Greenbrier Companies, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended August 31, 2022; comparisons are primarily with FY2021. Greenbrier designs and manufactures railcars and marine barges and provides maintenance, leasing, and fleet-management services through three reportable segments.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $2,977.7 million | $1,747.9 million |
| Margin dollars / margin as % of revenue | $306.0 million / 10.3% | $231.6 million / 13.3% |
| Operating earnings | $118.0 million | $41.0 million |
| Net earnings attributable to Greenbrier | $46.9 million | $32.4 million |
| Diluted EPS | $1.40 | $0.96 |
| Cash used in operating activities | $150.4 million | $40.5 million |
| Cash used in investing activities | $224.0 million | $117.8 million |
- Revenue increased 70.4%, principally reflecting a 65.5% increase in railcar deliveries to 18,700 units. Manufacturing revenue rose 88.9% to $2,476.6 million.
- Manufacturing margin percentage fell to 7.1% from 9.3%, amid higher input costs, supply constraints, and production ramp-up inefficiencies. Leasing & Management Services operating profit increased to $108.3 million, including higher syndication activity and a $32.5 million increase in net gains on equipment dispositions.
- Cash and cash equivalents were $543.0 million at year-end; restricted cash was $16.1 million. The company reported $147.9 million available under committed credit facilities.
- Notes payable, net, were $1,269.1 million and revolving notes were $296.6 million. The company reported compliance with debt covenants. About 79% of outstanding debt had fixed rates; a 10% increase in variable rates was estimated to add $1.4 million of annual interest expense.
Material changes and business developments
- Railcar backlog rose to 29,500 units valued at an estimated $3.48 billion, versus 26,600 units and $2.81 billion a year earlier. About 22,100 units were scheduled for delivery in FY2023; the remainder was scheduled for FY2024. Backlog is subject to changes, delays, and cancellations.
- Capital expenditures increased to $380.7 million from $139.0 million, largely reflecting lease-fleet additions. Operating cash use also increased, primarily from working-capital investment as production grew and input costs rose.
- Greenbrier issued $323.3 million of railcar asset-backed securities in February 2022 and acquired more than 3,600 railcars in September 2021. It reported an approximately 12,200-car owned lease fleet, 98.4% of owned units on lease, and management services for approximately 408,000 railcars.
- Three customers accounted for approximately 39% of FY2022 revenue. One customer represented 12% of year-end accounts receivable.
- FY2021 results included a $40.2 million income tax benefit, largely related to CARES Act loss carrybacks; FY2022 reported $18.1 million of tax expense.
Outlook, risks, contingencies, and unusual items
- No specific revenue or earnings guidance is provided. Management described the market as recovering but highlighted inflation, higher interest rates, supply-chain disruption, skilled-labor shortages, shipping delays, and the effects of the war in Ukraine. European production was slowed after limited new orders in the third quarter.
- FY2023 capital expenditures were expected to be approximately $330 million: $240 million for Leasing & Management Services, $80 million for Manufacturing, and $10 million for Maintenance Services. Management expected existing funds, operating cash flows, and financing sources to cover anticipated needs over the next 12 months.
- The company faces exposure to material and component availability and pricing, customer concentration, backlog conversion, cyclical rail demand, lease utilization and residual values, and financing costs.
- Environmental exposure at the Portland Harbor Superfund site remains unresolved. The EPA’s estimated cleanup cost for the entire site is $1.7 billion, but Greenbrier’s responsibility and potential loss cannot currently be determined or reasonably estimated. Separate Oregon DEQ investigations could also lead to remediation costs.
- The company disclosed a proposed SEC settlement, subject to Commission approval, involving executive-compensation perquisite and related-party disclosures. The proposed civil penalty is $1 million; the company stated no restatement or amendment of prior financial statements was required.
- Management and KPMG identified a material weakness in internal controls over change management for system configurations in one IT environment. KPMG issued an adverse opinion on internal control effectiveness, while giving an unqualified opinion on the financial statements. Remediation was planned but not yet established as complete.
- Greenbrier adopted accounting guidance for convertible instruments effective September 1, 2021, recording a cumulative adjustment to equity and increasing the reported convertible-note balance; the filing says this had no liquidity or cash-flow impact.
Important facts for investors to verify
- Whether manufacturing margins recover as production ramps up and inflation, labor, and supply-chain costs evolve.
- How much of the $3.48 billion backlog converts to revenue on schedule, and whether order mix or cancellations affect its value.
- Whether increased lease-fleet investment produces adequate utilization, syndication proceeds, and returns while preserving liquidity and covenant headroom.
- Progress in remediating the material weakness and the effect, if any, on future financial reporting.
- Developments in Portland Harbor and DEQ proceedings, including any change in Greenbrier’s ability to estimate or limit potential liability.
- Approval and final terms of the proposed SEC settlement, and the company’s customer and receivables concentration.