GBX - Earnings call transcript Q3 2019 | The Greenbrier Companies, Inc.

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Operator

Hello and welcome to The Greenbrier Companies Third Quarter of Fiscal Year 2019 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 Companies, this conference call is being recorded for instant replay purpose.

like over I'd to conference time, Mr. this to the turn over At

President Roberts Treasurer. Roberts, and Justin Vice Mr. you begin. may

Justin Roberts

results outlook conference Dustin. Bill CEO, you, Executive an our I'm and will Good everyone. by call. Adrian quarter joined And call, quarter On fourth COO; the Chairman Greenbrier's provide Furman; President Lorie They and Thank XXXX. Downes, CFO. Greenbrier's for today's Senior and third welcome President quarter for morning, Vice the of third and to and Tekorius, discuss Vice fiscal

call remarks, questions. Following will our introductory we open up the for

In section addition and includes key release our of today a this information supplemental be can morning posted found in website. to which the press metrics slide financial IR data, the additional presentation issued on

statements of today's meaning statement actual cause factors of from forward-looking XXXX. Greenbrier's behalf made Matters conference the to differ any Private Litigation we forward-looking by of those today, the XXXX results some discussion materially expressed in include call will Reform in within Securities on on describe or important Greenbrier. Throughout Act and the beyond of could discussed that our

with to Bill. it turn that, I'll And over

William Furman

morning, North the revenue everybody. Justin. quarter, Greenbrier's third core Okay. you, margin gains. Thank American Good strong produced business In and

points achieved Third core we than XX.X% as more XX%, quarter the achieved last to margin in margin for these of revenue and Manufacturing the grew over gains our the quarter. the year at way an basis by second our XXX gross quarter from XX% Greenbrier performance business. compared gross of of highest led consolidated increase

led railcar improved fiscal during the deliveries. operating year in efficiencies expected is half second we increased manufacturing of momentum and the by materializing, The

and spoke solid will Greenbrier's railcar others and third to touch Lorie which quarter we Another highlight the this on press of morning. release, in which activity, included

share year our We earnings of earlier accordance with guidance. strongest fourth expect XXXX in during quarter the our of per fiscal

goodwill reorganization. review the unit impairment by in to bottom operations, quarter within our were continuing results repair non-cash and and that impacted railcar to is line bottom Greenbrier's top undergo

In turn to a profitability. speak Tekorius our to operations repair actions to Lorie sustained will moment, specific the

joint operating also quarter. this experienced venture Our Brazil loss an

We as have see anomaly. operation and normalized to reflect Brazil demand quarter an been this rightsizing the

to beginning in the deliveries in improve expect We quarter. Brazil current

the ramps deliveries As renewal real increase concession and we in process expect beyond. Brazilian XXXX to up, substantially

Clearly, in lower per earlier, share the due months with previously result fiscal is I some events. preoccupation and results for this XXXX from first our much believe to will nine guided. of than timing announced publicly earnings

in turned been start we think summary, pursuing over that led conditions, aggressively in results. have been there. We addressing bad a but Europe, got the have that we've these that. we've Definitely, the to corner We've

European are will in And our the as tailwind seeing operations monthly in throughout before reorganized a We its Gunderson, operations, and improvement beyond. improvements that. quarter quarter fourth and second the in serve

In fact, the should less-than-expected year be have turned those in forces that have tailwinds quarters. a caused coming us into to

So, more Adrian financial current his third results remarks. in our full financial guidance quarter discuss detail and will our during

Acquisition-related expectations. proceeding in ARI's quarter, business also demanded consistent affecting the this results. attention, our management third regulatory ability and of acquisition our announced is financial focus in activities review, Our with manufacturing priorities other to the on through quarter impacted

our and business. Greenbrier once manufacturing We fully a goal ARI North accretive goal will are core be confident highly serving and engineering geographic American scale that to diversification integrated, operations of are protection

we today able to the the are to with extent ARI comments transaction. is of respect the This provide

rate as a hike many as to as move as are about rate quarter, next pace from forecasting be slower to The is a growing at the cut core aware, economic data. year. interest a in X% GDP last opposed most on the rate. Reserve, as of than more is case Turning cuts May still than likely economy continues overall most two greater US a growth the to US coming same Federal people are you inflation and

accommodating Overall, in into the Major low continue current shocks more inflation of political a the should year allow in GDP remainder here for XXXX. and monetary or and this economic risks be uncertainty. policy the and States sphere trade to expansion external through United

to sector coal XX, is the of Turning which railroads and year-to-date due decreased related to flooding nonmetallic intermodal throughout our part in minerals, the volumes trade. together through year-over-year. Class Midwest, of grain for all shipments American in This have taken to I declines June additions in some to North impacting X.X%

change to been see the as The in change together. roughly it loadings has in online is railcars line That for in track number volume. with builders good prefer the of we

those The however, than Canadian railroads, better counterparts. spot, US of loadings posting bright year-over-year their are a

down has seem For velocity Volumes growth. example, American while Class loadings have than two people X% months, difference. I North I X.X% believe. country by Canadian many the reveals in Average Canadian the US volume the Class year-over-year, Pacific's increased led railroads breaking volumes X.X% than by to railroads trailing X.X% the railroads for the year-over-year, less XX for increased less declined

many has steadily is types. Car train with still quarter three year. ticking railroad past average car performance the this major velocity demand over risen over months. up lower This time remains strong Terminal the dwell across

seen and we course, receiving by the industry builder attention It great identifiable or adoption have car stemming and, date, every railroading, a leasing from by is significantly of company. impacts deal Precision freight system. of PSR, analysts this to solely not of

weather in a have policy, part rate shipments to for spot and trade due softer Intermodal uncertainties in lower, market shipping. been truck impacts

by the outlook amazingly North deliveries. FTR XX, number. XXX, Anticipated American same delivery projections the an by lowered delivery for recently, XXXX also to railcar lowered its More transportation approximately XX,XXX precise to analytics FTR, railcars deliveries. firm, XXXX over XX,XXX amount its railcar

months of replacement is there has type and, demand over Nonetheless, XX well historically, cycle a Greenbrier this the performed strong next market. in primarily

certain that either. the may concerns about an about not We trade-specific cycle the we're reductions FTR and believe be to overreaction economic concerns

very trade, including Washington on just tracking number June issues We our meeting of And China. issues company's strategy, concerning the working. board Board affirmed in had a the important is DC. which We're

the one pillars strategy, our of Revenue working. for increased our drive four has significantly scale, of and is

core We are acquisition. North strengthening ARI business American the with our

international will Our despite payoff hiccups. diversification recent

The results quarter, of our less annual we as impact forecast, mentioned our than current will totals. reported course earlier, originally for

fundamentals of are our improving strategy However, strong and the business and our sound. is

we're our As business Lorie ahead. North has American will more its from for performance manufacturing of describe, recent core challenging strong memory positioned in two quarters emerged and

produce tailwinds the Improvements quarter and future will fourth to begin periods. in

At returned is the definitely have a present even market. after strong dividends prices, undervalued to ratios the we acquisition balance We X% these with strong Greenbrier sheet, by and a at our have prices. substantial shareholders financial ARI yield

look We're grateful our to to progress. are working colleagues customers our hard all to very of and updated support performance. friends, We and Greenbrier's on our you keeping forward industry who

Lorie, over you. to

Lorie Tekorius

outlook. performance Thank Greenbrier's the and you, Will. Good everyone. Adrian financial details more morning, details operating before briefly on addresses I'll provide some

We delivered a X,XXX units railcar approximately range and types, orders in including tank X,XXX of $XXX hoppers railcar quarter covered at for were cars, and units, for valued Orders broad received the million. boxcars.

as units, billion. backlog of XX $X.X an value estimated of with diversified Our totaled XX,XXX May

moving a what the pieces was quarter. highlight mixed third I'll in

assets million. announced of the $XXX at positives, acquisition the Bill transaction ARI pending a we you, reminded the manufacturing for As of as valued in

and second predicted North strong in increase for of deliveries, production margin XX-percent-plus America performance. began the year The a in materialize primarily to the the in with half improvements quarter,

with the occurred in expected Europe And improvements Gunderson in in performance in quarter stronger QX.

the flipside, of and Brazilian environment. a had business quarter demand deliveries continued railcar as the to result the with operationally repair On weak operations struggle minimal challenging a

on more of bit I'll each give color a little Now, operations. our

moment Our thank North production this led and manufacturing a quarter. by the performance take work GMO team, American Alejandro for a hard Centurion, and like successful had to the this year. strong activity I'd

the hundred were This rates, added is the safely line changeovers. several that's years. testament been strong Several built production manufacturing increased a across locations. employees managing Greenbrier We've at organization to production while multiple over

revived board Europe, operations, The plan. improve was a the supervisory out a as by commercial William plan collaboration laid efficiencies their in as procurement close meeting mid-June. our with In from Graham team led well GMO production held Glenn, management Martin in to new and of

the and turn tailwinds this plan this operation from on executing QX in headwinds into We're XXXX. expect and continuing into to

the the operating ability the to four regaining have XX optimization of on Since August, repair shops a wheels parts A and of continues. network and last repair our review control be impairment locations based legacy closed quarter. our In combination served operation, been the of goodwill railcar and direct being this evaluation networks of profitable. and smaller performance marketing the triggered the

improved with best to integrated on performance locations. we focus part network can the XXXX. we improve business the our optimistic of have how network the of the optimization, expect to the and remaining profitability As repair customers to value by serve about networks the at We and end we solidified remain the our model continue of operating

wheels to were our operations parts performance weather demand is segment efficiently. the and the of Seasonally, QX and contributors and this wheels to the and operate the restocking stronger during and fiscal parts business winter QX due to The continues business spring have in good positive also quarter.

was leasing our revenue reflecting segments, to in Turning of sourced of high syndication the leasing robust, quarter the levels externally railcars.

syndication generates positive reminder, margin is of from This for sourced meet syndication manufacturing gross a percentage activity partners, outside dilutive some from return, this is to our our product the segment. own As demand operation. to but

about activity, and margin services this the was gross Excluding in leasing XX%.

its to grow both with management provided Greenbrier the quarter. of existing base Management Services, in and new multiple railcar our customer customers continues services proprietary customers this provider, to addition

renewal under the In issued by the new a and of quarters. The customers concessions for been of ongoing Brazil, government. issuance several our concession concessions last operate has existing

in customers' the further purchase thus The issuing fiscal expected of the these impacted the is benefit pent-up of substantial creation improvement These seen of the ability QX We've activity delays and delays with into modest issuance demand. in to XXXX. concessions improvements far in finance railcars. order concessions

nimble have We the demand in as demand rail operation for expected current our the remaining near future. when while rightsized environment, improves for

operationally of continues American North business specific our identified changes QX. well. the building on areas are core momentum our financially, achieved summary, in on improve to We've executing and problematic to perform operation and In

We're strong and right over I'm excited strategic the about Our team for business, structural the is and and to growth long-term. our the dedicated decisions future. making

Adrian discuss provide quarter and updates our third performance guidance. now will to

Adrian Downes

available Lorie. slide Thank you, and and our in the metrics press morning, supplemental Quarterly information are release Good on everyone. website. financial

provide XXXX discussion additional quarter fiscal so on then the additional information our the far, year Given in few guidance. and focus a on details I'll

for Greenbrier $XX share, and third or share million earnings to goodwill of million per Highlights net of $X.XX or to railcar the $X.XX $X.XX at quarter ARI share of tax acquisition. impairment the or per attributable million $XX.X operation related the include repair costs of per including net $X.X

are earnings Excluding attributable items, or $XX.X net share. to Greenbrier per million these $X.XX

of million X.X% revenue. EBITDA $XX.X was of Adjusted

strongest XX% grew million, quarterly to $XXX.X Revenue ever. our result

our of X,XXX the of units the delivered minimal Deliveries again were syndication XX% in reflecting occurring markets. market Brazil. with activity this strong quarter, American were American North over outside quarter. manufacturing. the with units Approximately in in strong XX% XX% the sequentially, orders international in grew quarter the unit X,XXX was from X,XXX performance Approximately Internally-produced delivered activity North

substantial significantly a to Aggregate gross by from gross increase led margins XX.X% in manufacturing improved of QX, margin XX.X%.

gross higher than QX. improve Manufacturing QX margins margins XXX QX. from expect in XXX and to were points gross to points We basis almost continue increased basis

operating the we liquidity. We over cash. have ARI to closure of million million balance acquisition, flexible, Upon with continue quarter. strong cash flow Greenbrier's generated be to to the in strong nearly sheet the $XXX and continues of expect $XX of

of the subject cars. higher quarter, Revisiting capital, the during rates decrease working and lining production levels sequentially, reduction for of started stabilization certain although of the reflecting of the inventory outsourcing to

inventory expect decrease reflecting fourth in work. the completion the levels the modestly We outsourcing quarter, to of

cash We will dividend emphasizes that continue the last create over to deployment generation is our long-term approach our employed flow return believe several capital supported of steady and by shareholder years.\ on value. to history This increases capital

announced We've XXst dividend we shareholders $XXX per already paid over program. of dividend. under dividend, $X.XX our dividends share Today, our current a million quarterly to quarterly consecutive

reflect to the outlook. QX includes Based far, expect be – our Greenbrier XXX X,XXX guidance Greenbrier's trends, to QX instead to to to are Maxion X,XXX Moving moving guidance. which parts current of annual from units, many to so business deliveries QX we providing fiscal Due XXX in Brazil. on units about this year approximately we

will EPS acquisition QX $X.XX QX ARI any excluding the our from acquisition. $X.XX benefits ARI revenue will billion. to be nearly $X costs, be

operating strongest the to of year. QX expect be We the quarter

which expenditures excludes positive Further flow; fourth $XX to G&A of million expenditures of and with our in expect ARI expect QX the QX acquisition capital parts. expense gains fleet XXXX, $XX our QX we of $XX fiscal million. million $XX QX of net quarter; million activity, on proceeds about in million repair operating million additional from for sale to and $X $XX those we will be invest sales; expect wheels fleet the of about million cash $XX our we about Combined capital on quarter any cost; in manufacturing

and amortization be million. is about QX depreciation $XX to expected

Brazil we affiliates With challenges line now $X third a in million expect to $X the QX million of our in the unconsolidated item. quarter, loss in

We expect attributable interest $XX earnings million. be to QX to XXXX non-controlling about

expected Our XX%. about to QX rate be consolidated tax is

To American in along full-year guidance. headwinds. QX to North strong sum represents with momentum some our reduction up, we had our mixed a outlook with We a earnings previous compared acknowledge QX delivery and manufacturing,

As as delays. few changes during primarily reflects Europe as Brazil, these disposition repair, the or year and Lorie changes well have impact Bill mentioned, of the a production

are into that XXXX we discussed, has in headwinds and head As is tailwinds fiscal remedial fiscal XXXX. finish turn and cases as into underway action or occurred will we these we we well optimistic all

up questions. we'll Justin, it now open for

Operator

Instructions]. [Operator you. Thank

Our Go Long. ahead. is question from Justin first

line Your open. is

Justin Long

Thanks. And morning. good

William Furman

Good morning, Justin.

Justin Long

orders could I the start Maybe Morning. with in the quarter.

thoughts what were Is more they color we given to just on related going and forward in any little more you us pickup or demand sequentially around rail environment environment? most uncertainties. think some order well? macro bit as than a give share? And people getting Greenbrier a we've better I it is seen Can volumes the order market what probably the expected, of the saw then, with

William Furman

others the others. grouping throughout a are car but orders comment, stronger types. of I'll portfolio had let we than some mixed areas benefiting Obviously, of car different

view still And still affected declines And market. to autos demand. loadings. even are strong a the Actually, by in railcar have the But see visibility some a railcars show across So, strong and cars for strength. to understand our continue tank that portfolio. the business I we the different we petrochemicals approach demand is in

turn do in while good those going European the and we in which of fixing future, them. say an in our franchises, tailwinds and some expect believe to model very the get to in from around and taking both I'd Europe we have margins think, to We're on markets. well I so we're there that, be we're have the we those Lastly, adjustment did Brazil, valuable, orders strong way to

give more If you to want color…

Lorie Tekorius

think Bill. great color, you. I that's Thank

think, but every Just led demand to petrochemical across all demand, saw emphasize, bit different type. there types, car the we was car industry, a I broad-based by in

Adrian Downes

a of what that's cars. new does said shippers discussion And, need Justin, before, news, about will lessors they've just we're to not of to tack activity railroads owning of as on around to cars, and that necessarily it around well. bit more benefit lot little a and is and But, is, PSR that a mean there lot you've fewer so again, seeing own talked but and as

William Furman

that it to a Greenbrier's to point, just really question. strategy model On point, That's great as I and Justin. to speak this want to relates

engineering, company. origination the watching manufacturing, a different, have somewhat are public trajectory asset you comments and been companies, of other is All recognizing we Greenbrier's of management

that. a service together business have aftermarket of also with all bundled strong We

our business customers. We support to are in

companies out feeding to not base intend some companies, compete Our able for to don't to about with by We're and intend model. customers. with past. the and that. and serves business very we ARI our to years we've the do strong strong customers of machine integrated with case, to include In very and we – dealt us serve with the be only product The relationship has the that GATX to need these it to industry We not needs done our well continue we've in customers product years, very fact companies. give to those business expect we and whom positive hold leasing to

wanted just add comments. So, those I two to

effect getting that. I think some halo from we're

Justin Long

is going stable that's It relatively Okay, forward, that like, sequentially, your should expectation fair? is on helpful. all sounds orders they that be

Lorie Tekorius

I think that is a fair statement.

orders disclosing have we to received activity we're expect fourth not the and that seen quarter, While continue. during robust

Justin Long

into every been you I thoughts quarter And rate any levels I'll if the increasing and targeting had fiscal has initial will but XXXX. production wanted pass be sequentially you we to about as great. Okay, then, it build on, get the see this year, secondly,

fourth as of thinking that So, at should quarter to builds, production we about for early X,XXX next look well? be if I is rate year the guidance X,XXX for that

Adrian Downes

Nice XXXX. effort for guidance on the try your get to

Justin Long

try. I to had

Adrian Downes

of there's paid producing want have the off. XXXX. do I model going that a good surprised by at products generally we But with with would agree I'm kind very shift, be things we relationships you big it to site, reliability. that of FTR momentum of certainly XXXX. rate a since These for booted don't our high under commercial the guidance good on in customers,

momentum still I'm define and say do. we're and in We've given for this year, visibility about next it. about will that's regard model to So, that we there you going all our what in some is for that afraid quarter

Lorie Tekorius

Greenbrier It bit and forth. back I wouldn't a and if be you conversation call a didn't have of a

Adrian Downes

That's certainly true. Yeah.

Lorie Tekorius

all – when the we're our very want I know on that building customers types dependent are would car of remind the our production cars. those timing you and rates guys

that So, some moderate production need moderate or depending rates. on of could that our will

Adrian Downes

True.

Justin Long

at enough. I'll Thanks the it fair that. Okay, for time. leave

Operator

Our from next from question is Matt ahead. Go Cowen. Elkott

Your open. line is

Matthew Elkott

you, morning. guys. Thank Good

tell your question. follow-up you delivery how much Just of current a for backlog fiscal on guys the deliveries? XXXX Did is us

Justin Roberts

Right this kind get muddier. this try we're point. XXXX at of in XX% to to because Matt, is sitting prepared don't now, with our we're what will about activity But it So, triangulate of backlog. Justin. further that's Please only say

situation entering again. So, very good XXXX we're in a

Lorie Tekorius

interim would XXXX May just a number. is clarify XX Justin's I that And on based

Justin Roberts

Correct.

Lorie Tekorius

having us of flexibility. the fully because of up have or Greenbrier, activity short-term doesn't to bolster And We take know, to guys schedule. give advantage near-term you don't production demand. opportunity go it love quarter another as still booked being to we enjoy our So, we commercial at all

William Furman

thanks I'd to and I'd like But made. focus just on to – joining us you for like Matt, remarks you the today. I

between the which We those builders, customers moving and content. who what we lease the middle leasing of more are of do, major in essentially engineer, a differentiation potentially that car who are toward serve those is the those

companies make We need those leasing product need will strong whom the for differentiation GATX, this and because had be is strategic to hope relationships relationships, have on with someone and literature who or the we to can't We with benefit they to from like had future, in to we've others a reliable commitments intend for customers in for about whom that will economics them. product read company forecasts. produce we've factor that really be industry strong that This relationship. those you a

it's to be for a think I up that regard. orders factor Greenbrier. coming in differentiating going are there's And multiyear that

Matthew Elkott

people And know helpful that to not back some That's ARI the that think In to commentary. gotten would that your very of acquisition future? that got influenced you've going company, front, maybe has you're not ARI you very ARI many know going other these words, you by was do as guys be the to yet, fact that I was in the which to quarter well have orders? order the order had but in was closed the announced the strong activity be go you not

William Furman

don't Personally, that. I believe

parallel reaction has geographic positive customers giving us because our the it's and a it diversifies think almost product diversity. from product I universally line been

serve our I our customers. position to it think strengthens

think minutes that, customers ago. happy I remarks apropos are our earlier a my about few

Matthew Elkott

you're you Bill. knowing that be have tank that to cars. placing so customers that to Got capacity you're orders was know with going forward disagree if wondering I it. going ARI, with that, don't going just I for they're

And just one final question.

are rail Intermodal, is is noted there for weak to petroleum are you declined weak the potential calls foreseeable customers remarks, intermodal or significantly. from any or many Frac products. sand of be about future. except your Everything frac pretty in basically has there – down getting my spots cars much prepared for grain going in traffic. deferments cars any Is grain equipment? you As sand

William Furman

Lorie?

Lorie Tekorius

else work weakness weakness. customers find who just are make some it Lorie. they I in sometimes for areas they who additional be that on, size, with is they a for with have a to particular car our a we car I customers win-win the seeing our when particular can they seeing Matt, say, will broad they've we see. Greenbrier – would add, placed What customers the that orders there mix, situation would because some are because had you're strength – and color, are a work type shift both to ordered this we've spot and are to that going and is product have were not such to thought let's of same would way seeing prefer where, say we customer something

potential calendar customers how of for is think I demonstrated that that find with that beneficial over have But a do solution for as the we both. XXXX. know work try our So, we there we that to believe rest we to that and

William Furman

So, one customer we prospective that are with least conversation score. a having on at

down We – also the been affecting with the hit in that's intermodal. loadings have and trade area, intermodal intermodal

So, types, what we long-term capacity an our and produce to revenue capacity is have This These had us. for streams of We're flow very positive said. to discussions, redeploying financial cash exchange in cars detriment long-term customers flexible. all. some at freight very our I but do of not

there's marketplace. We have our keep in nature limited That's these the them And business. big players a happy. of the number to of

pay close to So, them. have attention we to

Car Trinity solid and Tank have also Car, National others, Steel Freight – Car. competitors very and strong We Union

game, to your of means on customers. have top that we keep and satisfying So, our

Matthew Elkott

Thank very Great. much. you

Operator

Our next from question Stifel. Go ahead. Baudendistel from is Mike

Your line open. is

Michael Baudendistel

Thank you.

Just ask updated guidance. to wanted you on your delivery

slots there about at versus before. sort visibility and delta X,XXX-unit back just I looks the sort what understand was more I of model, impression of was to I'm happened looking was there. to you my what of trying under knew like build you there. had what and it sort going were what build Just And

Lorie Tekorius

question. I'll Mike, that answer Sure.

can the guidance the at expectations are when a year, to visibility when we on and we have. based As provide production we our best activity enter shift. of we've different times times, encountered do or timing There disposition

and as operations, disposition be our That to bit it out of still will of being a what activity, a So, very is as little well delivery earnings Brazil. expect weakness fourth that's Europe a quarter strong strong quarter. in and international shift a you're quarter very primarily said, coming we that seeing, be

William Furman

And back, the I We sometimes quarters – and step come we've the to to in years say, weakness, look to that which just got with we and to to tend come. tend to look we to at to think respect have forward build look We coming franchises. Europe are franchise it. both games. lose management we change, made and Brazil management to franchise, In and have To great a a that you new have a good in. Europe, booted some Glenn with William

Just meeting. an great from I Amsterdam came reorganizing that board on They are and way doing things a think job back the good are really there.

franchise had just timing think we it's kicking largely in. blip, that I a So, of and

Same thing in awarded concessionaires have government equipment, invest heavily got are When has the these opportunity Brazil, there. buy good to as the really at part some of Brazil. Brazil concessions new mandates.

So, of concessions. of they put dollars billions these in each

received Now, about or concession is has to. Rumo its

a car closely tracking anomaly. market, in behind. for the problem going quarter, in is I XX cars, will be period there question for sellers will Brazil. limited be be but the there down a think of we've this built is a time them are to capacity And that others The when. an Certainly, It

in think, improvement. see gradual future I we'll quarters,

five As next turn in I awarded, visibility concessions around think to four soon are as the the with years. we'll

Michael Baudendistel

but ARI, said year, in that the relevant. in by you that that $XX are Got of to all to being April still on ask it. year. call know next said I make statistic expect accretive, to just All you the close last timing, the you wanted sure on to things to just synergies, early sort those of at you helpful. the end million XX% you the fiscal also much wanted say ask don't That's you, want And

Adrian Downes

Yes.

that of That's relevant. is All what we believe. still still

Michael Baudendistel

That's it. I you. had. Thank all Got

Lorie Tekorius

Thank you.

Operator

Our next Go from Matt ahead. question is Brooklier from Research. Buckingham

open. is line Your

Matthew Brooklier

the of terms Hey. profit in the good had here. in progression of sequential Europe much as I'm headwind, to the of on think were hiccups Any or sense margins morning. quarter? Thanks some trying that you to of just a margin and how

William Furman

a That's or is that to if That a to or question. prepared question, it. Adrian great Justin Lorie fail lot. answer or they answer was me

Justin?

Justin Roberts

XXX in return see a Europe the So, level. normalized starts basis little manufacturing in about more XXX would another points to to our expect step-up was margins as in actually to bit impact points European We to basis QX. of QX a in

and strength kind rates all what in saying of to year, see as quite progression the continue our line we'll of for we run North bit quarter, in have entire So, with stairstep the America. a see current been we've especially

Adrian Downes

revenues step also the QX margin in up up. Manufacturing step will and will

double So, benefit. we'll get a

William Furman

I for is headwinds the had order just of in think the might what terms be you magnitude we in of looking an quarter. that

was the like, think It I it to which speaking. number $XX is and something a wasn't close not repeat. we will Brazil, relatively think And into tailwind between million, Europe turn will it?

Justin Roberts

correct. Yes, that's

William Furman

All right.

Matthew Brooklier

Okay. That's all inclusive, headwinds and fiscal XQ with everything.

William Furman

repair lump. was That's just another But those two parts. big for

underway in at be little In wildcard, in knock quarter, normalcy. work of we're repair was but not it's Brazil, to least it's hope, it – aberration off a this in the and Europe that more well we as to a wood. we on So, going

quarter. homes unexpected at coming we was expecting were areas noisy perspective. think a these – write-off and kept legacy and well residual of as corralled, we drag the carrying had positive most But now. from the we with dogs from We a can speaking, think a QX. thought those we've relates it relatively announced got last what in to that's corralled we're look had after we relative but We pretty this quite The and quarter cats issues this we

Lorie Tekorius

gross $XX you million. very, From And consideration just repair Europe, perspective, a clear. are take very talking if to into be about margin operations, you Brazil and

Matthew Brooklier

business to able you target? you're respect not the it locations. that What's of left to potentially with goals question, operations, second if your you've to a then, to repair And consider hit ever targeted asset return couple order would that Okay. in with and to selling margin closed do that

Lorie Tekorius

Sure.

brought legacy just we in So, August. operations back Greenbrier into our

So, feels say that it long, and efficiently would hasn't while time, moving really an and for we're some of us, fairly that been long through been a I like it's it facilities, profitable. to a closely that those the service is see of us geographic areas with these each in becoming if review more working there to some of solution customers optimization of we

that of nine operating it if XX that I the closed working goes fact in of locations. months, by out think that a just we locations seen figure performance improvements at way. also X several we good quickly the cannot we've out are the We've to fact

XXXX. how activity works facility again, So, but how a we're very to model a things get this we optimization we services set of end integrated with have by that from network taking our timeline come by this into of or tight network don't And consideration we the final management details it this lot an the business into to including of perspective. provide, operation a facility,

manage North As you fleet. railcars are the over aware, we American for XXX,XXX

As that those the associated oftentimes, activities with management, managing we maintenance part railcars. of are

looking at activities we're go they these So, as hand-in-hand. two

Matthew Brooklier

Appreciate helpful. very time. Okay, the

Operator

next ahead. Our Go Susquehanna. question from is Bascome Majors from

open. is line Your

Bascome Majors

taking Yeah. question. Thanks for my

something talked the we you positive swinging and little the some a not if working for cash could Thanks. year? significant Can in Is deliver that a back cash headwinds bit the in it levy operating that next look positive a in flow next capital maybe enough – to reverse, have? Is of You quarter quarter. operating And the or full entire year. to or bridge fourth free flow if guys the about little cash that's number year? even could the out at

Justin Roberts

half, breakeven be say for that, point, assets since next capital just but enter syndication, robust close but itself we the cash on definitely we some this It's fiscal zero build, to do is working don't held as – reversing this getting would inventories, railcars that. – year. it's We at probably that, on also the an I the operating basis of with the also those that year. will flow carry back Justin. including to So, sell Bascome, down we'll for is

So, we and closer to will well us cash breakeven strong to quarter, be fourth a will operating for XXXX. expected which get then have position on will the flow us

Bascome Majors

gets some the investor kind anything next first any in your reluctance year questions today, at full Thank or the on of quarters some And I to for year, would had From [ph]? on to quarter Okay. at a get directional out to a little us there's thoughts range think, speak know bogey give the you've range earlier the to share the least of you certainly you least the bit, cover year you But I What this helpful. sense outgoing been for in can us that early to really world where backlog past. willing at one the some with next wide sit it. be two expectations and you. help year? even there of Just next comfort are $X-ish expectations understand of to we year, and

Lorie Tekorius

excited we're momentum that the the with achieved say I'd Well, quarter. that we've in third

North market Again, expect We've to the I was over come is my which quarter the we our can corrected market, growth. understating, fourth – railcars we're XXX,XXX mentioned service so excited. that conservatism North continue American market choppy We American out. that largest where But market. sometimes

to we aggressive. be don't So, overly want

of assets manufacturing close opportunity fantastic to the We also on have ARI. the

quickly and distinguish So, it's them Greenbrier on between combining run is network units. quickly is be and and to distinct focused what these going difficult to legacy assimilating we're to because combined operations this to not going very continue what become as

I think And over turn they Justin will I'll comments of say to for I and those saying about us that been Adrian for So, to moderate or is I'm it lot this following all. – – see what want my excited at our you a be to have that if would expectations XXXX.

William Furman

optimistic a Look, that's that know officer. I from so. Lorie, of as wouldn't chief financial statement the do history you who do those because may positive Lorie's for they very

got that think million of a – the EBITDA Justin for correct company me, guidance $XXX can – construct current is quarter. you from – this that I we've

what is share. earnings per the can You construct

hard-pressed to It model me with be to the seems worse changed year, have I but do we'd – we baseline dramatically. than next that, –

some We international very optionality quickly. We stuff in have business Arabian turn have in They're still Saudi as there. mining real industry investing the can optionality the heavily. the

joint over the there. conclude still are venture trying to activities We

So, pop as can good and these things to to as the bad. well break the

a to we're if bit high a as we've sheet, billion had but North production the company going lot of the is We're as that's there going a undervalued in industry at for it as doesn't downturn. just about different we well normalize rate levels, shock a And Street our that's it hit negative an is against with revenue for a revenues, is we the inventory next and strong lot season So, the got its the a not the election But strength we've America balance of we dividend lot in last. downturn, for happen truth record is a stronger record was think any up ourselves cash from yield, a been cycle. declining last in we're a beating we the little all hit hoped, performing company than news flow little bit can that that beginning beginning the like outside. $X running the look quarter, just and up, in looking arguably, a of keep but XX-year I to the looking the is unless

very it I see very me So, a how worse. for we to baseline, be difficult – see do would

Now, by this that having I something want to curse then happen. saying and don't

that's best the outlook of to going kind be we're I'm you, give to afraid. So, able

it's I think positive. with agree I very Lorie. But

Bascome Majors

you October. That's That's lay it us hear of for your history and a I'm conservatism. to hear and to have to you we'll what good from see Lorie, you. that Thank are and with glad to guys in wait hear optimistic out – you

Lorie Tekorius

Thanks, Bascome.

William Furman

Bascome. Thanks,

Justin Roberts

Bascome. you, Thank

Operator

Barger from Markets. is Steve from question last our KeyBanc Go Capital ahead. And

open. line is Your

Steve Barger

Thanks. Good morning.

William Furman

Good morning.

Lorie Tekorius

Hi, Steve.

Justin Roberts

Steve. Hi,

Steve Barger

market commercial the specifics gauge your on I'm lot plan you're track. changing back on about a you talked how opportunity us just this And on for just call the any market Europe You've in of versus terms reality. recent specifically, more getting trying international strategy? give And to more can

William Furman

That's Navy, to stupid Admiral stuff stop going stuff the lot doing quote a We're number from Yes. stuff, you the our along comes easier. and stop a on. once port, good doing stupid on Fargo

officer, who Alejandro We very our Centurion. well is with a veteran of working chief he's have – commercial Glenn as William

Once to we're margins took are weren't itself much make some a veteran, We well details, many but on one, had quarter before – difference. some factories. an being customers. that too number second there those tough regulatory you've cart bad got they they really is we was watching to seeking it's business [indiscernible]. approval. when that have didn't seeing were industry many contained. really We're the are a both has We mistake should contracts, we major they during BB earlier screening of we business And will the The major got That the William money and took deal at state-owned got So, that the a in areas contracts losses, made who we They on, taken that producing all no there legacy make have of margins the were of if more blinds then the integrated XX% too you took environment selective that attention on contract. that in companies like make transition XX% of some is pay they deploying about producing store. administration. loss. that specialized. customers. when over and Graham, approved and And Martin kind

calling He's right run customers. around. I'm difference. will made this they've Europe. experienced with turn he on to a think They've put – William the optimistic He's I So, very customers. tremendous used

at next to it bottom to line positive Europe will we the improve. had in make few alone, in the expect difference shift our quarters continue the we the looking Just and from will negative a big

reasonably a there that we're market had the neglected is trade-related importantly, so – for kind strong There's on. strong more not a of Brexit some of and we still over issues seeing Now, flat. orders. noise. to booking But there. the downside of we're is companies. And go companies big German relationships with and of as over we're it's European Lot lot growth building

corrected that mistake mistake. that We as well. So, a was

Steve Barger

Of this how quarter, versus you. the orders X,XXX Thank were domestic? international it. many Got

Adrian Downes

About domestic. XX% international. was Balance

Steve Barger

you mix XQ? would expect in a And similar fiscal

William Furman

Broadly.

Steve Barger

still All the right. but going Bill, quick has the is cash one. you've and as stock years XXXX over leasing you on, to done that generation or actions. and that more to made these flow gets some come you it by are just and that all come international last still And investments back one keep Is couple case last there undervalued yet investments have all headwinds depressed? of the hard will made the been that you've to free versus cash free flow reasonable

William Furman

rate the to tackling being be that achieved, Well, all get But line and general can what digest that we think done. be make that at $X.X run great. $X have run would top the that to million profitable strategy, better revenue, rate, as a we to we've could is sure be I If blocking we if done. million

open get always button continuing house We're to going and working But sure very So, strong to of that look more working down running plan. order. down the about to our sheet G&A basic mean able be we any to contingencies for costs, allocation we're We looking in want a to to in things type as continue acquisitions rapid balance should to tighten dividend. pace But closely. really good aggressive does capital, in do at that doing growth. opportunities. opposed not for trying be XXXX what we're capital? have more be downside we international its be are just contingencies We intend capital for But

Steve Barger

you notwithstanding, year? things next would better operating leasing cash unusual free So, flow and expect

Lorie Tekorius

Yes.

William Furman

Yes.

Justin Roberts

Yeah.

Steve Barger

All right, thanks.

Lorie Tekorius

Thank you.

Justin Roberts

Thank have much very Fourth And for reach July. you. you day. happy questions, everyone you time follow-up any and today. a please me. your great attention to And out if of Have Thank a

Operator

you That concludes participating. for conference. today's Thank

You at time. this may disconnect

The Greenbrier Companies, Inc. (GBX) 2 Jul 192019 Q3 Earnings call transcript