The Greenbrier Companies, Inc.

Hello and welcome to the Greenbrier Company's first quarter fiscal year 2020 earnings conference call. Following today's presentation, we will conduct a question and answer session. Each analyst should limit themselves to only two questions. Until that time, all lines will be in a listen-only mode. At the request of Greenbrier Company, this conference call is being recorded for instant replay purposes. At this time, I would like to turn the conference over to Mr. Justin Roberts, Vice President and Treasurer. Mr. Roberts, you may begin.

Thank you, Sarah. Good morning, everyone, and welcome to our first quarter of fiscal 2020 conference call. On today's call, I'm joined by Greenbrier's Chairman and CEO, Bill Furman, Lori Kikourios, President and COO, and Adrienne Downs, Senior Vice President and CFO. They will discuss the results for the first quarter in fiscal 2020. Following our introductory remarks, we will open up the call for questions. In addition to the press release issued this morning, which includes supplemental data, additional financial information, and key metrics can be found in a slide presentation posted today on the IR section of our website. Also, if you're in Portland today, our annual meeting will be occurring today at 2 p.m. Pacific at the Benson Hotel. A link to a webcast of the meeting is also live on our website, and you can follow along to the activities and events as well. Matters discussed on today's conference call include forward-looking statements within the meaning of the Private Securities and Litigation Reform Act of 1995. Throughout our discussion today, we will describe some of the important factors that could cause Greenbrier's actual results in 2020 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. And with that, I'll hand it over to Bill.

Thank you, Justin, and good morning, everyone. As we enter 2020, Greenbrier enters its fifth decade of operations. And we're operating at a much larger scale than the very small leasing company founded nearly 40 years ago with only 300 rail cars in Huntington, West Virginia. Just in the last year, we've achieved much greater scale through the acquisition of the ARI manufacturing assets, building on our various initiatives in international markets, In normalized markets, GreenGuard with its present platform should be capable of reaching $4 billion in annual revenue and perhaps more. Of course, we have to get margin and financial performance to match that revenue, but we believe we are firmly on the right track to do so. Our top objectives for calendar 2020 is to continue to integrate and extract value from the growth over the last two years. In its early stages, growth often results in uneven short-term financial performance. We ask our shareholders to be patient while we go through this process. And although this can be expected, we are dedicated with an action plan to improve operating performance and align financial metrics to our increased scale, all to produce shareholder value. Greenbrier, as you know, has a four-part strategy. First, we're strengthening our North American core markets. Setting aside ARI for a moment, North American manufacturing operations during the first quarter of fiscal 2020 were broadly in line with our expectations. We continue to progress on key areas, including cost reduction, succession planning, smart manufacturing initiatives, quality and customer satisfaction. The ARI acquisition strengthens our geographic footprint, bringing product diversity and a larger scale in domestic markets. Second leg of Green Bar Strategy international operations has also brought diversity and stability. These investments are producing results. In Q1 and in the last quarter of fiscal 2019, we had a very strong turnaround in operations. And post-quarter during the month of December, a strong order book came from relationships in the GCC, European orders, and long-awaited momentum in Brazil borne out by significant multi-year transaction for several thousand rail cars. The third and fourth elements of our strategy are robust development of Greenbrier's talent pipeline and bringing the business to a larger scale. Talent investment is occurring throughout our organization. Of course, the ARI deal has brought us excellent talent and greater scale in our core domestic markets. New employees in important roles will help us integrate ARI into Greenbrier and also serve Greenbrier's existing manufacturing platforms. We believe ARI will be accretive to Greenbar as operations are fully integrated. Despite a slow start, as Laurie and Adrian will describe, we're seeing cost synergies as expected and remain on target with our goals. In 2019, we identified challenges and deployed remedial actions in our European, Brazilian, and repair operations. The positive trends in our European business continued in Q1 with a second straight quarter free tax profit This contrasts with steep losses throughout most of fiscal 2019 as a result of legacy issues. Although overall results in Europe will remain choppy through 2020 due to some older transactions at AstroRail, the reversal of Europe's drag on earnings has already occurred and is meaningful to our bottom line. In Brazil, we're happy to see the return of significant rail car demand as a result of rail privatization, concession renewals, highway congestion, and government policies. Brazil's backlog in orders have intensified significantly in recent weeks, as referenced by the multi-year rail car order I mentioned a moment ago. The South American rail car market is better positioned in 2020 than at any time since Greenbar first entered that market in 2015. It is obvious in North America that there's a clear disconnect between economic conditions in the North American freight car markets in the U.S. and North American economy in general. As the U.S. economy still registers respectable growth, the rail sector is impacted by trade tensions and precision scheduled railroading, or PSR. In the broader economic environment, the U.S. economy continues to display resiliency, and there are reduced concerns about a general U.S. recession. According to the Bureau of Economic Analysis, U.S. real GDP growth was 2.1% in Q3 2019. Employment is also a continued positive for the U.S. economy. There were 266,000 jobs added in November. The national unemployment rate is a notable figure. low 3.5%. On the other hand, the freight rail sector is participating in a partly self-induced downturn in traffic driven by precision scheduled railroading, or PSR, and international trade tensions. Approximately 400,000 cars, or almost 25%, of the North American fleet is in storage. FTR associates recently reduced its forecast for rail deliveries significantly, to 38,000 units in calendar 2020 and 39,000 units in calendar 2021. However, the settling out of trade policies that stoked economic and investment uncertainty for the past several years is a promising development if it can be fully realized. They recently announced phase one of a trade deal with China has sent equity markets higher and should help spark some recovery in North American freight loadings as it takes effect. Another significant thing that has occurred after two years of hard work in December, the course of 24 hours, Congress took two major steps to ensure trade stability for the railway supply sector. These advances have been championed by Greenbrier and other industry participants over recent years. First, the House passed the United States-Mexico trade agreement, agreement, or USMCA. We expect the Senate will approve that compact soon. It continues to advance, and when signed by the President, this will eliminate longer-term concerns relating to the supply chain within our North American freight car equipment industry, and more particularly for Greenbrier, eliminate a potential threat to our heavy investment in Mexico. Receiving less attention but of strong importance to us was a provision signed into law by the President on December 20 that protects the rail industry from subsidized and unfair intrusions by Chinese state-owned enterprises in the United States. This is a serious issue internationally. Other nations economically aligned with the U.S. are also waking up to the threats posed by aggressive Chinese intrusions on many fronts from cybersecurity sources. to over espionage. In closing, we continue to treat 2020 as a year of integration, concentration, execution, and building of succession planning and talent pipeline. During the years ahead, we shall focus on absorbing our growth, generating positive cash flow, positive ROIC, and creating shareholder value. We have grown the company significantly in the last two years while addressing weaker areas of our business, Greenbrier, I firmly believe, is positioned for sustained and strong performance ahead. Companies in America cannot manage only quarter to quarter and build. We're affirming the four-year outlook for fiscal 2020 that we shared in October. Lori, over to you.