The Greenbrier Companies, Inc.

Hello and welcome to the Greenbrier Company's third quarter of fiscal 2021 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 the Greenbrier Company's, 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, Eilidh. Good morning, everyone, and welcome to our third quarter of fiscal 2021 conference call. On today's call, I'm joined by Greenbrier's Chairman and CEO, Bill Furman, Lori Tsikorias, President and Chief Operating Officer, Brian Comstock, Executive Vice President and Chief Commercial and Leasing Officer, and Adrian Downs, Senior Vice President and CFO. They will provide an update on Greenbrier's performance and our near-term priorities. Following our introductory remarks, we will open up the call for questions. In addition to the press release issued this morning, additional financial information and key metrics can be found in a slide presentation posted today on the IR section of our website. As a reminder, matters discussed today include forward-looking statements within the meaning of the Private Securities 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 2021 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. And now, I'll turn it over to Bill.

Thank you, Justin, and good morning, everyone. The recovery in our markets we forecast for the second half of this calendar year is now well underway. Greenbrier followed a disciplined strategy throughout the pandemic, and as a result, the company is in a very strong position. Last year, we articulated our strategy centered on continuing safe operation of our facilities as critical supply infrastructure under U.S. Presidential Policy Number 21, U.S. Department of Homeland Security and U.S. Department of Transportation. We also emphasized building and sustaining a strong liquidity position to withstand worst-case scenarios, eliminating all nonessential spending, reducing our fixed costs, right-sizing our labor force to reduce pandemic demand. Our actions were purposeful, and particularly regarding employee safety and those issues related to our cost base and manufacturing capacity. Greenbar has a flexible business plan and a flexible manufacturing strategy. Along with scalable manufacturing, these are central to Greenbar's response, not only in the V-shaped downturn, but in the improving market outlook and the upturn in strong economic recovery. This phase of our strategy is equally important. It presents novel challenges and operational risk as we add a large number of new production lines, many involving product changeovers, manufacturing line additions, and new designs. Simultaneously, we must safely, and I emphasize safely, integrate large numbers of new or furloughed manufacturing employees. Fortunately, our management team is seasoned and experienced at managing these operating dynamics. We are competent in our ability to execute Of course, COVID-19 continues to be an issue we are addressing. Reduced contagion rates among our workforce in the U.S., in Mexico, and Europe are very good to see. Brazil remains a hotspot, but because we are proactive, cases among our Brazilian colleagues remain relatively low. Despite these measures, we recently lost another colleague, Jorge Tellez, to COVID-19. Jorge worked in the paint department at our Greenbar Sagun, otherwise known as Plant 2 facility in Mexico. He was in his early 40s and had worked at Greenbar for over four years. Jorge is the eighth member of the Greenbar family we have lost to COVID-19. We are supporting his family through this difficult time. As vaccines become more widely available around the world, it is essential to remember that COVID-19 is a dangerous and increasingly contagious disease. We are urging and incenting our employees to get vaccinated. I urge all of you to consider doing the same thing who may be listening on this call. As new COVID variants appear globally, we will remain attentive and defend our employees and our stakeholders against this continued very real threat. I'm pleased to see that Greenbar's financial results for the quarter demonstrate strong, solid performance. Lori and Adrian will cover our detailed results later in the call. For now, I will simply say that we are very pleased. Q3 earnings moves Greenbar solidly into the black for fiscal 2021 through nine months after a very weak first half. And the outlook is strong for the fourth quarter and 2022. Importantly, our liquidity position also remains strong. At the end of the third quarter of 2020, we announced we achieved a liquidity target of $1 billion. Despite some challenging quarters since then, GreenBars continues to maintain almost that level of liquidity, including cash and additional available borrowing on our debt facilities. Future tax refunds and other initiatives underway. In the third quarter, we also executed a strategic debt refinancing, taking advantage of the opportunity to do so in these markets where money is reasonably available and interest rates are cheap. We extended maturities on our convertible notes out another four years at favorable interest rates. Liquidity is important during a steep recovery cycle, a V-shaped cycle. remembering that this is a 100-year pandemic that everyone has had to navigate. And this part of the cycle requires increased working capital. So we're pleased that we will have the working capital to deal and navigate through this time, particularly with supply chains being a little roiled. We are balancing efficient management of working capital and protecting our supply chain, ensuring production and labor continuity. Our COVID strategy, along with the three-year strategy of achieving scale in our business, are producing solid results. Greenbrier has grown substantially over the last three years in three separate markets. And as Laurie may speak to, or in questions and answers, our international backlog now is about a third of our base. Results in the third quarter reflect both the steady recovery in our markets as well as Greenbar's ability to manage through some of the most challenging quarters in the company's history. And in fact, over the last 100 years. During our last two calls, I discussed many of the steps Greenbar was taking to prepare for economic recovery and positive momentum in our markets. This momentum is reinforced as we prepare Greenbar's three-year plan and navigate as we achieve greater scale and efficiency. A greatly reduced and leaner cost structure achieved during the pandemic should also be a boost to our business unit efficiency and our financial momentum. We're joined today by an important guest, Brian Comstock. Brian is Greenbrier's Executive Vice President and Chief Commercial and Leasing Officer. He is here to share a little bit more about our outlook on the commercial side of our business. Brian. Thanks, Bill, and good morning, everyone. Across the economy, there are positive indicators and data points that indicate a sustained recovery in rail. In North America, the latest U.S. economic indicators reflect growing optimism with GDP consensus forecast growth continuing to be revised up. Through May, North American rail traffic was up 12.1%. Loadings were led by increases in grain, intermodal, and auto. We expect to see continued near-term demand for intermodal units and grain-covered hoppers as both segments continue to set monthly volume records. These segments should remain highly active well into 2022. Overall, system velocity has slowed approximately two mile per hour due to robust rail freight recovery. Slowing rail velocity, as everyone knows, decreases rail cars in storage and increases demand for new rail cars. Certain rail car types are in tight supply, including intermodal units, boxcars, and gondolas. These fleets are almost fully deployed with over 95% utilization. Total North American railcar utilization is nearly 80% as of June 1. Since the peak last year, over 160,000 cars have been taken out of storage in North America, bringing the number of stored cars to approximately 360,000 units. With higher scrap pricing and proposed tax benefits for construction of new, more efficient, and environmentally friendly equipment, we expect a trend of declining cars and storage to continue. We are also seeing robust activity in the rail car conversion market with a recent 1,000 sand car conversion order. The increase in commodity prices across almost every important sector has captured our attention. The current price for steel is more than three times higher than the August 2020 price. Greenbrier continues to utilize price indexing and material escalation pass-throughs to protect gross margin dollars. Although elevated steel prices can be a potential headwind, order cadence remains robust. In Europe, longer-term, broad-scale economic reforms to address climate change are ushering in an era of modal shift for freight. from polluting and congested road travel to efficient, higher speed rail service. This modal shift will drive growth in rail car demand in the years to come. This growth is in addition to the replacement demand as the fleets in the EU countries are aging, with many cars already well past the time for replacement. Greenbar's backlog in Europe was strong at the end of the third quarter. Our focus has now turned to ramping up manufacturing output to meet the market demand, with several production lines already booked well into fiscal 2023. Finally, in Brazil, the economy is improving. Our visibility is good, and we are experiencing our highest levels of backlog since we entered the market. Greenbrier's global commercial team continues to see strengthening in new railcar inquiries and orders. In the third fiscal quarter, Greenbrier 1 orders for 3,800 rail cars totaling $400 million, and our backlog as of May 31st was 24,800 units valued at $2.6 billion. Subsequent to quarter end, the commercial team has booked nearly 3,000 additional orders for intermodal, automotive, covered hoppers, and gondolas. I want to emphasize the conversion activity I spoke to earlier is not reflected in the new railcar orders or backlog. Overall, pipelines are strong, and I'm optimistic this momentum will carry into fiscal 2022. Now over to Lori for more about our Q3 operating performance.