GREENBRIER COMPANIES INC 10-K

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary The financial results for 2024 reflect a successful year executing on our multi-year strategy outlined last year. The strategy has three basic tenets: (1) Maintain our manufacturing leadership position across geographies; (2) Optimize our industrial footprint for efficiency and margin enhancement while addressing the needs of our customers; and (3) Increase our recurring revenue to reduce the impact of manufacturing cyclicality. Overall, demand in the marketplace remains steady for our products and services. We delivered strong results during the year, however, supply chain challenges, rail service congestion, inflation, high interest rates, labor shortages and foreign currency fluctuations continued to impact our business for the year ended August 31, 2024. Despite these challenges, we were able to deliver strong results and accomplish the following in 2024: • Achieved our second highest annual revenue in our company's history. • Expanded our Margin as a percentage of Revenue from 11.2% in 2023 to 15.8% in 2024. • Received new railcar orders for 21,700 units valued at approximately $2.8 billion. • Increased our owned lease fleet by 2,100, representing a 15.7% increase from the prior year. • Generated $330 million of Net cash provided by operating activities. We believe these results demonstrate the benefit of our continued focus on our strategic plan, and we remain focused on increasing recurring revenue, expanding our aggregate gross margin and raising our return on invested capital. Recurring revenue is defined as Leasing & Management Services revenue excluding the impact of syndication transactions. 32 Financial Highlights Despite the challenging operating environment, we accomplished the following in 2024: • Margin as a percentage of Revenue improved by 4.6% to 15.8% for the year ended August 31, 2024. The increase from the prior year was driven by operating efficiencies and favorable product mix in our Manufacturing segment. • Earnings from operations increased by $148.1 million or 84.0% compared to the prior year. The increase was primarily attributed to an increase in Margin in our Manufacturing and Leasing & Management Services segments during the year ended August 31, 2024. The prior year also included $46.7 million in Asset impairment, disposal, and exit costs, net. • Diluted Earnings per common share (EPS) increased by 162% to $4.96 for the year ended August 31, 2024. • Net cash provided by operating activities increased $258.4 million compared to the prior year. The increase was primarily attributed to a change in Leased railcars for syndication and a $97.1 million increase in Net earnings for the year ended August 31, 2024. 33 Manufacturing Backlog Our backlog remains strong at August 31, 2024 and includes a diverse portfolio of railcar types, highlighted by the following: • Our railcar backlog was 26,700 units with an estimated value of $3.4 billion as of August 31, 2024 with expected deliveries reaching 2026 and beyond. • During 2024, we generated new railcar orders of 21,700 units valued at approximately $2.8 billion. Our backlog includes approximately $590 million of railcars intended for syndication which are supported by lease agreements with external customers and may be syndicated to third parties or held in our lease fleet depending on a variety of factors. Approximately 3% of backlog units and estimated value as of August 31, 2024 was associated with our Brazilian manufacturing operation which is accounted for under the equity method. Our backlog of railcar units 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. 34 Financial Overview Revenue, Cost of revenue, Margin and Earnings from operations (operating profit) presented below exclude intersegment activity that is eliminated in consolidation. Year Ended August 31, (In millions, except per share amounts) 2024 2023 Revenue: Manufacturing $ 3,013.6 $ 3,357.7 Maintenance Services 298.8 406.4 Leasing & Management Services 232.3 179.9 3,544.7 3,944.0 Cost of revenue: Manufacturing 2,648.9 3,083.4 Maintenance Services 264.1 364.0 Leasing & Management Services 73.2 55.5 2,986.2 3,502.9 Margin: Manufacturing 364.7 274.3 Maintenance Services 34.7 42.4 Leasing & Management Services 159.1 124.4 558.5 441.1 Selling and administrative 247.1 235.3 Net gain on disposition of equipment (13.1 ) (17.3 ) Asset impairment, disposal, and exit costs, net — 46.7 Earnings from operations 324.5 176.4 Interest and foreign exchange 100.8 85.4 Earnings before income tax and earnings from unconsolidated affiliates 223.7 91.0 Income tax expense (62.0 ) (24.6 ) Earnings before earnings from unconsolidated affiliates 161.7 66.4 Earnings from unconsolidated affiliates 11.0 9.2 Net earnings 172.7 75.6 Net earnings attributable to noncontrolling interest (12.6 ) (13.1 ) Net earnings attributable to Greenbrier $ 160.1 $ 62.5 Diluted earnings per common share $ 4.96 $ 1.89 Performance for our reportable segments is evaluated based on 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. Year Ended August 31, (In millions) 2024 2023 Operating profit (loss): Manufacturing $ 281.6 $ 140.9 Maintenance Services 27.1 36.9 Leasing & Management Services 139.0 103.3 Corporate (123.2 ) (104.7 ) $ 324.5 $ 176.4 35 Consolidated Results Year Ended August 31, 2024 vs 2023 (In millions) 2024 2023 Increase (Decrease) % Change Revenue $ 3,544.7 $ 3,944.0 $ (399.3 ) (10.1 )% Cost of revenue $ 2,986.2 $ 3,502.9 $ (516.7 ) (14.8 )% Margin (%) 15.8 % 11.2 % 4.6 % * Net earnings attributable to Greenbrier $ 160.1 $ 62.5 $ 97.6 156.2 % * Not meaningful Through our integrated business model, we provide a broad range of custom products and services in each of our reportable segments, which have various selling prices and margins. The demand for and mix of products and services delivered changes from period to period, which causes fluctuations in our financial results. The 10.1% decrease in Revenue for the year ended August 31, 2024 as compared to the prior year was primarily due to a 10.2% decrease in Manufacturing Revenue. The decrease in Manufacturing Revenue was primarily attributed to a 10.4% decrease in deliveries. The 14.8% decrease in Cost of revenue for the year ended August 31, 2024 as compared to the prior year was primarily due to a 14.1% decrease in Manufacturing Cost of revenue. The decrease in Manufacturing Cost of revenue was primarily attributed to a 10.4% decrease in deliveries during the year ended August 31, 2024. Margin as a percentage of Revenue was 15.8% and 11.2% for the years ended August 31, 2024 and 2023, respectively. Margin as a percentage of Revenue was positively impacted by an increase in Manufacturing Margin percentage from 8.2% to 12.1% primarily attributed to operating efficiencies and favorable product mix during the year ended August 31, 2024. The $97.6 million increase in Net earnings attributable to Greenbrier for the year ended August 31, 2024 as compared to the prior year was primarily due to the following: • $117.4 million increase in Margin for the year ended August 31, 2024 primarily due to operating efficiencies and a favorable product mix within our Manufacturing segment and an increase in rents associated with a larger lease fleet and improved lease rates in our Leasing & Management Services segment. • $46.7 million in Asset impairment, disposal and exit costs, net for the year ended August 31, 2023 primarily related to the sale and closure of our Gunderson Facility. These were partially offset by the following: • $37.4 million increase in Income tax expense associated with higher pre-tax earnings during the year ended August 31, 2024. • $15.4 million increase in Interest and foreign exchange primarily attributed to an increase in interest expense from higher borrowings and interest rates for the year ended August 31, 2024. • $11.8 million increase in Selling and administrative expense was primarily attributed to an increase in employee related costs including higher long-term incentive compensation for the year ended August 31, 2024. For discussion related to the results of operations and changes in financial condition for 2023 compared to 2022 refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K, which was filed with the United States Securities and Exchange Commission on October 25, 2023. 36 Manufacturing Segment Year Ended August 31, 2024 vs 2023 (In millions, except deliveries) 2024 2023 Increase (Decrease) % Change Revenue $ 3,013.6 $ 3,357.7 $ (344.1 ) (10.2 )% Cost of revenue $ 2,648.9 $ 3,083.4 $ (434.5 ) (14.1 )% Margin (%) 12.1 % 8.2 % 3.9 % * Operating profit ($) $ 281.6 $ 140.9 $ 140.7 99.9 % Operating profit (%) 9.3 % 4.2 % 5.1 % * Deliveries 22,300 24,900 (2,600 ) (10.4 )% * Not meaningful Our Manufacturing segment primarily generates revenue from manufacturing a wide range of railcars and from the conversion of existing or in-service railcars through our facilities in North America and Europe. Manufacturing Revenue decreased $344.1 million or 10.2% for the year ended August 31, 2024 compared to the prior year. The decrease in Revenue was primarily attributed to a 10.4% decrease in deliveries during the year ended August 31, 2024. Manufacturing Cost of revenue decreased $434.5 million or 14.1% for the year ended August 31, 2024 compared to the prior year. The decrease in Cost of revenue was primarily attributed to a 10.4% decrease in the volume of deliveries and favorable product mix during the year ended August 31, 2024. Manufacturing Margin as a percentage of Revenue increased 3.9% for the year ended August 31, 2024 compared to the prior year. The increase in Margin percentage was primarily attributed to operating efficiencies and favorable product mix during the year ended August 31, 2024. Manufacturing Operating profit increased $140.7 million or 99.9% for the year ended August 31, 2024 compared to the prior year. The increase in Operating profit was primarily attributed to an increase in Margin during the year ended August 31, 2024 as well as the prior year including $46.7 million of charges related to the sale and closure of our Gunderson Facility during the year ended August 31, 2023. 37 Maintenance Services Segment Year Ended August 31, 2024 vs 2023 (In millions) 2024 2023 Increase (Decrease) % Change Revenue $ 298.8 $ 406.4 $ (107.6 ) (26.5 )% Cost of revenue $ 264.1 $ 364.0 $ (99.9 ) (27.4 )% Margin (%) 11.6 % 10.4 % 1.2 % * Operating profit ($) $ 27.1 $ 36.9 $ (9.8 ) (26.6 )% Operating profit (%) 9.1 % 9.1 % -- * * Not meaningful Our Maintenance Services segment primarily generates revenue from railcar component manufacturing and servicing, providing railcar maintenance services and scrapping wheels and other components. Maintenance Services Revenue decreased $107.6 million or 26.5% for the year ended August 31, 2024 compared to the prior year. The decrease was primarily attributed to 11.6% lower volumes in our wheels business due to lower demand, a change in product mix and a $9.1 million decrease due to lower scrap metal volume and pricing. Maintenance Services Cost of revenue decreased $99.9 million or 27.4% for the year ended August 31, 2024 compared to the prior year. The decrease was primarily due to operating at lower volumes and a change in product mix during the year ended August 31, 2024. Maintenance Services Margin as a percentage of Revenue increased 1.2% for the year ended August 31, 2024 compared to the prior year. The increase in Margin percentage was primarily attributed to a favorable change in product mix during the year ended August 31, 2024. This was partially offset by a decrease in scrap metal pricing during the year ended August 31, 2024. Maintenance Services Operating profit decreased $9.8 million or 26.6% for the year ended August 31, 2024 compared to the prior year. The decrease in Operating profit was primarily attributed to operating at lower volumes and a decrease in scrap metal pricing and volume during the year ended August 31, 2024. 38 Leasing & Management Services Segment Year Ended August 31, 2024 vs 2023 (In millions) 2024 2023 Increase (Decrease) % Change Revenue $ 232.3 $ 179.9 $ 52.4 29.1 % Cost of revenue $ 73.2 $ 55.5 $ 17.7 31.9 % Margin (%) 68.5 % 69.1 % (0.6 )% * Operating profit ($) $ 139.0 $ 103.3 $ 35.7 34.6 % Operating profit (%) 59.8 % 57.4 % 2.4 % * * Not meaningful Our Leasing & Management Services segment generates revenue from leasing railcars from our lease fleet, providing various management services, syndication revenue associated with leases attached to new railcar sales, interim rent on leased railcars for syndication and the sale of railcars purchased from third parties with the intent to resell. Leasing & Management Services Revenue increased $52.4 million or 29.1% for the year ended August 31, 2024 compared to the prior year. The increase was primarily attributed to an increase of $19.7 million in rents associated with a larger lease fleet and higher lease rates, an $8.9 million increase in the sale of railcars which were purchased from third parties with the intent to resell and a $9.7 million increase in interim rent on leased railcars for syndication during the year ended August 31, 2024. Leasing & Management Services Cost of revenue increased $17.7 million or 31.9% for the year ended August 31, 2024 compared to the prior year. This was primarily due to higher costs from an increase in the volume of railcars sold that we purchased from third parties and a larger lease fleet during the year ended August 31, 2024. Leasing & Management Services Margin as a percentage of Revenue decreased 0.6% for the year ended August 31, 2024 compared to the prior year. Margin as a percentage of Revenue for the year ended August 31, 2024 was negatively impacted by higher sales of railcars that were purchased from third parties which have lower margin percentages. Leasing & Management Services Operating profit increased $35.7 million or 34.6% for the year ended August 31, 2024 compared to the prior year. The increase was primarily attributed to higher rents from a larger lease fleet and improved lease rates during the year ended August 31, 2024. 39 Selling and Administrative Year Ended August 31, 2024 vs 2023 (In millions) 2024 2023 Increase (Decrease) % Change Selling and administrative $ 247.1 $ 235.3 $ 11.8 5.0 % Selling and administrative expense was $247.1 million or 7.0% of Revenue for the year ended August 31, 2024 and $235.3 million or 6.0% of Revenue for the year ended August 31, 2023. The $11.8 million increase was primarily attributed to an increase in employee related costs including higher long-term incentive compensation during the year ended August 31, 2024. Net Gain on Disposition of Equipment Net gain on disposition of equipment typically includes the sale of assets from our lease fleet (Equipment on operating leases, net) and disposition of property, plant and equipment. Assets are periodically sold in the normal course of business in order to optimize our lease fleet and to manage risk and liquidity. Net gain on disposition of equipment was $13.1 million and $17.3 million for the years ended August 31, 2024 and 2023, respectively. The decrease in Net gain on disposition of equipment was primarily attributed to fewer sales of assets from our lease fleet during the year ended August 31, 2024. Asset Impairment, Disposal and Exit Costs, Net Asset impairment, disposal, and exit costs, net was $46.7 million for the year ended August 31, 2023 related to charges associated with the Gunderson Facility and divestiture of Southwest Steel, partially offset by a gain on disposal of majority interest in the Rayvag joint venture. Interest and Foreign Exchange Interest and foreign exchange expense was composed of the following: Year Ended August 31, Increase (Decrease) (In millions) 2024 2023 2024 vs 2023 Interest and foreign exchange: Interest and other expense $ 93.8 $ 79.2 $ 14.6 Foreign exchange loss, net 7.0 6.2 0.8 $ 100.8 $ 85.4 $ 15.4 The $15.4 million increase in Interest and foreign exchange expense during the year ended August 31, 2024 compared to the prior year was primarily attributed to an increase in interest expense from higher borrowings and interest rates. 40 Income Tax In 2024 our Income tax expense was $62.0 million on $223.7 million of pre-tax earnings for an effective tax rate of 27.7%. The rate was higher than the U.S statutory tax rate primarily due to the geographic mix of earnings, nondeductible expenses, increased valuation allowance, and U.S. taxes on profits in foreign jurisdictions, offset by a benefit for additional U.S. foreign tax credits carried forward to future periods. In 2023 our income tax expense was $24.6 million on $91.0 million of pre-tax earnings for an effective tax rate of 27.0%. The rate was higher than the U.S. statutory tax rate primarily due to the geographic mix of earnings and U.S. taxes on profits in foreign jurisdictions, offset by net favorable impacts related to changes in foreign currency exchange rates for our U.S. Dollar denominated foreign operations. The effective tax rate can fluctuate year-to-year due to discrete items and 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. The EU Member States have formally adopted the Pillar Two Directive, which generally provides for a minimum effective tax rate of 15%, as established by the Organisation for Economic Co-operation and Development (OECD) Pillar Two Framework. The OECD Pillar Two Framework must be adopted by each respective country into their tax laws, which are effective for us beginning on September 1, 2024. We continue to closely monitor additional guidance from the OECD and analyze potential impacts these law changes may have, however we do not expect a material change to our effective tax rate. Earnings From Unconsolidated Affiliates Through unconsolidated affiliates we produce rail and industrial components and have an ownership stake in a railcar manufacturer in Brazil. We record the results from these unconsolidated affiliates on an after-tax basis. Earnings from unconsolidated affiliates were $11.0 million and $9.2 million for the years ended August 31, 2024 and 2023, respectively. The increase was primarily related to $5.2 million in higher earnings at our Brazil operations during the year ended August 31, 2024. This was partially offset by $4.5 million in lower earnings related to a temporarily idle facility during the year ended August 31, 2024. Net Earnings Attributable to Noncontrolling Interest Net earnings attributable to noncontrolling interest were $12.6 million and $13.1 million for the years ended August 31, 2024 and 2023, respectively. Net earnings attributable to noncontrolling interest primarily represents our joint venture partner's share in the results of operations of our Mexican railcar manufacturing joint ventures, adjusted for intercompany sales, and our European partner’s share of the results of our European operations. 41 Liquidity and Capital Resources Year Ended August 31, (In millions) 2024 2023 Net cash provided by operating activities $ 329.6 $ 71.2 Net cash used in investing activities (320.4 ) (280.0 ) Net cash provided by (used in) financing activities 86.2 (76.2 ) Effect of exchange rate changes (29.5 ) 28.6 Net increase (decrease) in cash and cash equivalents and restricted cash $ 65.9 $ (256.4 ) We continue to be financed through cash generated from operations and borrowings. At August 31, 2024 Cash and cash equivalents and Restricted cash were $368.6 million, an increase of $65.9 million from $302.7 million at the prior year end. Cash Flows From Operating Activities The $258.4 million increase in cash from operating activities for the year ended August 31, 2024 compared to the year ended August 31, 2023 was primarily due to a change in Leased railcars for syndication and a $97.1 million increase in Net earnings. Cash Flows From Investing Activities Cash used in investing activities primarily related to capital expenditures net of proceeds from the sale of assets and investment activity with our unconsolidated affiliates. The $40.4 million increase in cash used in investing activities for the year ended August 31, 2024 was primarily attributable to a $36.2 million increase in capital expenditures compared to the year ended August 31, 2023. Year Ended August 31, (In millions) 2024 2023 Capital expenditures: Leasing & Management Services $ (277.0 ) $ (272.9 ) Manufacturing (102.8 ) (71.9 ) Maintenance Services (18.5 ) (17.3 ) Total capital expenditures (gross) $ (398.3 ) $ (362.1 ) Proceeds from sales of assets 75.0 78.8 Total capital expenditures (net of proceeds) $ (323.3 ) $ (283.3 ) Capital expenditures primarily relate to additions to our lease fleet and on-going investments in the safety, productivity and improvements of our facilities. Proceeds from the sale of assets primarily relate to sales of railcars from our lease fleet within Leasing & Management Services. Assets from our lease fleet are periodically sold in the normal course of business to accommodate customer demand and to manage risk and liquidity. Proceeds from sales of assets are expected to be approximately $90 million for 2025. Gross capital expenditures for 2025 are expected to be approximately $360 million for Leasing & Management Services, approximately $110 million for Manufacturing and approximately $10 million for Maintenance Services. Capital expenditures for 2025 primarily relate to additions to our lease fleet reflecting our leasing strategy and continued investments into the safety and productivity of our facilities. Cash Flows From Financing Activities The $162.4 million increase in cash flow from financing activities for the year ended August 31, 2024 compared to the year ended August 31, 2023 was primarily attributed to a $57.4 million increase in net proceeds from revolving notes, $52.8 million higher proceeds from the issuance of notes payable, net of repayments and a $55.6 million reduction in the repurchase of stock compared to the prior year. During the year ended August 31, 2024 we issued $178.5 million of asset backed securities and used proceeds to pay down $139.9 million of our GBX Leasing warehouse facility. We also borrowed $196.6 million on the GBX Leasing 42 warehouse facility to grow the lease fleet. In February 2024, we paid $47.7 million to retire our 2024 Convertible Notes. Dividend & Share Repurchase Program A quarterly dividend of $0.30 per share was declared on October 16, 2024. The Board of Directors has authorized our company to repurchase in aggregate up to $100.0 million of our common stock. The program may be modified, suspended, or discontinued at any time without prior notice and currently has an expiration date of January 31, 2025. Under the share repurchase program, shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. The timing and amount of purchases is 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. During the year ended August 31, 2024, we purchased a total of 38 thousand shares for $1.3 million. During the year ended August 31, 2023, we purchased a total of 1.9 million shares for $56.9 million, of which 1.8 million shares for $53.6 million were purchased under the current authorization of the share repurchase program. As of August 31, 2024, the amount remaining for repurchase under the share repurchase program was $45.1 million. Cash, Borrowing Availability and Credit Facilities Our current cash balance is part of our strategy to maintain strong liquidity to respond to current uncertainties. As of August 31, 2024, we had $351.8 million in Cash and cash equivalents and $345.9 million in available borrowings. The available balance to draw under committed credit facilities includes $258.3 million on the North American credit facility, $31.6 million on the European credit facilities and $56.0 million on the Mexican credit facilities. Our senior secured credit facilities, consisting of four components, aggregated to $1.4 billion as of August 31, 2024. Nonrecourse Credit Facilities GBX Leasing – As of August 31, 2024, a $550.0 million nonrecourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under the facility are secured by a pool of leased railcars and bear interest at the Secured Overnight Financing Rate (SOFR) plus 1.85% plus 0.11% as a SOFR adjustment. As of August 31, 2024, interest rate swap agreements cover 74% of the outstanding balance to swap the floating interest rate to a fixed rate. The warehouse credit facility was amended in September 2024 to reduce the size of the credit facility by $100.0 million to $450.0 million and to extend the maturity date from August 2027 to September 2029. The warehouse credit facility currently converts to a term loan in September 2027. Other Credit Facilities North America – As of August 31, 2024, a $600.0 million revolving line of credit existed to provide working capital and interim financing of equipment, principally for our U.S. and Mexican operations. The North America credit facility is secured by substantially all our U.S. assets not otherwise pledged as security for term loans, the warehouse credit facility or the railcar asset-backed securities. Available borrowings are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios. Advances bear interest at SOFR plus 1.50% plus 0.10% as a SOFR adjustment or Prime plus 0.50% depending on the type of borrowing. The North America credit facility matures in August 2026. Europe – As of August 31, 2024, lines of credit totaling $78.2 million, secured by certain of our European assets, were available for working capital needs of our European manufacturing operations. The European lines of credit include $33.1 million which are guaranteed by us. The European credit facilities have variable rates that range from Warsaw Interbank Offered Rate (WIBOR) plus 1.10% to WIBOR plus 1.45% and Euro Interbank Offered Rate (EURIBOR) plus 1.90%. The European credit facilities are regularly renewed and currently have maturities that range from October 2024 through September 2026. 43 Mexico – As of August 31, 2024, our Mexican railcar manufacturing operations had lines of credit totaling $166.0 million for working capital needs, $66.0 million of which we and our joint venture partner have each guaranteed 50%. Advances under these facilities bear interest at variable rates that range from SOFR plus 2.22% to SOFR plus 4.25%. The Mexican credit facilities have maturities that range from February 2025 through January 2027. As of August 31, (In millions) 2024 2023 Nonrecourse credit facility balances: GBX Leasing $ 194.9 $ 139.9 Other credit facility balances: North America — — Europe 46.7 47.2 Mexico 110.0 110.0 Total Revolving notes $ 351.6 $ 297.1 Outstanding commitments under the North American credit facility included letters of credit which totaled $5.9 million and $4.9 million as of August 31, 2024 and 2023, respectively. Other Information 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 financing 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, 2024, 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 convertible notes, borrowings and equity securities, and take other steps to reduce our debt, extend the maturities of 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 of one note or security for another note or security (now or hereafter existing), 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. 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 with established financial institutions to protect the revenue or margin on a portion of forecasted foreign currency sales and expenses. Given the strong credit standing of the counterparties, no provision has been made for credit loss due to counterparty non-performance. To mitigate the exposure to changes in interest rates, we have managed a portion of our variable rate debt with interest rate swap agreements, effectively converting $653.1 million of variable rate debt to fixed rate debt as of August 31, 2024. 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 repayments, working capital needs, planned capital expenditures, additional investments in our unconsolidated affiliates and dividends during the next twelve months. 44 The following table shows our estimated future contractual cash obligations as of August 31, 2024: Year Ended August 31, (In millions) Total 2025 2026 2027 2028 2029 Thereafter Notes payable 1 $ 1,420.9 $ 42.8 $ 265.5 $ 312.4 $ 389.2 $ 14.6 $ 396.4 Interest 2 437.1 70.9 65.2 50.6 29.2 17.9 203.3 Railcar & operating leases 72.9 14.6 13.5 10.7 9.8 8.0 16.3 Revolving notes 351.6 154.4 2.3 194.9 — — — $ 2,282.5 $ 282.7 $ 346.5 $ 568.6 $ 428.2 $ 40.5 $ 616.0 1 The repayment of the $373.8 million of 2028 Convertible Notes due April 2028 is assumed to occur at the scheduled maturity instead of assuming an earlier conversion by the holders. 2 A portion of the estimated future cash obligation relates to interest on variable rate borrowings. Amounts are based on interest rates as of August 31, 2024. 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 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. Impairment of long-lived assets - We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When such events or changes in circumstances occur, a recoverability test is performed based upon estimated undiscounted cash flows expected to be realized over the remaining useful life of the asset group. If the carrying amount of an asset group exceeds the estimated undiscounted future cash flows, an impairment would be measured as the difference between the fair value of the asset group and the carrying amount of the asset group. An asset group is generally established by identifying the lowest level of cash flows generated by a group of assets that are largely independent of the cash flows of other assets. Determining whether a long-lived asset is impaired requires various estimates and assumptions, including whether a triggering event has occurred, the identification of asset groups, and the determination of the fair value of real and personal property. Estimates of future cash flows are by nature highly uncertain and contemplate factors that may change over time. For further information, see Note 4 - Divestitures to the Consolidated Financial Statements. Goodwill - We evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amounts of our reporting units exceed their fair value. We test goodwill for impairment by either performing a qualitative or quantitative assessment. When we perform a qualitative assessment, we analyze macroeconomic and industry conditions, financial performance, and cost estimates associated with a particular reporting unit. This assessment requires subjectivity based on cumulative information available at the assessment date. If a qualitative assessment indicates it is more likely than not that the carrying value of a reporting unit exceeds its respective fair value, a quantitative assessment is performed. We performed a qualitative assessment for our annual goodwill impairment test during the third quarter of 2024 and determined that it was more likely than not that the fair values of all reporting units with goodwill exceeded their carrying values; therefore, we concluded that goodwill was not impaired. When we perform a quantitative assessment, we exercise judgment to develop estimates of the fair values 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 forecasted revenues, long-term growth rate, gross margin percentages, operating expenses, and the use of discount rates. Under 45 the market approach, we estimate the fair value based on observed market multiples for comparable businesses. If the fair value of a reporting unit is lower than its carrying value, an impairment to goodwill is recorded, not to exceed the carrying amount of goodwill in the reporting unit. In 2023, we performed a quantitative goodwill impairment test and determined that the estimated fair values of all reporting units with goodwill exceeded their carrying values. We make certain estimates and assumptions to determine our reporting units and whether the fair value of each reporting unit is greater than its respective carrying value. The above highlighted judgments contemplated estimates and effects of macroeconomic trends that are inherently uncertain. Changes in these estimates, which may include the effects of inflation and policy reactions thereto, increases in pricing of materials and components, changes in demand, or potential macroeconomic events may cause future assessment conclusions to differ. For further information, see Note 7 - Goodwill to the Consolidated Financial Statements. 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 a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities. Our annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate. Judgment is required in determining our tax expense and in evaluating our tax positions, as tax laws are complex and subject to different interpretations by taxpayers and government taxing authorities. Our income tax rate is affected by the tax rates that apply to our foreign earnings and could be adversely impacted by higher or lower earnings than anticipated in a particular jurisdiction. In addition to local country tax laws and regulations, our income tax rate depends on the extent that our foreign earnings are taxed by the U.S. through provisions such as the global intangible low-taxed income (GILTI) tax and base erosion and anti-abuse tax (BEAT). We review our deferred tax assets and tax positions quarterly and adjust the balances as new information becomes available. For further information regarding income taxes, see Note 17 - Income Taxes to the Consolidated Financial Statements. 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. 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. Judgments used in determining if a liability is estimable are subjective and based on known facts and our historic experience. If further developments in or resolution of an environmental matter result in facts and circumstances that differ from those assumptions used to develop these reserves, the accrual for environmental remediation could be materially misstated. 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. For further information regarding our environmental costs, see Note 21 - Commitments and Contingencies to the Consolidated Financial Statements. 46 Item 7A. QUANTITATIVE AND QUALITAT IVE 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 forecasted foreign currency sales and expenses. At August 31, 2024 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros aggregated to $143.9 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 of 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, 2024, net assets of foreign subsidiaries aggregated to $164.7 million and a 10% strengthening of the U.S. Dollar relative to the foreign currencies would result in a decrease in equity of $16.5 million, or 1.2% 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 $653.1 million of variable rate debt to fixed rate debt. Notwithstanding these interest rate swap agreements, we are still exposed to interest rate risk relating to our revolving debt and a portion of term debt, which are at variable rates. At August 31, 2024, 84% of our outstanding debt had fixed rates and 16% had variable rates. At August 31, 2024, a uniform 10% increase in variable interest rates would result in approximately $1.4 million of additional annual interest expense. 47 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors The Greenbrier Companies, Inc.: 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, 2024 and August 31, 2023, 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, 2024, 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, 2024 and August 31, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended August 31, 2024, 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, 2024, 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 24, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. 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 Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Sufficiency of audit evidence within the North American manufacturing businesses As discussed in Item 9A. Controls and Procedures, a material weakness was identified as of August 31, 2023 that was remediated during fiscal year 2024. The description of the material weakness stated that the Company did not effectively design and maintain controls over information technology (IT) general controls in one IT environment in its primary North America manufacturing businesses that are relevant to the preparation of the Company’s consolidated financial statements. The Company did not (i) maintain change management controls to ensure 48 configuration data changes affecting the IT application were appropriate (ii) design and maintain program development controls to ensure the data migration, program testing and approval of new software development is aligned with business and IT requirements and (iii) maintain user access controls to ensure segregation of duties in the Company’s financial application. The control deficiencies resulted from incomplete risk assessment, inadequate training of personnel and ineffective control activities related primarily to the implementation of a new ERP system in the Company’s primary North America manufacturing businesses. As a result, during the period of fiscal year 2024 in which the material weakness remained unremediated, process level automated controls that are dependent on the affected IT environment and manual controls that rely on system-generated data or reports from the affected IT environment were ineffective because they could have been adversely impacted. We identified the evaluation of the sufficiency of audit evidence over the Company’s primary North American manufacturing businesses as a critical audit matter. Evaluating the sufficiency of audit evidence obtained required especially subjective auditor judgment because of the pervasiveness of the material weakness noted above. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over the Company’s primary North American manufacturing businesses including evaluating our scoping thresholds and control risk assessments considering the material weakness noted above. For relevant financial statement account balances at the North America manufacturing businesses, we: • increased the number of sample selections compared to what we would have otherwise made if the Company’s controls were designed and operating effectively for the full fiscal year • tested the underlying records of selected transaction data obtained from the impacted information technology system to support the use of the information in the conduct of the audit • inspected supporting documentation and evidence of authorization for a selection of manual and automated journal entries. We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence. /s/ KPMG LLP We have served as the Company’s auditor since 2011. Portland, Oregon October 24, 2024 49 Item 8. FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATA Consolidated Balance Sheets As of August 31, (In millions, except number of shares which are reflected in thousands) 2024 2023 Assets Cash and cash equivalents $ 351.8 $ 281.7 Restricted cash 16.8 21.0 Accounts receivable, net 523.8 529.9 Income tax receivable 45.1 42.2 Inventories 770.9 823.6 Leased railcars for syndication 130.7 187.4 Equipment on operating leases, net 1,243.5 1,000.0 Property, plant and equipment, net 711.7 619.2 Investment in unconsolidated affiliates 87.3 88.7 Intangibles and other assets, net 244.4 255.8 Goodwill 128.5 128.9 $ 4,254.5 $ 3,978.4 Liabilities and Equity Revolving notes $ 351.6 $ 297.1 Accounts payable and accrued liabilities 731.4 743.5 Deferred income taxes 130.1 114.1 Deferred revenue 58.9 46.2 Notes payable, net 1,404.2 1,311.7 Commitments and contingencies (Notes 20 & 21) Contingently redeemable noncontrolling interest 41.7 55.6 Equity Greenbrier Preferred stock - without par value; 25,000 shares authorized; none outstanding — — Common stock - without par value; 50,000 shares authorized; 31,135 and 30,880 outstanding at August 31, 2024 and 2023 — — Additional paid-in capital 375.1 364.4 Retained earnings 1,035.0 897.5 Accumulated other comprehensive loss ( 34.0 ) ( 7.3 ) Total equity - Greenbrier 1,376.1 1,254.6 Noncontrolling interest 160.5 155.6 Total equity 1,536.6 1,410.2 $ 4,254.5 $ 3,978.4 The accompanying notes are an integral part of these financial statements. 50 Consolidated Stat ements of Income Years ended August 31, (In millions, except number of shares which are reflected in thousands and per share amounts) 2024 2023 2022 Revenue Manufacturing $ 3,013.6 $ 3,357.7 $ 2,476.6 Maintenance Services 298.8 406.4 347.7 Leasing & Management Services 232.3 179.9 153.4 3,544.7 3,944.0 2,977.7 Cost of revenue Manufacturing 2,648.9 3,083.4 2,300.9 Maintenance Services 264.1 364.0 322.0 Leasing & Management Services 73.2 55.5 48.8 2,986.2 3,502.9 2,671.7 Margin 558.5 441.1 306.0 Selling and administrative 247.1 235.3 225.2 Net gain on disposition of equipment ( 13.1 ) ( 17.3 ) ( 37.2 ) Asset impairment, disposal, and exit costs, net — 46.7 — Earnings from operations 324.5 176.4 118.0 Interest and foreign exchange 100.8 85.4 57.4 Earnings before income tax and earnings from unconsolidated affiliates 223.7 91.0 60.6 Income tax expense ( 62.0 ) ( 24.6 ) ( 18.1 ) Earnings before earnings from unconsolidated affiliates 161.7 66.4 42.5 Earnings from unconsolidated affiliates 11.0 9.2 11.3 Net earnings 172.7 75.6 53.8 Net earnings attributable to noncontrolling interest ( 12.6 ) ( 13.1 ) ( 6.9 ) Net earnings attributable to Greenbrier $ 160.1 $ 62.5 $ 46.9 Basic earnings per common share $ 5.15 $ 1.95 $ 1.44 Diluted earnings per common share $ 4.96 $ 1.89 $ 1.40 Weighted average common shares Basic 31,102 31,983 32,569 Diluted 32,363 33,799 33,631 The accompanying notes are an integral part of these financial statements. 51 Consolidated Statements of Comprehensive Income Years ended August 31, (In millions) 2024 2023 2022 Net earnings $ 172.7 $ 75.6 $ 53.8 Other comprehensive income (loss) Translation adjustment ( 14.9 ) 25.3 ( 21.6 ) Reclassification of derivative financial instruments recognized in net earnings 1 ( 14.7 ) ( 9.1 ) 4.7 Unrealized gain on derivative financial instruments 2 2.9 23.1 15.7 Other (net of tax effect) — ( 1.0 ) ( 0.7 ) ( 26.7 ) 38.3 ( 1.9 ) Comprehensive income 146.0 113.9 51.9 Comprehensive income attributable to noncontrolling interest ( 12.6 ) ( 13.1 ) ( 6.9 ) Comprehensive income attributable to Greenbrier $ 133.4 $ 100.8 $ 45.0 1 Net of tax effect of $ 4.0 million , $ 3.7 million and $( 1.7 ) million for the years ended August 31, 2024, 2023 and 2022 , respectively. 2 Net of tax effect of $( 0.5 ) million , $( 8.8 ) million and $( 6.2 ) million for the years ended August 31, 2024, 2023 and 2022 , respectively. The accompanying notes are an integral part of these financial statements. 52 Consolidated Stat ements of Equity Attributable to Greenbrier (In millions) Common Stock Shares Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Equity - Greenbrier Noncontrolling Interest Total Equity Contingently Redeemable Noncontrolling Interest Balance August 31, 2021 32.4 $ 469.7 $ 881.7 $ ( 43.7 ) $ 1,307.7 $ 168.7 $ 1,476.4 $ 29.7 Cumulative effect adjustment due to adoption of ASU 2020-06 (See Note 2) — ( 58.9 ) 4.9 — ( 54.0 ) — ( 54.0 ) — Net earnings — — 46.9 — 46.9 8.9 55.8 ( 2.0 ) Other comprehensive loss, net — — — ( 1.9 ) ( 1.9 ) — ( 1.9 ) — Noncontrolling interest adjustments — 2.2 — — 2.2 ( 6.2 ) ( 4.0 ) — Joint venture partner distribution declared — — — — — ( 19.2 ) ( 19.2 ) — Restricted stock awards (net of cancellations) 0.2 11.3 — — 11.3 — 11.3 — Unamortized restricted stock — ( 15.0 ) — — ( 15.0 ) — ( 15.0 ) — Stock based compensation expense — 15.5 — — 15.5 — 15.5 — Cash dividends ($ 1.08 per share) — — ( 35.8 ) — ( 35.8 ) — ( 35.8 ) — Balance August 31, 2022 32.6 $ 424.8 $ 897.7 $ ( 45.6 ) $ 1,276.9 $ 152.2 $ 1,429.1 $ 27.7 Net earnings — — 62.5 — 62.5 11.5 74.0 1.6 Other comprehensive income, net — — — 38.3 38.3 — 38.3 — Noncontrolling interest adjustments — ( 12.5 ) ( 26.3 ) — ( 38.8 ) 2.8 ( 36.0 ) 26.3 Joint venture partner distribution declared — — — — — ( 10.9 ) ( 10.9 ) — Restricted stock awards (net of cancellations) 0.2 8.8 — — 8.8 — 8.8 — Unamortized restricted stock — ( 11.4 ) — — ( 11.4 ) — ( 11.4 ) — Stock based compensation expense — 12.1 — — 12.1 — 12.1 — Repurchase of stock ( 1.9 ) ( 57.4 ) — — ( 57.4 ) — ( 57.4 ) — Cash dividends ($ 1.11 per share) — — ( 36.4 ) — ( 36.4 ) — ( 36.4 ) — Balance August 31, 2023 30.9 $ 364.4 $ 897.5 $ ( 7.3 ) $ 1,254.6 $ 155.6 $ 1,410.2 $ 55.6 Net earnings — — 160.1 — 160.1 10.3 170.4 2.3 Other comprehensive loss, net — — — ( 26.7 ) ( 26.7 ) — ( 26.7 ) — Noncontrolling interest adjustments — — 16.2 — 16.2 3.9 20.1 ( 16.2 ) Joint venture partner distribution declared — — — — — ( 9.3 ) ( 9.3 ) — Restricted stock awards (net of cancellations) 0.2 16.4 — — 16.4 — 16.4 — Unamortized restricted stock — ( 21.5 ) — — ( 21.5 ) — ( 21.5 ) — Stock based compensation expense — 17.1 — — 17.1 — 17.1 — Repurchase of stock — ( 1.3 ) — — ( 1.3 ) — ( 1.3 ) — Cash dividends ($ 1.20 per share) — — ( 38.8 ) — ( 38.8 ) — ( 38.8 ) — Balance August 31, 2024 31.1 $ 375.1 $ 1,035.0 $ ( 34.0 ) $ 1,376.1 $ 160.5 $ 1,536.6 $ 41.7 The accompanying notes are an integral part of these financial statements. 53 Consolidated Statem ents of Cash Flows Years ended August 31, (In millions) 2024 2023 2022 Cash flows from operating activities Net earnings $ 172.7 $ 75.6 $ 53.8 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Deferred income taxes 16.8 7.2 12.9 Depreciation and amortization 115.6 106.3 102.0 Net gain on disposition of equipment ( 13.1 ) ( 17.3 ) ( 37.2 ) Stock based compensation expense 17.1 12.1 15.5 Asset impairment, disposal, and exit costs, net — 46.7 — Noncontrolling interest adjustments 3.9 8.4 1.6 Other 3.8 3.7 3.8 Decrease (increase) in assets: Accounts receivable, net 9.2 ( 14.6 ) ( 198.2 ) Income tax receivable ( 2.9 ) ( 2.4 ) 72.3 Inventories 50.0 ( 17.2 ) ( 267.9 ) Leased railcars for syndication ( 5.1 ) ( 123.7 ) ( 40.6 ) Other assets 13.6 ( 51.6 ) ( 28.1 ) Increase (decrease) in liabilities: Accounts payable and accrued liabilities ( 63.5 ) 16.3 165.3 Deferred revenue 11.5 21.7 ( 5.6 ) Net cash provided by (used in) operating activities 329.6 71.2 ( 150.4 ) Cash flows from investing activities Proceeds from sales of assets 75.0 78.8 155.5 Capital expenditures ( 398.3 ) ( 362.1 ) ( 380.7 ) Investment in and advances to unconsolidated affiliates — ( 3.5 ) ( 2.3 ) Cash distribution from unconsolidated affiliates and other 2.9 6.8 3.5 Net cash used in investing activities ( 320.4 ) ( 280.0 ) ( 224.0 ) Cash flows from financing activities Net changes in revolving notes with maturities of 90 days or less ( 27.8 ) 29.8 ( 101.3 ) Proceeds from revolving notes with maturities longer than 90 days 226.6 220.0 35.0 Repayments of revolving notes with maturities longer than 90 days ( 146.6 ) ( 255.0 ) — Proceeds from issuance of notes payable 180.6 75.0 398.3 Repayments of notes payable ( 89.6 ) ( 36.8 ) ( 23.4 ) Debt issuance costs ( 2.9 ) ( 0.6 ) ( 7.3 ) Repurchase of stock ( 1.3 ) ( 56.9 ) — Dividends ( 38.4 ) ( 36.1 ) ( 35.8 ) Cash distribution to joint venture partner ( 9.3 ) ( 13.0 ) ( 16.9 ) Tax payments for net share settlement of restricted stock ( 5.1 ) ( 2.6 ) ( 3.7 ) Net cash provided by (used in) financing activities 86.2 ( 76.2 ) 244.9 Effect of exchange rate changes ( 29.5 ) 28.6 17.2 Increase (decrease) in cash and cash equivalents and restricted cash 65.9 ( 256.4 ) ( 112.3 ) Cash and cash equivalents and restricted cash Beginning of period 302.7 559.1 671.4 End of period $ 368.6 $ 302.7 $ 559.1 Balance Sheet Reconciliation Cash and cash equivalents $ 351.8 $ 281.7 $ 543.0 Restricted cash 16.8 21.0 16.1 Total cash and cash equivalents and restricted cash as presented above $ 368.6 $ 302.7 $ 559.1 Cash (received) paid during the period for Interest $ 85.7 $ 70.0 $ 45.1 Income taxes, net $ 42.6 $ 23.0 $ ( 55.0 ) Non-cash activity Transfer from Leased railcars for syndication and Inventories to Equipment on operating leases, net $ ( 66.8 ) $ ( 40.0 ) $ ( 11.6 ) Capital expenditures accrued in Accounts payable and accrued liabilities $ 61.1 $ 22.0 $ 10.9 Transfer from Property, plant and equipment, net to Intangibles and other assets, net for assets moved to Assets held for sale $ — $ — $ 3.5 Change in Accounts payable and accrued liabilities associated with dividends declared $ ( 0.4 ) $ ( 0.3 ) $ — Change in Accounts payable and accrued liabilities associated with cash distributions to joint venture partner $ — $ 2.1 $ 1.4 The accompanying notes are an integral part of these financial statements . 54 Notes to Consolidated Financial Statements Note 1 — Nature of Operations The Company operates in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management Services. The segments support the Company's integrated business model. The Manufacturing segment, which currently operates from facilities in the U.S., Mexico, Poland and Romania, produces double-stack intermodal railcars, tank cars, freight railcars, and automotive railcar products. The Maintenance Services segment performs wheel and axle servicing, railcar maintenance services and produces a variety of component parts for the rail industry in North America. The Leasing & Management Services segment owns approximately 15,500 railcars as of August 31, 2024. The Company also provides management services for railroads, shippers, carriers, institutional investors and other leasing and transportation companies in North America. Through unconsolidated affiliates the Company produces rail and industrial components and has an ownership stake in a railcar manufacturer in Brazil . 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; Maintenance Services; and Leasing & Management 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. 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). 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 relates to amounts held to support a target minimum rate of return on certain agreements, terms of our credit agreement, and a pass through account for activity related to management services provided for certain third-party customers. Accounts receivable - Accounts receivable consists of receivables from customers and receivables from related parties (see Note 16 - Related Party Transactions to the Consolidated Financial Statements) and is stated net of allowance for doubtful accounts of $ 3.6 million and $ 2.8 million as of August 31, 2024 and 2023, respectively. As of August 31, (In millions) 2024 2023 2022 Allowance for doubtful accounts Balance at beginning of period $ 2.8 $ 2.3 $ 2.4 Additions, net of reversals 0.8 0.5 0.4 Usage ( 0.1 ) ( 0.2 ) ( 0.3 ) Currency translation effect 0.1 0.2 ( 0.2 ) Balance at end of period $ 3.6 $ 2.8 $ 2.3 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 in transit or not on lease. 55 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. 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 forty years . Management periodically reviews useful lives and 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 in certain investees which are accounted for under the equity method of accounting as the Company has determined that the investment provides the Company with the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an ownership interest in the voting stock of the investee of at least 20%. Several factors are considered in determining whether the equity method of accounting is appropriate including the relative ownership interests and governance rights of the joint venture partners. As of August 31, 2024 , investments in unconsolidated affiliates include the Company’s 60 % interest in Greenbrier-Maxion, 29.5 % interest in Amsted-Maxion Cruzeiro (which owns 40 % of Greenbrier-Maxion) and 41.9 % interest in Axis. 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. 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: Depreciable Life Buildings and improvements 15 - 25 years Machinery and equipment 3 - 15 years Other 3 - 10 years 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 . Intangible assets with indefinite useful lives are not amortized and are periodically evaluated for impairment. Other assets include operating lease right-of-use (ROU) assets, nonqualified savings plan investments, and revolving note fees which are capitalized and amortized as interest expense over the life of the related borrowings. Under the short term lease recognition exemption, the Company does not recognize ROU assets or lease liabilities for qualifying leases with terms of less than twelve months. The Company does not separate lease and non-lease components. Impairment of long-lived assets - When changes in circumstances indicate the carrying amount of certain long-lived asset groups 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. The Company recorded $ 24.2 million as impairment of long-lived assets for the year ended August 31, 2023. No impairment of long-lived assets was recorded in the years ended August 31, 2024 and 2022 . See Note 4 - Divestitures to the Consolidated Financial Statements for additional information. 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 indicators of impairment arise. 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 the Company determines that fair value of each reporting unit more likely than not exceeds its carrying value, no further assessment 56 is necessary. For reporting units where the Company performs 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. No impairment of goodwill was recorded in the years ended August 31, 2024, 2023, and 2022 . See Note 7 - Goodwill to the Consolidated Financial Statements for additional information. 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 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 a tax benefit from uncertain tax positions in the financial statements only when it is more likely than not the position will be sustained upon examination by relevant tax authorities. 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. 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 B.V. was formed in 2017 to combine the Company’s existing European operations headquartered in Swidnica, Poland and Astra Rail Industries S.A., based in Arad, Romania. Greenbrier-Astra Rail B.V. is controlled by the Company with an approximate 75 % interest. Astra Holdings GmbH received a put option to sell its entire noncontrolling interest to the Company at an exercise price equal to the higher of fair value or a defined earnings before interest, taxes, depreciation and amortization (EBITDA) multiple as measured on the exercise date. During 2022, the option was extended to be exercisable 30 business days prior to and up until June 1, 2026. The Company consolidates Greenbrier-Astra Rail B.V. for financial reporting purposes and includes the noncontrolling interest in the mezzanine section of the Consolidated Balance Sheet in Contingently redeemable noncontrolling interest. 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. During the fourth quarter of 2024, the Company recorded a noncash $ 16.2 million redemption value adjustment to Contingently redeemable noncontrolling interest and Retained earnings to reduce the carrying value to the maximum redemption amount. During 2023, the Company recorded a noncash $ 26.3 million redemption value adjustment to Contingently redeemable noncontrolling interest and Retained earnings to increase the carrying value to the maximum redemption amount. The change in the maximum redemption amount in 2023 and 2024 was primarily attributed to industry and entity-specific indicators which impacted the estimated future cash flows of Greenbrier-Astra Rail B.V. Net earnings attributable to noncontrolling interest on the Company’s Consolidated Statement of Income represents the Company’s partners’ share of results from operations. 57 Accumulated other comprehensive loss – Accumulated other comprehensive loss, net of tax as appropriate, consisted of the following: (In millions) Unrealized Gain (Loss) on Derivative Financial Instruments Foreign Currency Translation Adjustment Other Accumulated Other Comprehensive Loss Balance, August 31, 2023 $ 27.0 $ ( 32.1 ) $ ( 2.2 ) $ ( 7.3 ) Other comprehensive income (loss) before reclassifications 2.9 ( 14.9 ) — ( 12.0 ) Amounts reclassified from accumulated other comprehensive loss ( 14.7 ) — — ( 14.7 ) Balance, August 31, 2024 $ 15.2 $ ( 47.0 ) $ ( 2.2 ) $ ( 34.0 ) The amounts reclassified out of Accumulated other comprehensive loss into the Consolidated Statements of Income, with the financial statement caption, were as follows: Year Ended August 31, (In millions) 2024 2023 2022 Financial Statement Caption (Gain) loss on derivative financial instruments: Foreign exchange contracts $ ( 2.0 ) $ ( 2.0 ) $ 1.2 Revenue and Cost of revenue Interest rate swap contracts ( 16.7 ) ( 10.8 ) 4.9 Interest and foreign exchange ( 18.7 ) ( 12.8 ) 6.1 Total before tax 4.0 3.7 ( 1.4 ) Tax expense (benefit) $ ( 14.7 ) $ ( 9.1 ) $ 4.7 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. The Company treats shipping costs that occur after control is transferred as fulfillment costs. 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. Maintenance Services The Company operates a network of facilities in North America that provide wheel and axle servicing and products, railcar maintenance services and produces a variety of component parts for the rail industry. Wheels revenue is recognized when wheelsets are shipped to the customer. Parts revenue is recognized upon shipment of the parts to the customers. Maintenance 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 servicing the railcars for the customer. Maintenance services are typically completed in less than 90 days. 58 Leasing & Management Services The Company owns a fleet of new and used railcars which are leased to third-party customers. Lease revenue is recognized over the lease-term in the period in which it is earned. Syndication transactions represent new and used railcars which have been placed on lease to a customer and which the Company sells to an investor with the lease attached. At the time of such sale, revenue and cost of revenue is allocated between the Manufacturing segment and Leasing & Management Services segment based on the relative standalone selling price of the product and services provided. The Company utilizes both ASC 842, Leases and ASC 606, Revenue from Contracts with Customers when evaluating retained risk of services and other performance obligations in conjunction with selling railcars with a lease attached as part of the syndication model. 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 includes amortization of debt issuance costs and external interest expense. Foreign exchange gains and losses includes the effects of remeasuring monetary assets and liabilities denominated in a currency other than the functional currency of the respective subsidiary. Year Ended August 31, (In millions) 2024 2023 2022 Interest and foreign exchange: Interest and other expense $ 93.9 $ 79.2 $ 55.7 Foreign exchange loss, net 6.9 6.2 1.7 $ 100.8 $ 85.4 $ 57.4 Forward exchange contracts - Foreign operations give rise to risks from fluctuations 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, 2024, 2023 and 2022 were $ 5.2 million, $ 4.0 million and $ 5.4 million, respectively, included in Selling and administrative expenses. Net earnings per share - Basic EPS is calculated using weighted average basic common shares outstanding. Diluted EPS is calculated using the if-converted method, associated with shares underlying the 2024 and 2028 2.875 % Convertible notes, and the treasury stock method associated with performance based restricted stock units subject to performance criteria. Stock-based compensation – Stock based compensation expense consists of restricted stock units. Restricted stock units are accounted for as equity based awards (see Note 14 - Equity to the Consolidated Financial Statements). The value of stock-based compensation awards is amortized as compensation expense from the date of grant through the vesting period. Forfeitures are recognized as they occur. Management 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, revenues and expenses 59 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. Initial Adoption of Accounting Policies Convertible Instruments and Contracts in an Entity’s Own Equity In August 2020, the FASB issued Accounting Standard Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain convertible instruments, amends guidance on derivative scope exceptions for contracts in an entity’s own equity and modifies the guidance on diluted EPS calculations as a result of these changes. The Company adopted this guidance effective September 1, 2021 on a modified retrospective basis and recorded a cumulative effect adjustment to increase Retained earnings by $ 5 million. The impact of adoption also resulted in a reduction to Additional paid in capital of approximately $ 59 million related to amounts attributable to conversion options that had previously been recorded in equity and the associated derecognition of related deferred tax liabilities of $ 17 million. Additionally, the Company recorded an increase to its convertible notes balance by an aggregate amount of approximately $ 71 million as a result of derecognizing the debt discount. The adoption of this guidance also decreased the amount of non-cash interest expense to be recognized in future periods as a result of eliminating the discount associated with the equity component. The Company did not incur any impact to liquidity or cash flows. Beginning September 1, 2021, when calculating net earnings attributable to Greenbrier per share of common stock, the Company uses the if-converted method as required under ASU 2020-06 to determine the dilutive effect of its convertible notes. Recent Accounting Pronouncements Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires disclosure of incremental segment information on an annual and interim basis, primarily through enhanced disclosures of significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all periods presented upon adoption. The Company is currently evaluating the impact that ASU 2023-07 will have on its consolidated financial statement disclosures. Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statement disclosures. Note 3 – Revenue Recognition Contract balances Contract assets primarily consist of work completed for railcar maintenance but not billed at the reporting date. Contract liabilities primarily consist of customer prepayments for new railcars and other management-type services, for which the Company has not yet satisfied the related performance obligations. 60 The opening and closing balances of the Company’s contract balances are as follows: (In millions) Balance sheet classification August 31, 2024 August 31, 2023 $ change Contract assets Accounts receivable, net $ 6.7 $ 0.1 $ 6.6 Contract assets Inventories $ 10.8 $ 7.0 $ 3.8 Contract liabilities 1 Deferred revenue $ 54.6 $ 43.3 $ 11.3 1 Contract liabilities balance includes deferred revenue within the scope of Revenue from Contracts with Customers (Topic 606) . For the years ended August 31, 2024 and 2023 the Company recognized $ 22.9 million and $ 13.0 million of revenue, respectively, that was included in Contract liabilities as of August 31, 2023 and 2022. Performance obligations As of August 31, 2024 , the Company has entered into contracts with customers for which revenue has not yet been recognized. The following table outlines estimated transaction prices related to performance obligations wholly or partially unsatisfied, that the Company anticipates will be recognized in future periods. (In millions) August 31, 2024 Revenue type: Manufacturing – Railcar sales $ 2,678.7 Manufacturing – Sustainable conversions $ 50.4 Services $ 133.7 Other $ 14.9 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 2025 while the remaining amount is expected to be recognized in 2026 and beyond. Sustainable conversions represent orders to modify existing railcars and are expected to be recognized in 2025. Services includes management and maintenance services of which approximately 61 % are expected to be performed through 2029 and the remaining amount through 2037. Note 4 – Divestitures Gunderson In November 2022, as part of the Company's strategic review of the global business capacity footprint, the Company decided to permanently cease rail production at the Gunderson Facility and to explore alternatives to exit marine barge production . Due to the change in future use of the facility, management assessed recoverability of the Gunderson assets in accordance with the Company’s policy on impairment of long-lived assets. Based on an analysis of future undiscounted cash flows associated with these assets, management determined that the carrying value was not recoverable. The carrying amount of the Company’s long-lived assets at the Gunderson Facility was $ 44.0 million and the fair value was $ 19.8 million as of the impairment date. The Company concluded that an impairment charge was necessary and $ 24.2 million was recorded within the Manufacturing segment as Asset impairment, disposal and exit costs, net on the Consolidated Statements of Income for the year ended August 31, 2023. In May 2023, the Company sold its ownership interest in Gunderson Marine and the Gunderson Facility assets (which includes the Portland Property) and recognized a $ 14.4 million loss on sale and $ 2.1 million severance, which are recorded within the Manufacturing segment as Asset impairment, disposal, and exit costs, net on the Consolidated Statements of Income for the year ended August 31, 2023. Southwest Steel In August 2023, the Company sold its ownership interest in Southwest Steel Castings Company, a steel foundry business in Longview, Texas, and recorded a $ 9.7 million loss on sale, which is recorded within the Manufacturing segment as Asset impairment, disposal, and exit costs, net on the Consolidated Statements of Income for the year ended August 31, 2023. 61 Rayvag In August 2023, Greenbrier-Astra Rail sold its approximately 68 % ownership interest in Rayvag, a railcar manufacturing company based in Adana, Türkiye. The Company deconsolidated Rayvag and its noncontrolling interest and recorded a $ 3.7 million gain on sale, which is recorded within the Manufacturing segment as Asset impairment, disposal, and exit costs, net on the Consolidated Statements of Income for the year ended August 31, 2023. Total Asset impairment, disposal, and exit costs, net were $ 46.7 million for the year ended August 31, 2023. There were no Asset impairment, disposal, and exit costs, net for the years ended August 31, 2024 and 2022. Note 5 — Inventories As of August 31, (In millions) 2024 2023 Manufacturing supplies and raw materials $ 532.6 $ 638.2 Work-in-process 152.0 138.2 Finished goods 92.6 64.4 Excess and obsolete adjustment ( 6.3 ) ( 17.2 ) $ 770.9 $ 823.6 As of August 31, (In millions) 2024 2023 2022 Excess and obsolete adjustment Balance at beginning of period $ 17.2 $ 14.1 $ 19.9 Charge to cost of revenue 1.2 5.4 1.5 Disposition of inventory ( 12.2 ) ( 2.7 ) ( 6.9 ) Currency translation effect 0.1 0.4 ( 0.4 ) Balance at end of period $ 6.3 $ 17.2 $ 14.1 Note 6 — Property, Plant and Equipment, net As of August 31, (In millions) 2024 2023 Land and improvements $ 69.9 $ 70.9 Machinery and equipment 626.5 574.0 Buildings and improvements 366.6 352.0 Construction in progress 155.4 81.3 Other 131.7 118.3 1,350.1 1,196.5 Accumulated depreciation ( 638.4 ) ( 577.3 ) $ 711.7 $ 619.2 Depreciation expense was $ 72.4 million, $ 71.5 million and $ 70.7 million for the years ended August 31, 2024, 2023 and 2022 , respectively. Note 7 — Goodwill Changes in the carrying value of goodwill are as follows: (In millions) Manufacturing Maintenance Services Leasing & Management Services Total Balance August 31, 2023 $ 85.9 $ 43.0 $ — $ 128.9 Translation and other adjustments — ( 0.4 ) — ( 0.4 ) Balance August 31, 2024 $ 85.9 $ 42.6 $ — $ 128.5 62 (In millions) Goodwill Gross goodwill balance before accumulated goodwill impairment losses and other reductions $ 292.3 Accumulated goodwill impairment losses ( 138.2 ) Accumulated other reductions ( 25.6 ) Balance August 31, 2024 $ 128.5 The Company performed its annual goodwill impairment test during the third quarter of 2024. The Company utilized the qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its respective carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as macroeconomic considerations and industry indicators, financial performance, and cost estimates associated with a particular reporting unit. If, based on a review of qualitative factors, it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. Based on the qualitative assessment, the Company determined that it was more likely than not that the fair value of each reporting unit with goodwill exceeded its respective carrying value and a quantitative impairment test was not necessary; therefore, the Company concluded that goodwill was not impaired. As of August 31, 2024 , the Manufacturing segment includes the North America Manufacturing reporting unit with a goodwill balance of $ 56.3 million and the Europe Manufacturing reporting unit with a goodwill balance of $ 29.6 million. The Maintenance Services segment had a goodwill balance of $ 42.6 million related to the Wheels & Parts reporting unit. Note 8 — Intangibles and Other Assets, net The following table summarizes the Company’s identifiable intangible and other assets balance: As of August 31, (In millions) 2024 2023 Intangible assets subject to amortization: Customer and supplier relationships $ 87.5 $ 87.5 Accumulated amortization ( 72.1 ) ( 69.1 ) Other intangible assets 43.3 43.0 Accumulated amortization ( 27.2 ) ( 22.3 ) 31.5 39.1 Intangible assets not subject to amortization 2.3 2.3 Prepaid and other assets 51.7 56.4 Operating lease ROU assets 65.1 70.6 Nonqualified savings plan investments 54.5 47.7 Debt issuance costs, net 4.8 6.3 Assets held for sale 0.3 0.3 Deferred tax assets 34.2 33.1 $ 244.4 $ 255.8 Amortization expense for the years ended August 31, 2024, 2023 and 2022 was $ 7.2 million, $ 8.0 million and $ 9.3 milli on, respectively. As of August 31, 2024 , amortizable intangible assets had a weighted-average remaining useful life of 6.6 years. Amortization expense for the years ending August 31, 2025, 2026, 2027, 2028 and 2029 is expected to be $ 6.6 million, $ 6.1 million, $ 5.2 million, $ 3.8 million and $ 2.6 million, respectively. Note 9 — Revolving Notes Senior secured credit facilities, consisting of four components, aggregated to $ 1.4 billion as of August 31, 2024 . The Company had an aggregate of $ 345.9 million available to draw down under credit facilities as of August 31, 2024 . 63 This amount consists of $ 258.3 million available on the North American credit facility, $ 31.6 million on the European credit facilities and $ 56.0 million on the Mexican credit facilities. Nonrecourse credit facilities: GBX Leasing – As of August 31, 2024 , a $ 550.0 million nonrecourse warehouse credit facility existed to support the operations of GBX Leasing. Advances under the warehouse credit facility are secured by a pool of leased railcars and bear interest at SOFR plus 1.85 % plus 0.11 % as a SOFR adjustment. As of August 31, 2024, interest rate swap agreements cover 74 % of the outstanding balance to swap the floating interest rate to a fixed rate. The warehouse credit facility was amended in September 2024 to reduce the size of the credit facility by $ 100.0 million to $ 450.0 million and to extend the maturity date from August 2027 to September 2029 . The warehouse credit facility currently converts to a term loan in September 2027. Other credit facilities: North America – As of August 31, 2024 , a $ 600.0 million revolving line of credit existed to provide working capital and interim financing of equipment, principally for the Company’s U.S. and Mexican operations. The North America credit facility is secured by substantially all the Company’s U.S. assets not otherwise pledged as security for term loans, the warehouse credit facility or the railcar asset-backed securities. Available borrowings are generally based on defined levels of eligible inventory, receivables, property, plant and equipment and leased equipment, as well as total debt to consolidated capitalization and fixed charges coverage ratios. Advances bear interest at SOFR plus 1.50 % plus 0.10 % as a SOFR adjustment or Prime plus 0.50 % depending on the type of borrowing. The North America credit facility matures in August 2026 . Europe – As of August 31, 2024 , lines of credit totaling $ 78.2 million secured by certain of the Company’s European assets, were available for working capital needs of the Company’s European manufacturing operations. The European lines of credit include $ 33.1 million which are guaranteed by the Company. The European credit facilities have variable rates that range from WIBOR plus 1.10 % to WIBOR plus 1.45 % and EURIBOR plus 1.90 %. European credit facilities are regularly renewed and currently have maturities that range from October 2024 through September 2026 . Mexico – As of August 31, 2024 , the Company’s Mexican railcar manufacturing operations had lines of credit totaling $ 166.0 million for working capital needs, $ 66.0 million of which the Company and its joint venture partner have each guaranteed 50 %. Advances under these facilities bear interest at variable rates that range from SOFR plus 2.22 % to SOFR plus 4.25 %. The Mexican credit facilities have maturities that range from February 2025 through January 2027 . Revolving notes consisted of the following balances: As of August 31, (In millions) 2024 2023 Nonrecourse credit facility balances: GBX Leasing $ 194.9 $ 139.9 Other credit facility balances: North America — — Europe 46.7 47.2 Mexico 110.0 110.0 Total Revolving notes $ 351.6 $ 297.1 As of August 31, 2024, repayments of Revolving notes are expected to be $ 154.4 million, $ 2.3 million, and $ 194.9 million for the years ending August 31, 2025, 2026, and 2027, respectively. In addition, outstanding commitments under the North American credit facility included letters of credit which totaled $ 5.9 million and $ 4.9 million as of August 31, 2024 and 2023 , respectively. 64 Note 10 — Accounts Payable and Accrued Liabilities As of August 31, (In millions) 2024 2023 Trade payables $ 370.7 $ 396.8 Other accrued liabilities 100.4 90.3 Operating lease liabilities 66.0 72.2 Accrued payroll and related liabilities 170.5 158.6 Accrued warranty 23.8 25.6 $ 731.4 $ 743.5 Note 11 — Warranty Accrual As of August 31, (In millions) 2024 2023 2022 Balance at beginning of period $ 25.6 $ 24.0 $ 27.9 Charged to cost of revenue 13.4 6.7 5.0 Payments ( 15.7 ) ( 5.8 ) ( 7.9 ) Currency translation effect 0.5 0.7 ( 1.0 ) Balance at end of period $ 23.8 $ 25.6 $ 24.0 Note 12 — Notes Payable, net As of August 31, (In millions) 2024 2023 Leasing nonrecourse term loans $ 792.1 $ 640.2 Senior term debt 251.7 266.4 2.875 % Convertible senior notes, due 2028 373.8 373.8 2.875 % Convertible senior notes, due 2024 — 47.7 Other notes payable 3.3 1.8 $ 1,420.9 $ 1,329.9 Debt discount and issuance costs ( 16.7 ) ( 18.2 ) $ 1,404.2 $ 1,311.7 Leasing nonrecourse term loans include: • N onrecourse senior term debt, secured by a pool of leased railcars. The debt bears a floating interest rate of SOFR plus 1.625 % plus 0.10 % as a SOFR adjustment, with principal of $ 3.1 million paid quarterly in arrears and a balloon payment of $ 283.7 million due upon maturity in August 2027 . Interest rate swap agreements cover nearly 100 % of the principal balance to swap the floating interest rate to fixed rates. The principal balance as of August 31, 2024 was $ 320.5 million . • Asset-backed term notes, as discussed below. The principal balance as of August 31, 2024 was $ 471.6 million. Senior term debt bears a floating interest rate of SOFR plus 1.50 % plus 0.10 % as a SOFR adjustment, with principal of $ 3.7 million paid quarterly in arrears and a balloon payment of $ 222.6 million due upon maturity in August 2026 . Interest rate swap agreements cover approximately 75 % of the principal balance to swap the floating interest rate to fixed rates. The principal balance as of August 31, 2024 was $ 251.7 million . 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, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, 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. 65 As of August 31, 2024, principal payments on the notes payable are expected as follows: (In millions) Year ending August 31, 2025 $ 42.8 2026 265.5 2027 312.4 2028 1 389.2 2029 14.6 Thereafter 396.4 $ 1,420.9 1 The repayment of the $ 373.8 million of 2028 Convertible Notes due April 2028 is assumed to occur at the scheduled maturity instead of assuming an earlier conversion by the holders. Convertible notes Convertible senior notes, due 2028 (2028 Convertible Notes), bear interest at a fixed rate of 2.875 %, paid semiannually in arrears on April 15 th and October 15 th . Issuance costs are amortized using the effective interest rate method through 2028 and the amortization expense is included in Interest and foreign exchange on the Company's Consolidated Statements of Income. As of August 31, 2024 , the effective interest rate was 5.75 %. The convertible notes mature on April 15, 2028 , unless earlier repurchased, redeemed or converted in accordance with their terms prior to such date. The convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 18.0317 shares of common stock per $ 1,000 principal amount which is equivalent to an initial conversion price of approximately $ 55.46 per share. The conversion rate and the resulting conversion price are subject to adjustment in certain events, such as distributions, dividends or stock splits. Conversion of the par value of the note will be settled in cash, with any premium convertible in cash or shares at the Company’s option. Upon a conversion of the notes, the Company may elect to pay or deliver, as the case may be, cash and, if applicable, shares of the Company’s common stock, as provided in the 2028 Notes Indenture (as defined below). As of August 31, 2024 , the Company has reserved approximately 8.2 million shares for issuance upon conversion of these notes. The 2028 Convertible Notes are subject to an indenture entered into on April 20, 2021 by the Company and Wells Fargo Bank, National Association, as trustee, as amended and restated by the first supplemental indenture dated June 1, 2021 (2028 Notes Indenture). The 2028 Convertible Notes are convertible at the option of the holders prior to January 15, 2028 , under certain circumstances as described in the 2028 Notes Indenture. Additionally, the Company may elect to call the notes on or after April 15, 2025 and on or before the 40 th trading day prior to April 15, 2028 , at a cash redemption price described in the 2028 Notes Indenture if the stock price exceeds 130 % of the conversion price during certain trading days as defined in the 2028 Notes Indenture. Calling any Convertible Note for redemption will constitute a make-whole fundamental change with respect to that Convertible Note, in which case the conversion rate applicable to the conversion of that Convertible Note will be increased in certain circumstances if it is converted after it is called for redemption. The Company's 2.875 % Convertible senior notes, due 2024 (2024 Convertible Notes), matured on February 1, 2024 . The outstanding principal balance of $ 47.7 million plus accrued interest was settled in cash on the maturity date to retire the 2024 Convertible Notes. Asset-backed term notes GBX Leasing 2022-1 LLC (GBXL I or Issuer) was formed as a wholly owned special purpose entity (SPE) of GBX Leasing to securitize the leasing assets of GBX Leasing. GBXL I issued $ 323.3 million of term notes in February 2022 (2022 GBXL Notes) and $ 178.5 million of term notes in November 2023 (2023 GBXL Notes), which are secured by a portfolio of railcars and associated operating leases and other assets, acquired and owned by GBXL I. Greenbrier Management Services, LLC (GMS) entered into certain agreements relating to the management and servicing of the Issuer’s assets. The Company evaluated the accounting for the transaction and concluded that, based on its equity investment in the Issuer combined with GMS’s capacity as servicer, the Company is the primary beneficiary of the SPE and therefore consolidates the SPE for financial reporting purposes. 66 Issued debt of GBXL I includes: • GBXL I Series 2022-1 Class A Secured Railcar Equipment Notes (2022 Class A Notes) with a principal balance of $ 274.8 million as of August 31, 2024 and GBXL I Series 2022-1 Class B Secured Railcar Equipment Notes (2022 Class B Notes) with a principal balance of $ 20.7 million as of August 31, 2024, collectively the 2022 GBXL Notes; and • GBXL I Series 2023-1 Class A Secured Railcar Equipment Notes (2023 Class A Notes) with a principal balance of $ 156.7 million as of August 31, 2024 and GBXL I Series 2023-1 Class B Secured Railcar Equipment Notes (2023 Class B Notes) with a principal balance of $ 19.4 million as of August 31, 2024, collectively the 2023 GBXL Notes. GBX Leasing used the net proceeds received from the issuance of the 2023 GBXL Notes to pay down the GBX Leasing warehouse credit facility. The 2022 GBXL Notes bear interest at fixed rates of 2.87 % and 3.45 % for the Class A Notes and Class B Notes, respectively. The 2022 GBXL Notes are payable monthly , with a contractual maturity date of February 20, 2052 and an anticipated repayment date of January 20, 2029 . While the contractual maturity date is in 2052 , the cash flows generated from the railcar assets will pay down the 2022 GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the contractual maturity date. The 2023 GBXL Notes bear interest at fixed rates of 6.42 % and 7.28 % for the 2023 Class A Notes and 2023 Class B Notes, respectively. The 2023 GBXL Notes are payable monthly , with a contractual maturity date of November 20, 2053 and an anticipated repayment date of November 20, 2030 . While the contractual maturity date is in 2053 , the cash flows generated from the railcar assets will pay down the 2023 GBXL Notes in line with the agreement, which based on expected cash flow payments, would result in repayment in advance of the contractual maturity date. If the principal amount of the 2023 GBXL Notes and 2022 GBXL Notes has not been repaid in full by the anticipated repayment date, then the Issuer will also be required to pay additional interest to the holders at a rate equal to 4.00 % per annum. The GBXL Notes are obligations of the Issuer only and are nonrecourse to Greenbrier. The GBXL Notes are subject to a Master Indenture between the Issuer and U.S. Bank Trust Company, National Association, as trustee, as supplemented by the Series 2022-1 Supplement dated February 9, 2022 and the Series 2023-1 Supplement dated November 20, 2023. The GBXL Notes may be subject to acceleration upon the occurrence of certain events of default. The following table summarizes the Issuer's net carrying amount of the assets transferred and the related debt. As of August 31, (In millions) 2024 2023 Assets Restricted cash $ 0.3 $ 6.7 Equipment on operating leases, net 651.0 388.9 Liabilities Notes payable, net $ 464.5 $ 302.1 Note 13 — 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 loss. At August 31, 2024 exchange rates, notional amounts of forward exchange contracts for the purchase of Polish Zlotys and the sale of Euros aggregated to $ 143.9 million. The fair value of the contracts is included on the Consolidated Balance Sheets as Accounts payable and accrued liabilities when in a loss position, or as Accounts receivable, net when in a gain position. As the contracts mature at various dates through March 2027, 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 67 foreign exchange at the time of occurrence. At August 31, 2024 exchange rates, approximately $ 3.0 million would be credited to revenue in the next year. At August 31, 2024 , interest rate swap agreements maturing from August 2025 through January 2032 had notional amounts that aggregated to $ 653.1 million . The fair value of the contracts are included on the Consolidated Balance Sheets in Accounts payable and accrued liabilities when in a loss position, or in Accounts receivable, net when in a gain position. 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, 2024 interest rates, approximately $ 8.5 million would be credited to interest expense in the next year. Fair Values of Derivative Instruments Asset Derivatives Liability Derivatives August 31, August 31, 2024 2023 2024 2023 (In millions) Balance sheet caption Fair Value Fair Value Balance sheet caption Fair Value Fair Value Derivatives designated as hedging instruments Foreign forward exchange contracts Accounts receivable, net $ 4.3 $ 2.5 Accounts payable and accrued liabilities $ 0.1 $ 0.1 Interest rate swap contracts Accounts receivable, net 19.7 34.9 Accounts payable and accrued liabilities 1.3 0.1 $ 24.0 $ 37.4 $ 1.4 $ 0.2 Derivatives not designated as hedging instruments Foreign forward exchange contracts Accounts receivable, net $ — $ 0.5 Accounts payable and accrued liabilities $ — $ — The Effect of Derivative Instruments on the Consolidated Statements of Income Derivatives in cash flow hedging relationships Location of gain (loss) recognized in income on derivative Gain (loss) recognized in income on derivatives Years ended August 31, 2024 2023 Foreign forward exchange contract Interest and foreign exchange $ 0.1 $ — Derivatives in cash flow hedging relationships Gain (loss) recognized in OCI on derivatives Years ended August 31, Location of gain (loss) reclassified from accumulated OCI into income Gain (loss) reclassified from accumulated OCI into income Years ended August 31, Location of gain (loss) in income on derivative (amount excluded from effectiveness testing) Gain (loss) recognized on derivative (amount excluded from effectiveness testing) Years ended August 31, 2024 2023 2024 2023 2024 2023 Foreign forward exchange contracts $ 3.4 $ 5.6 Revenue $ 2.5 $ ( 0.2 ) Revenue $ 2.5 $ 2.0 Foreign forward exchange contracts ( 0.6 ) 2.0 Cost of revenue ( 0.5 ) 2.2 Cost of revenue 0.9 0.6 Interest rate swap contracts 0.4 24.8 Interest and foreign exchange 16.7 10.8 Interest and foreign exchange — — $ 3.2 $ 32.4 $ 18.7 $ 12.8 $ 3.4 $ 2.6 68 The following table presents the amounts in the Consolidated Statements of Income in which the effects of the cash flow hedges are recorded and the effects of the cash flow hedge activity on these line items for the years ended August 31, 2024, 2023 and 2022: For the Year Ended August 31, 2024 2023 2022 (In millions) Total Amount of gain (loss) on cash flow hedge activity Total Amount of gain (loss) on cash flow hedge activity Total Amount of gain (loss) on cash flow hedge activity Revenue $ 3,544.7 $ 2.5 $ 3,944.0 $ ( 0.2 ) $ 2,977.7 $ ( 1.5 ) Cost of revenue $ 2,986.2 $ ( 0.5 ) $ 3,502.9 $ 2.2 $ 2,671.7 $ 0.3 Interest and foreign exchange $ 100.8 $ 16.7 $ 85.4 $ 10.8 $ 57.4 $ ( 4.9 ) Note 14 — Equity Stock Incentive Plan The 2021 Stock Incentive Plan was approved by shareholders on January 6, 2021. The new plan replaced the 2014 Amended and Restated Stock Incentive Plan, which was amended and restated as the 2017 Amended and Restated Stock Incentive Plan on October 24, 2017 and approved by shareholders on January 5, 2018. The 2021 Stock Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, restricted shares, restricted stock units and stock appreciation rights. In addition to the 1.5 million shares reserved for issuance under the 2021 Stock Incentive Plan, up to 0.5 million shares previously reserved for issuance, but not issued or subject to outstanding awards, are available for issuance under the 2021 Stock Incentive Plan, and up to 0.9 million shares that were subject to outstanding awards under the 2017 Amended and Restated Stock Incentive Plan as of the effective date of the 2021 Stock Incentive Plan will also become available for issuance under the 2021 Stock Incentive Plan to the extent such shares are not issued and cease to be subject to such awards following the effective date of the 2021 Stock Incentive Plan. On August 31, 2024 , there were 1.0 million shares available for grant compared to 1.2 million and 1.4 million shares available for grant as of August 31, 2023 and 2022, respectively. There are no stock options, restricted shares, or stock appreciation rights outstanding as of August 31, 2024. The Company currently grants restricted stock units. Shares associated with restricted stock unit awards are not considered legally outstanding shares of common stock until they are issued following vesting. Restricted stock unit awards, including performance based awards, are entitled to participate in dividends. During the years ended August 31, 2024, 2023, and 2022 , the Company awarded restricted stock unit grants totaling 0.4 million, 0.5 million, and 0.4 million shares, respectively, which include performance based grants and dividend equivalent rights. For performance based awards granted in 2022, the performance metrics included an EBITDA metric, weighted 80 %, and a return on invested capital (ROIC) metric, weighted 20 %. For performance based awards granted in 2023 and 2024, the performance metrics included the Company’s total shareholder return relative to a designated peer group (Relative TSR), weighted 20 %, in addition to an EBITDA metric, weighted 60 %, and an ROIC metric, weighted 20 %. Performance based award share payouts depend on the extent to which the performance goal has been achieved. The number of shares that a participant receives is equal to the award granted multiplied by a payout factor, which ranges from 0 % to a maximum of 200 %. The fair value of awards granted, including performance based grants that did not contain a Relative TSR market condition, was determined based on the market closing price of the underlying shares on the date of grant. For the awards granted with a Relative TSR market condition, the Company estimates the fair value using a Monte-Carlo simulation model utilizing the following key assumptions for such awards: For the Year Ended August 31, 2024 2023 Expected share price volatility (GBX) 45.0 % 54.0 % Risk-free rate of return 5.0 % 4.4 % 69 The fair value of awards granted was $ 17.3 million, $ 12.4 million, and $ 18.7 million for the years ended August 31, 2024, 2023 and 2022 , respectively. The grant date fair value of stock awarded under restricted stock unit grants is amortized as compensation expense over the vesting period of one to three years . Compensation expense recognized related to restricted stock unit grants for the years ended August 31, 2024, 2023 and 2022 was $ 17.1 million, $ 12.1 million, and $ 15.5 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 unit grants was $ 16.7 million as of August 31, 2024, which is expected to be recognized over a weighted average period of approximately two years. During the year ended August 31, 2024 , a total of 0.4 million restricted stock units vested, including shares that were withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. The following table summarizes the activity for the Company’s restricted stock unit grants, including performance based grants, under the 2021 Stock Incentive Plan and the 2017 Amended and Restated Stock Incentive Plan: (in thousands, except per unit amounts) Number of Units Weighted Average Grant Date Fair Value Outstanding as of August 31, 2023 972 $ 33.75 Granted 393 $ 44.06 Vested ( 410 ) $ 33.44 Forfeited ( 54 ) $ 32.50 Outstanding as of August 31, 2024 901 $ 38.47 Share Repurchase Program The Board of Directors has authorized the Company to repurchase in aggregate up to $ 100.0 million of the Company’s common stock. The program may be modified, suspended, or discontinued at any time without prior notice and currently has an expiration date of January 31, 2025 . Under the share repurchase program, shares of common stock may be purchased from time to time on the open market or through privately negotiated transactions. The timing and amount of purchases is based upon market conditions, securities law limitations and other factors. The share repurchase program does not obligate the Company to acquire any specific number of shares in any period. During the year ended August 31, 2024 , the Company purchased a total of 38 thousand shares for $ 1.3 million. During the year ended August 31, 2023 , the Company purchased a total of 1.9 million shares for $ 56.9 million, of which 1.8 million shares for $ 53.6 million were purchased under the current authorization of the share repurchase program. There were no shares repurchased under the share repurchase program during the year ended August 31, 2022. As of August 31, 2024 , the amount remaining for repurchase under the share repurchase program was $ 45.1 million. For shares repurchased subsequent to December 31, 2022, the Company accrued excise tax of $ 0.5 million to Additional paid-in capital for the year ended August 31, 2023. Accrued excise tax of $ 0.5 million is included within Accounts payable and accrued liabilities on the Consolidated Balance Sheets as of August 31, 2024 and 2023. 70 Note 15 — Earnings Per Share The shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows: Year Ended August 31, (In thousands) 2024 2023 2022 Weighted average basic common shares outstanding 31,102 31,983 32,569 Dilutive effect of 2.875 % Convertible notes, due 2024 1 345 824 — Dilutive effect of 2.875 % Convertible notes, due 2028 2 — — — Dilutive effect of restricted stock units 3 916 992 1,062 Weighted average diluted common shares outstanding 32,363 33,799 33,631 1 The dilutive effect of the 2.875 % Convertible notes due 2024 was excluded for the year ended August 31, 2022 as they were considered anti-dilutive under the “if converted” method as further discussed below. These notes were retired on February 1, 2024. 2 The dilutive effect of the 2.875 % Convertible notes, due 2028 was excluded for the years ended August 31, 2024, 2023 and 2022 as the average stock price was less than the applicable conversion price and therefore was considered anti-dilutive. As these notes require cash settlement for the principal, only a premium is potentially dilutive. 3 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. Basic EPS is computed by dividing Net earnings attributable to Greenbrier by weighted average basic common shares outstanding. For the years ended August 31, 2024, 2023, and 2022 , diluted EPS was calculated using the more dilutive of two methods. The first method includes the dilutive effect, using the treasury stock method, associated with restricted stock units and performance based restricted stock units subject to performance criteria, for which actual levels of performance above target have been achieved. The second method supplements the first by also including the “if converted” effect of the 2.875 % Convertible notes due 2024 and shares underlying the 2.875 % Convertible notes due 2028, when there is a conversion premium. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes due 2024 are added back to net earnings and the share count is increased by the shares underlying the convertible notes. (In millions, except number of shares which are reflected in Year Ended August 31, thousands and per share amounts) 2024 2023 2022 Net earnings attributable to Greenbrier $ 160.1 $ 62.5 $ 46.9 Weighted average basic common shares outstanding 31,102 31,983 32,569 Basic earnings per share $ 5.15 $ 1.95 $ 1.44 Net earnings attributable to Greenbrier $ 160.1 $ 62.5 $ 46.9 Add back: Interest and debt issuance costs on the 2.875 % convertible notes due 2024, net of tax 0.5 1.2 n/a Earnings before interest and debt issuance costs on the 2.875 % convertible notes due 2024 $ 160.6 $ 63.7 n/a Weighted average diluted common shares outstanding 32,363 33,799 33,631 Diluted earnings per share $ 4.96 1 $ 1.89 1 $ 1.40 1 Diluted earnings per share was calculated as follows: Earnings before interest and debt issuance costs on the 2.875 % convertible notes due 2024 Weighted average diluted common shares outstanding 71 Note 16 — Related Party Transactions The Company has a 41.9 % interest in Axis, a joint venture. The Company purchased $ 8.8 million, $ 8.7 million and $ 11.5 million of railcar components from Axis during the years ended August 31, 2024, 2023 and 2022, respectively. The Company held a 40 % interest in the common equity of an unconsolidated affiliate that bought and sold railcar assets that are leased to third parties. As of August 31, 2023, the Company no longer held an investment in this entity. Upon sale of railcars to this entity from Greenbrier, 60 % of the related revenue and margin was recognized and 40 % was deferred until the railcars were ultimately sold by the entity. The Company recognized $ 15.1 million and $ 9.3 million with railcars sold out of the leasing warehouse during the year ended August 31, 2023 and 2022, respectively. Note 17 — Income Taxes Components of income tax expense (benefit) were as follows: Year Ended August 31, (In millions) 2024 2023 2022 Current Federal $ 2.0 $ 7.4 $ ( 6.7 ) State 2.2 2.7 0.9 Foreign 38.8 9.7 19.2 43.0 19.8 13.4 Deferred Federal 14.6 7.9 2.2 State 0.1 0.6 1.4 Foreign ( 2.0 ) ( 3.4 ) 1.6 12.7 5.1 5.2 Change in valuation allowance 6.3 ( 0.3 ) ( 0.5 ) Income tax expense (benefit) $ 62.0 $ 24.6 $ 18.1 Earnings before income tax and earnings from unconsolidated affiliates for the years ended August 31, 2024, 2023 and 2022 were $ 111.4 million, $ 32.2 million and $ 12.4 million, respectively, for our domestic U.S. operations and $ 112.3 million, $ 58.8 million and $ 48.2 million, respectively for our foreign operations. The reconciliation between effective and statutory tax rates on operations is as follows: Year Ended August 31, 2024 2023 2022 Federal statutory rate 21.0 % 21.0 % 21.0 % State income taxes, net of federal benefit 1.4 3.0 3.1 Foreign operations 4.6 6.2 9.0 U.S. tax on foreign earnings 2.3 4.5 1.8 U.S. impact of foreign branch ( 1.9 ) — — Carryback rate benefit — — ( 3.2 ) Permanent differences 4.0 ( 5.8 ) 5.4 Base erosion and anti-avoidance tax (BEAT) 0.5 1.6 — Change in valuation allowance 2.8 ( 0.5 ) ( 0.8 ) Unrecognized tax benefits 0.7 1.4 ( 1.8 ) Noncontrolling interest in flow-through entity ( 0.3 ) ( 2.7 ) ( 3.0 ) Credits ( 4.7 ) 0.1 ( 0.6 ) Other ( 2.7 ) ( 1.8 ) ( 1.0 ) Effective tax rate 27.7 % 27.0 % 29.9 % Due to the enactment of the Coronavirus Aid, Relief and Economic Security (CARES) Act in 2020, the Company filed a Federal claim to carryback fiscal year 2021 tax losses to the fiscal years 2016 through 2018, allowing the recovery of Federal income taxes previously paid at rates of 35.0 % or 25.7 %, rather than the current Federal rate of 72 21.0 % in effect beginning with the fiscal year 2019. As of August 31, 2024, income taxes receivable includes a balance of $ 22.8 million related to the carryback of the 2021 loss. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities were as follows: As of August 31, (In millions) 2024 2023 Deferred tax assets: Accrued payroll and related liabilities $ 31.7 $ 37.1 Deferred revenue 6.7 6.6 Inventories and other 26.7 12.4 Maintenance and warranty accruals 3.5 3.5 Lease liability 14.7 16.5 Net operating losses 35.9 18.4 Investment, asset tax credits and other 16.3 0.9 135.5 95.4 Valuation allowance ( 15.9 ) ( 9.6 ) Deferred tax liabilities: Fixed assets ( 187.3 ) ( 131.9 ) Intangibles ( 5.2 ) ( 5.1 ) Right-of-use asset ( 14.4 ) ( 16.0 ) Other ( 8.7 ) ( 13.8 ) ( 215.6 ) ( 166.8 ) Net deferred tax liability $ ( 96.0 ) $ ( 81.0 ) As of August 31, 2024, the Company had $ 67.4 million of federal NOL carryforwards that do not expire, $ 15.4 million of federal credit carryforwards that will begin to expire in 2028, $ 193.0 million of state net operating loss carryforwards that will begin to expire in 2029 , $ 0.9 million of state credit carryforwards that will begin to expire in 2025 , $ 9.9 million of foreign net operating loss carryforwards that begin to expire in calendar 2024 and $ 26.2 million of foreign net operating loss carryforwards that do not expire. The Company has placed a valuation allowance of $ 15.9 million against the deferred tax assets for which a benefit is not more likely than not to be realized, including those for loss and credit carryforwards unlikely to be used before their expiration dates or where the possibility of utilization is remote. The net increase in the total valuation allowance was approximately $ 6.3 million for the year ended August 31, 2024. The Company's cumulative undistributed foreign earnings, if repatriated, would be accompanied by foreign withholdings taxes. However, the Company does not intend to repatriate these foreign earnings and continues to assert that its foreign earnings are indefinitely reinvested. As a result, it has not recorded a liability for foreign withholding taxes associated with undistributed foreign earnings. The following is a tabular reconciliation of the total amounts of unrecognized tax benefits: Year Ended August 31, (In millions) 2024 2023 2022 Unrecognized Tax Benefit – Opening Balance $ 1.7 $ 0.4 $ 1.6 Gross increases – tax positions in prior period 1.8 1.3 — Gross decreases – tax positions in prior period — — ( 0.9 ) Settlements — — — Lapse of statute of limitations ( 0.4 ) — ( 0.3 ) Unrecognized Tax Benefit – Ending Balance $ 3.1 $ 1.7 $ 0.4 All unrecognized tax benefits, when recognized, would impact the effective tax rate. Interest and penalties related to income taxes are classified as a component of Income tax expense. As of August 31, 2024 and 2023, the total amount of accrued interest was $ 0.8 million and $ 0.6 million, respectively. Income tax 73 expense for the years ended August 31, 2024, 2023 and 2022 included interest expense (benefit) related to unrecognized tax benefits of $ 0.2 million, $ 0.5 million and ($ 0.3 ) million, respectively. The Company has not accrued any penalties on the unrecognized tax benefits and does not anticipate a significant decrease in unrecognized tax benefits during the next twelve months. 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 2016. The Company currently has ongoing examinations in the U.S., Poland, and Romania. Note 18 — Segment Information The Company operates in three reportable segments: Manufacturing; Maintenance Services; and Leasing & Management Services. 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 benefit (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. The information in the following tables is derived directly from the segments’ internal financial reports used for corporate management purposes. For the year ended August 31, 2024: Revenue Earnings (loss) from operations (In millions) External Intersegment Total External Intersegment Total Manufacturing $ 3,013.6 $ 228.8 $ 3,242.4 $ 281.6 $ 24.9 $ 306.5 Maintenance Services 298.8 49.7 348.5 27.1 — 27.1 Leasing & Management Services 232.3 1.0 233.3 139.0 0.1 139.1 Eliminations — ( 279.5 ) ( 279.5 ) — ( 25.0 ) ( 25.0 ) Corporate — — — ( 123.2 ) — ( 123.2 ) $ 3,544.7 $ — $ 3,544.7 $ 324.5 $ — $ 324.5 For the year ended August 31, 2023: Revenue Earnings (loss) from operations (In millions) External Intersegment Total External Intersegment Total Manufacturing $ 3,357.7 $ 307.1 $ 3,664.8 $ 140.9 $ 28.7 $ 169.6 Maintenance Services 406.4 36.0 442.4 36.9 — 36.9 Leasing & Management Services 179.9 1.2 181.1 103.3 0.3 103.6 Eliminations — ( 344.3 ) ( 344.3 ) — ( 29.0 ) ( 29.0 ) Corporate — — — ( 104.7 ) — ( 104.7 ) $ 3,944.0 $ — $ 3,944.0 $ 176.4 $ — $ 176.4 74 For the year ended August 31, 2022: Revenue Earnings (loss) from operations (In millions) External Intersegment Total External Intersegment Total Manufacturing $ 2,476.6 $ 191.6 $ 2,668.2 $ 97.2 $ 11.9 $ 109.1 Maintenance Services 347.7 26.4 374.1 21.7 — 21.7 Leasing & Management Services 153.4 1.9 155.3 108.3 0.1 108.4 Eliminations — ( 219.9 ) ( 219.9 ) — ( 12.0 ) ( 12.0 ) Corporate — — — ( 109.2 ) — ( 109.2 ) $ 2,977.7 $ — $ 2,977.7 $ 118.0 $ — $ 118.0 Year Ended August 31, (In millions) 2024 2023 2022 Assets: Manufacturing $ 1,881.2 $ 1,847.0 $ 1,853.9 Maintenance Services 291.2 294.4 284.8 Leasing & Management Services 1,633.6 1,458.1 1,152.2 Unallocated, including cash 448.5 378.9 560.6 $ 4,254.5 $ 3,978.4 $ 3,851.5 Depreciation and amortization: Manufacturing $ 61.5 $ 60.3 $ 61.7 Maintenance Services 10.6 10.5 10.7 Leasing & Management Services 43.5 35.5 29.6 $ 115.6 $ 106.3 $ 102.0 Capital expenditures: Manufacturing $ 102.8 $ 71.9 $ 48.3 Maintenance Services 18.5 17.3 9.2 Leasing & Management Services 277.0 272.9 323.2 $ 398.3 $ 362.1 $ 380.7 The following table summarizes selected geographic information. Year Ended August 31, (In millions) 2024 2023 2022 Revenue 1 : U.S. $ 2,787.5 $ 3,235.3 $ 2,452.1 Foreign 757.2 708.7 525.6 $ 3,544.7 $ 3,944.0 $ 2,977.7 Assets: U.S. $ 2,775.4 $ 2,593.4 $ 2,689.6 Mexico 1,145.3 1,084.3 948.4 Europe 333.8 300.7 213.5 $ 4,254.5 $ 3,978.4 $ 3,851.5 1 Revenue is presented on the basis of geographic location of customers. Reconciliation of Earnings from operations to Earnings before income tax and earnings from unconsolidated affiliates: Year Ended August 31, (In millions) 2024 2023 2022 Earnings from operations $ 324.5 $ 176.4 $ 118.0 Interest and foreign exchange 100.8 85.4 57.4 Earnings before income tax and earnings from unconsolidated affiliates $ 223.7 $ 91.0 $ 60.6 75 Note 19 — Customer Concentration Customer concentration is defined as a single customer that accounts for more than 10% of Consolidated Revenue or Accounts receivable, net. In 2024 , revenue from one customer represented 10 % of Consolidated Revenue. In 2023 , revenue from two customers represented 21 % and 10 % of Consolidated Revenue. In 2022 , revenue from three customers each represented 16 %, 12 % and 11 % of Consolidated Revenue. No other customers accounted for more than 10% of Consolidated Revenue for the years ended August 31, 2024, 2023, or 2022 . One customer had a balance that individually equaled or exceeded 10% of Accounts receivable, net, representing 14 % of the Consolidated Accounts receivable, net balance at August 31, 2024. No customer had a balance that individually equaled or exceeded 10% of Accounts receivable, net at August 31, 2023. Note 20 — Lease Commitments Lessor Equipment on operating leases is reported net of accumulated depreciation of $ 93.4 million, $ 68.0 million and $ 48.6 million as of August 31, 2024, 2023, and 2022 , respectively. Depreciation expense was $ 36.0 million, $ 26.0 million and $ 22.0 million for the years ended August 31, 2024, 2023, and 2022 respectively. In addition, certain railcar equipment leased-in by the Company on operating leases is subleased to customers under non-cancelable operating leases with lease terms ranging from one to ten years . Operating lease rental revenues included in the Company’s Consolidated Statements of Income for the years ended August 31, 2024, 2023, and 2022 was $ 121.1 million, $ 91.9 million and $ 66.8 million respectively, which included $ 19.9 million, $ 19.3 million, and $ 18.1 million respectively, of revenue as a result of daily, monthly or car hire utilization arrangements. Aggregate minimum future amounts receivable under all non-cancelable operating leases and subleases as of August 31, 2024, will mature as follows: (In millions) 2025 $ 102.9 2026 93.3 2027 83.4 2028 65.5 2029 48.5 Thereafter 112.7 $ 506.3 Lessee The Company leases railcars, real estate, and certain equipment under operating and, to a lesser extent, finance lease arrangements. As of and for the years ended August 31, 2024, 2023, and 2022, finance leases were not a material component of the Company's lease portfolio. The Company’s real estate and equipment leases have remaining lease terms ranging from less than one year to 74 years , with some including options to extend up to 7 years . The Company recognizes a lease liability and corresponding ROU asset based on the present value of lease payments. To determine the present value of lease payments, as most of its leases do not provide a readily determinable implicit rate, the Company’s incremental borrowing rate is used to discount the lease payments based on information available at the lease commencement date. The Company gives consideration to its recent debt issuances as well as publicly available data for instruments with similar characteristics when estimating its incremental borrowing rate. The components of operating lease costs were as follows: For the Year Ended August 31, (In millions) 2024 2023 2022 Operating lease expense $ 17.3 $ 13.6 $ 10.7 Short-term lease expense 7.9 9.3 6.0 Total $ 25.2 $ 22.9 $ 16.7 76 Aggregate minimum future amounts payable under operating leases having initial or remaining non-cancelable terms as of August 31, 2024 will mature as follows: (In millions) 2025 $ 14.6 2026 13.5 2027 10.7 2028 9.8 2029 8.0 Thereafter 16.3 Total lease payments $ 72.9 Less: Imputed interest ( 6.9 ) Total lease obligations $ 66.0 The table below presents additional information related to the Company’s operating leases as of August 31, 2024: Weighted average remaining lease term 10.77 years Weighted average discount rate 2.8 % Supplemental cash flow information related to leases were as follows: (In millions) For the Year Ended August 31, 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 17.1 ROU assets obtained in exchange for new operating lease liabilities $ 8.6 Note 21 — Commitments and Contingencies Portland Harbor Superfund Site The Company’s former Portland, Oregon manufacturing facility (the Portland Property) 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 Portland Property, 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 financially 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, approximately 100 parties, including the State of Oregon and the federal government, are participating in a non-judicial, mediated allocation process to try to allocate costs associated with remediation of the Portland Harbor Site. The Company will continue to participate in the allocation process. 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 14, 2025. 77 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. The EPA has identified several work areas within the ROD cleanup area. One of the units, RM9W, includes the nearshore area of the river sediments offshore and downstream of the Portland Property. It also includes a portion of the Portland Property's riverbank. The ROD does not break down total remediation costs by Sediment Decision Unit. The EPA requested that potentially responsible parties enter AOCs during 2019 agreeing to conduct remedial design studies. Some parties have signed AOCs, including one party with respect to RM9W. The Company has not signed an AOC in connection with remedial design, but is assisting in funding a portion of the RM9W remedial design. 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 contaminants of concern 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 the Portland Property precedes the Company’s ownership of the Portland Property. 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 or remedial action, and may be liable for damages to natural resources. On January 30, 2017 the Confederated Tribes and Bands of Yakama Nation sued 33 parties including the Company as well as the federal government 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., U.S. 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 14, 2025. Oregon Department of Environmental Quality (DEQ) Regulation of Portland Property The Company entered into a Voluntary Cleanup Agreement with the Oregon Department of Environmental Quality (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. The Company’s aggregate expenditure has not been material, however it could incur significant expenses for remediation. Some or all of any such outlay may be recoverable from other responsible parties. Sale of Portland Property The Company sold the Portland Property in May 2023, but remains potentially liable with respect to the above matters. Any of these matters could adversely affect the Company's business and Consolidated Financial Statements. However, any contamination or exacerbation of contamination that occurs after the sale of the property will be the liability of the current and future owners and operators of the Portland Property. Other Litigation, Commitments and Contingencies 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, 2024 , the Company had outstanding letters of credit aggregating to $ 5.9 million associated with performance guarantees, facility leases and workers compensation insurance. 78 Note 22 – Fair Value Measures Certain assets and liabilities are reported at fair value on either a recurring or nonrecurring basis. Fair value 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, 2024 are: (In millions) Total Level 1 Level 2 (1) Level 3 Assets: Derivative financial instruments $ 24.0 $ — $ 24.0 $ — Nonqualified savings plan investments 54.5 54.5 — — Cash equivalents 195.3 195.3 — — $ 273.8 $ 249.8 $ 24.0 $ — Liabilities: Derivative financial instruments $ 1.4 $ — $ 1.4 $ — 0 Assets and liabilities measured at fair value on a recurring basis as of August 31, 2023 are: (In millions) Total Level 1 Level 2 (1) Level 3 Assets: Derivative financial instruments $ 37.9 $ — $ 37.9 $ — Nonqualified savings plan investments 47.7 47.7 — — Cash equivalents 51.2 51.2 — — $ 136.8 $ 98.9 $ 37.9 $ — Liabilities: Derivative financial instruments $ 0.2 $ — $ 0.2 $ — 1 Level 2 assets include derivative financial instruments which are valued based on significant observable inputs. See Note 13 - Derivative Instruments for further discussion. Note 23 – 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 millions) Carrying Amount 1 Estimated Fair Value (Level 2) Notes payable as of August 31, 2024 $ 1,417.6 $ 1,442.1 Notes payable as of August 31, 2023 $ 1,328.1 $ 1,314.3 1 Carrying amount disclosed in this table excludes other notes payable and debt discount and issuance costs. The carrying amount of cash and cash equivalents, accounts receivable, revolving notes and accounts payable and accrued liabilities 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. 79 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.