant’s Form 8-K filed August 29, 2019.

to the Registrant’s Bylaws, dated August 26, 2019,

is incorporated herein by

Specimen Common Stock Certificate of Registrant
is incorporated herein by reference to
Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 filed April 7, 2010 (SEC File
Number 333-165924).

Indenture between the Registrant and Wells Fargo Bank, National Association, as Trustee,
including the Form of Note attached as Exhibit A thereto, dated February 6, 2017, is incorporated
herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed February 6, 2017.

Description of the Registrant’s Securities Under Section 12 of the Securities Exchange Act of
1934.

Amended and Restated Employment Agreement between the Registrant and Mr. William A.
Furman, dated August 28, 2012, is incorporated herein by reference to Exhibit 10.3 to the
Registrant’s Form 10-Q filed January 9, 2013.

Form of Amended and Restated Employment Agreement between the Registrant and certain of its
executive officers, as amended and restated on August 28, 2012, is incorporated herein by
reference to Exhibit 10.8 to the Registrant’s Form 10-K filed November 1, 2012.

Amendment No. 1 to Form of Amended and Restated Employment Agreement between the
Registrant and certain of its executive officers, as amended and restated on August 28, 2012, is
incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed January 8,
2014.

Second Amendment to Form of Amended and Restated Employment Agreement between the
Registrant and certain of its executive officers, as amended and restated on August 28, 2012, is
incorporated herein by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed June 29,
2018.

Form of Amendment to Amended and Restated Employment Agreement between the Registrant
and certain of its executive officers.

Form of Change of Control Agreement is incorporated herein by reference to Exhibit 10.5 to the
Registrant’s Form 10-Q filed April 4, 2013.

The Greenbrier Companies, Inc. Form of Amendment to Change of Control Agreement, approved
on May 28, 2013, is incorporated herein by reference to Exhibit 10.2 of the Registrant’s Form 8-K
filed June 3, 2013.

The Greenbrier Companies, Inc. 2014 Amended and Restated Stock Incentive Plan is incorporated
herein by reference to Appendix A to the Registrant’s Proxy Statement on Schedule 14A filed
November 19, 2014.

The Greenbrier Companies, Inc. 2017 Amended and Restated Stock Incentive Plan is incorporated
herein by reference to Appendix A to the Registrant’s Proxy Statement on Schedule 14A filed
November 14, 2017.

10.10*

The Greenbrier Companies, Inc. Nonqualified Deferred Compensation Plan 2018 Amendment and
Restatement of the Basic Plan Document is incorporated herein by reference to Exhibit 10.4 to the
Registrant’s Form 10-Q filed June 29, 2018.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

10.11*

The Greenbrier Companies Nonqualified Deferred Compensation Plan 2018 Amendment and
Restatement of the Adoption Agreement is incorporated herein by reference to Exhibit 10.5 to the
Registrant’s Form 10-Q filed June 29, 2018.

10.12* 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.

10.13* Amendment No. 1 to Trust Agreement, dated June 15, 2018, related to The Greenbrier
Companies, Inc. Nonqualified Deferred Compensation Plan, is incorporated by reference to
Exhibit 10.6 to the Registrant’s Form 10-Q filed June 29, 2018.

10.14*

The Greenbrier Companies Nonqualified Deferred Compensation Plan Adoption Agreement for
Directors, dated July 1, 2012,
is incorporated herein by reference to Exhibit 10.28 to the
Registrant’s Form 10-K filed November 1, 2012.

10.15* Amendment No. 1 to the Greenbrier Companies Nonqualified Deferred Compensation Plan
Adoption Agreement for Directors, dated December 15, 2015, is incorporated herein by reference
to Exhibit 10.1 to the Registrant’s Form 10-Q filed April 5, 2016.

10.16*

10.17*

The Greenbrier Companies, Inc. 2014 Employee Stock Purchase Plan is incorporated herein by
reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed on
November 19, 2014.

The Greenbrier Companies,
to 2014 Employee Stock Purchase Plan is
incorporated herein by reference to Appendix A to the Registrant’s Definitive Proxy Statement on
Schedule 14A filed on November 14, 2018.

Inc. Amendment

10.18* Consulting Services Agreement between Greenbrier Leasing Company LLC and Charles J.
Swindells dated January 7, 2016 is incorporated herein by reference to Exhibit 10.3 to the
Registrant’s Form 10-Q filed April 5, 2016.

10.19

10.20

10.21

10.22

10.23

Dissolution Agreement, dated August 20, 2018, by and among the Registrant, Greenbrier Rail
Services Holdings, LLC, Watco Companies, L.L.C., Millennium Rail, L.L.C., Watco Mechanical
Services, L.L.C., GBW Railcar Services Holdings, L.L.C., GBW Railcar Services, L.L.C., and
GBW Railcar Services Canada, Inc. is incorporated herein by reference to Exhibit 10.26 to the
Registrant’s Form 10-K filed October 26, 2018.

Second Amended and Restated Limited Liability Company Agreement of GBW Railcar Services
Holdings, L.L.C., dated August 20, 2018, by and among Greenbrier Rail Services Holdings, LLC,
Watco Mechanical Services, L.L.C., and Millennium Rail, L.L.C. is incorporated herein by
reference to Exhibit 10.27 to the Registrant’s Form 10-K filed October 26, 2018.

Fourth Amended and Restated Credit Agreement, dated as of September 26, 2018, by and among
The Greenbrier Companies, Inc., Bank of America, N.A., as Administrative Agent, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as Sole Lead Arranger and Sole Bookrunner, MUFG Union
Bank, N.A., as Syndication Agent, Bank of the West, Branch Banking and Trust Company, Fifth
Third Bank, and Wells Fargo Bank, National Association, as Co-Documentation Agents, and the
lenders identified therein is incorporated herein by reference to Exhibit 10.28 to the Registrant’s
Form 10-K filed October 26, 2018.

First Amendment
to the Fourth Amended and Restated Credit Agreement, dated as of
September 26, 2018, by and among The Greenbrier Companies, Inc., Bank of America, N.A., as
Administrative Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead
Arranger and Sole Bookrunner, MUFG Union Bank, N.A., as Syndication Agent, Bank of the
West, Branch Banking and Trust Company, Fifth Third Bank, and Wells Fargo Bank, National
Association, as Co-Documentation Agents, and the lenders identified therein.

Fourth Amended and Restated Security Agreement, dated as of September 26, 2018, by and
among The Greenbrier Companies, Inc., and the other parties identified as Debtors therein, in
favor of Bank of America, N.A., as Administrative Agent is incorporated herein by reference to
Exhibit 10.29 to the Registrant’s Form 10-K filed October 26, 2018.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

10.24

10.25

10.26

10.27

10.28

10.29

14.1

21.1

23.1

31.1

31.2

32.1

32.2

101

Fourth Amended and Restated Pledge Agreement, dated as of September 26, 2018, by and among
The Greenbrier Companies, Inc., and the other parties identified as Debtors therein, in favor of
Bank of America, N.A., as Administrative Agent is incorporated herein by reference to Exhibit
10.30 to the Registrant’s Form 10-K filed October 26, 2018.

Amended and Restated Credit Agreement, dated as of September 26, 2018, by and among
Greenbrier Leasing Company LLC, an Oregon limited liability company, Bank of America, N.A.,
as Administrative Agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole Lead
Arranger and Sole Bookrunner, MUFG Union Bank, N.A., as Syndication Agent, and the lenders
identified therein is incorporated herein by reference to Exhibit 10.31 to the Registrant’s Form
10-K filed October 26, 2018.

Amended and Restated Security Agreement, dated as of September 26, 2018, by and between
Greenbrier Leasing Company LLC, an Oregon limited liability company, in favor of Bank of
America, N.A., as Administrative Agent is incorporated herein by reference to Exhibit 10.32 to
the Registrant’s Form 10-K filed October 26, 2018.

Purchase Agreement, dated January 31, 2017, among The Greenbrier Companies, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. is incorporated herein by
reference to Exhibit 10.1 of the Registrant’s Form 8-K filed February 6, 2017.

Asset Purchase Agreement, dated as of April 17, 2019, by and among The Greenbrier Companies,
Inc., GBXL, LLC, and American Railcar Industries, Inc., is incorporated herein by reference to
Exhibit 2.1 to the Registrant’s Form 8-K filed April 18, 2019.

Convertible Promissory Note issued by The Greenbrier Companies, Inc. to American Railcar
Industries, Inc. is incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K
filed July 29, 2019.

Code of Business Conduct and Ethics is incorporated herein by reference to Exhibit 14.1 to the
Registrant’s Form 8-K filed January 12, 2016.

List of the subsidiaries of the Registrant.

Consent of KPMG LLP.

Certification pursuant to Rule 13(a) – 14(a).

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

The following financial information from the Company’s Annual Report on Form 10-K for the
year ended August 31, 2019, formatted in XBRL (eXtensible Business Reporting Language) and
furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated
the
Statements of
Consolidated Statements of Equity (v) the Consolidated Statements of Cash Flows; (vi) the Notes
to Condensed Consolidated Financial Statements.

(iii) Consolidated Statements of Comprehensive Income (iv)

Income;

* Management contract or compensatory plan or arrangement

Note: For all exhibits incorporated by reference, unless otherwise noted above, the SEC file number is 001-13146.

Item 16. FORM 10-K SUMMARY

None.

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE GREENBRIER COMPANIES, INC.

Dated: October 29, 2019

By: /s/ William A. Furman
William A. Furman
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature

/s/ William A. Furman

William A. Furman,
Chief Executive Officer and Chairman of the Board

/s/ Thomas B. Fargo

Thomas B. Fargo, Director

/s/ Wanda F. Felton

Wanda F. Felton, Director

/s/ Graeme A. Jack

Graeme A. Jack, Director

/s/ Duane C. McDougall

Duane C. McDougall, Director

/s/ David L. Starling

David L. Starling, Director

/s/ Charles J. Swindells

Charles J. Swindells, Director

/s/ Donald A. Washburn

Donald A. Washburn, Director

/s/ Kelly M. Williams

Kelly M. Williams, Director

/s/ Adrian J. Downes

Date

October 29, 2019

Adrian J. Downes, Senior Vice President,
Chief Financial Officer and Chief Accounting Officer
(Principal Financial Officer and Principal Accounting
Officer)

T h e G r e e n b r i e r C o m p a n i e s 2 0 1 9 A n n u a l R e p o r t

THE GREENBRIER COMPANIES INVESTOR INFORMATION

Directors
Director Name and Title

William A. Furman Chairman of the Board and Director

Thomas B. Fargo Independent Director

Wanda F. Felton Independent Director

Graeme A. Jack Independent Director

Duane C. McDougall Independent Director

David L. Starling Independent Director

Charles J. Swindells Independent Director

Wendy L. Teramoto Director(1)

Donald A. Washburn Independent Director

Kelly M. Williams Independent Director

(1) Based on its review of the circumstances, the Board has determined that Ms. Teramoto will be eligible to qualify as independent in less than one year beginning on September 1, 2020.
Ms. Teramoto’s current non-independent status is a result of her afﬁliation with a third-party which had a joint-venture with Greenbrier that was concluded over two years ago.

Executive and Other Ofﬁcers

William A. Furman
Chairman and Chief Executive Ofﬁcer

Lorie L. Tekorius
President and Chief Operating Ofﬁcer

Alejandro Centurion
Executive Vice President and President,
Greenbrier Manufacturing Operations

Brian J. Comstock
Executive Vice President,
Sales & Marketing

Mark J. Rittenbaum
Executive Vice President and
Chief Commercial & Leasing Ofﬁcer

Investor Information

Corporate Ofﬁces

One Centerpointe Drive, Suite 200
Lake Oswego, OR 97035

Annual Shareholders’ Meeting
Wednesday, January 8, 2020 | 2:00 pm
Benson Hotel
309 SW Broadway
Portland, OR 97205

Martin R. Baker
Senior Vice President,
General Counsel and
Chief Compliance Ofﬁcer

Laurie Dornan
Senior Vice President,
Human Resources

Adrian J. Downes
Senior Vice President,
Chief Financial Ofﬁcer
and Chief Accounting Ofﬁcer

Jack Isselmann
Senior Vice President,
External Affairs & Communications

Financial Information
Request for copies of this annual report
and other ﬁnancial information should be
made to:

Investor Relations
The Greenbrier Companies, Inc.
One Centerpointe Drive, Suite 200
Lake Oswego, OR 97035

investor.relations@gbrx.com
503-684-7000

Legal Counsel
Tonkon Torp LLP
Portland, OR 97204

Rick M. Turner
Senior Vice President,
Greenbrier Rail Services

Anne T. Manning
Vice President and
Corporate Controller

Justin M. Roberts
Vice President,
Corporate Finance and Treasurer

Sherrill A. Corbett
Tonkon Torp LLP
Corporate Secretary

Independent Auditors
KPMG LLP
Portland, OR 97201

Transfer Agent
Computershare Trust Company, N.A.
PO Box 505000
Louisville, KY 40233

Greenbrier’s Transfer Agent maintains
stockholder records, issues stock
certiﬁcates and distributes dividends.
Requests concerning these matters
should be directed to Computershare
Trust Company, N.A.

2 0 19 A n n u a l R e p o r t

THE GREENBRIER COMPANIES
One Centerpointe Drive, Suite 200
Lake Oswego, Oregon 97035
info@gbrx.com