The Greenbrier Companies, Inc. (GBX) Earnings Call Transcript & Summary

Good afternoon. I'm Bill Furman. Welcome to the 2021 Annual Meeting for The Greenbrier Companies, Inc. I appreciate your joining the 2021 Annual Meeting of Shareholders. I will now call the meeting to order. To ensure the health and safety of our employees and shareholders, this is our first virtual shareholder meeting. We appreciate you joining us virtually since we cannot all gather as usual at The Benson Hotel in Downtown Portland, Oregon. We will start today's meeting by considering the matters described in our proxy statement. We will then provide an overview of the current business climate and open the meeting up for questions. You will have the opportunity to vote your shares if you have not already voted. At the bottom right-hand side of your screen are relevant materials for today's meetings, including our 2020 annual report, our 2021 proxy statement and a copy of the rules of conduct for this meeting. I would like to recognize the members of our Board of Directors, all joining us here today either remotely or in person. On the line are Kelly Williams, Admiral Tom Fargo, Graeme Jack, Wanda Felton, Dave Starling, Wendy Teramoto and Don Washburn. Ambassador Charles Swindells; and Lead Director, Duane McDougall, are with me at our corporate headquarters. Members of Greenbrier's management team, including our President and Chief Operating Officer, Lorie Tekorius; our Senior Vice President and Chief Financial Officer, Adrian Downes; and our Vice President of Corporate Finance and Treasurer, Justin Roberts, are also with us today here in our corporate offices; as well as Jack Isselmann, our Vice President of Public Policy and Communications. Our Corporate Secretary, Christian Lucky, is also here, and Christian will now review the voting formalities. Christian?

Thank you, Bill. Notice was sent to shareholders on November 12, 2020. We have a quorum present in person or by proxy. This meeting is duly constituted, and we may proceed with business. I will now turn the meeting back over to you, Bill.

Thank you, Christian. The polls are now open. If you have previously voted over the Internet or by phone or by mail, you do not need to take any action. If you have previously voted and wish to change your vote, please do so before the polls close. Once the polls close, we will announce the preliminary results. If you wish to vote during the meeting, you may do so by clicking on the link at the right-hand side of the screen on the meeting portal. [Operator Instructions] Please see the rules of conduct on the right-hand side of the screen on the meeting portal for more information about questions that will be answered at this meeting. [Operator Instructions] Portions of this meeting, including the business update, may contain forward-looking statements about Greenbrier's business opportunities and anticipated results of operations. Please keep in mind that forward-looking statements are subject to many risks and uncertainties and that actual results may differ materially from what is projected. Many of the risks and uncertainties are described in Greenbrier's most recently filed 10-Q and other SEC filings. And we have prepared our annual year-end video review, which we typically display at this time of the meeting. However, this year, you can view this at your convenience on the Investors page at gbrx.com. I will now review the 5 proposals for consideration today. We did not receive notice in accordance with our bylaws of any additional matters, and therefore, no other proposals or nominations may be introduced. The first item on the agenda is the election of directors, 3 directors to serve as Class III directors for a term of 3 years. The Board has recommended the following slate of nominees: myself, Bill Furman; Ambassador Charles Swindells; and Kelly Williams. The experience and qualifications of each of our nominees are described in our most recent proxy statement, which is accessible on the meeting portal. Our Board recommends that shareholders vote for all of these nominees. The second item on today's agenda is to approve by advisory vote the compensation of our named executive officers as disclosed in the proxy. Our Board recommends a vote for approval of executive compensation. The Compensation Committee and the Board values the views of our shareholders, and we are committed to excellence in the design and effectiveness of our executive compensation program. We do listen to you, and we appreciate your input. Our executive compensation program is designed to drive performance and to increase shareholder value. It also is intended to align the interest of key executives with shareholders. It helps attract, develop and retain key executives, and it strengthens the link between pay and performance. Greenbrier believes that its compensation program, a significant portion of which is performance-based, is strongly aligned with the long-term interest of shareholders. Greenbrier's total shareholder return over the 1-year period, the last 1-year period ending August 31, 2020, was 22.2%. The Board and Compensation Committee believe that the 2020 Compensation Program for our named executive officers helped drive solid financial performance in an especially challenging year given the beginning of the COVID-19 pandemic. Although this vote is nonbinding, our Compensation Committee, which is responsible for designing and administering the executive compensation program, highly values the opinions expressed by shareholders and their votes on this proposal. We also carefully consider the input from various advisory firms who publish on us. The Compensation Committee will consider the outcome of the vote when making future compensation policies and decisions for the company's named executive officers. In addition, we conduct regular shareholder outreach, talking directly to shareholders. And we always have an open door policy to shareholders who want to approach us, particularly our major long-term shareholders. The third item on today's agenda is to approve Greenbrier's 2021 Stock Incentive Plan. At its October meeting, our Board unanimously adopted the 2021 Stock Incentive Plan subject to approval by our shareholders at this meeting. The 2021 plan replaces our 2017 amended and restated stock incentive plan. The 2021 plan will be immediately effective following this meeting if it is approved by shareholders. Otherwise, the 2017 plan would remain in effect. The purpose of the 2021 Stock Incentive Plan is to attract, retain and motivate our officers, directors and other eligible participants by providing them the opportunity to acquire an interest in the company and to further align their interest with the long-term interest of the company's shareholders. Our Board recommends that shareholders vote for approval of the 2021 Stock Incentive Plan. The fourth item on the agenda is to ratify the selection of KPMG as the company's independent auditors for the 2021 fiscal year. Our Board recommends that the shareholders vote for the ratification of KPMG. The final item on the agenda is a shareholder proposal titled Independent Board Chair. In accordance with SEC rules, we will now play a prerecorded presentation of this proposal by the proponent. Can we play that?

I hereby present Proposal #5, which is a shareholder proposal regarding an independent Board chair. I urge all Greenbrier shareholders to vote in favor of Proposal 5. Thank you.

We appreciate the time and energy you've put into this shareholder proposal. Respectfully, we -- our Board recommends a vote against this proposal and considers it unnecessary. In October 2020, our Board unanimously adopted a policy that upon my retirement as CEO in September 2022, only independent directors will be eligible to serve as Chair of the Board. We will continue to have a Lead Director designated by our independent directors until such time. As noted earlier, there are no other proposals for consideration today. We will use the next few minutes to provide an overview of the current business climate, and then we will come back to the results of the voting after the polls are closed. As I mentioned earlier, matters to discuss today include forward-looking statements. Throughout this discussion, we will describe factors which could cause Greenbrier's actual results to differ from any forward-looking statement. On the screen, you'll see the typical safe harbor statement, and we know that this is also available to you electronically. Turning to Slide 2. Greenbrier's integrated business model provides customers with comprehensive freight car solutions. This is done by deploying our substantial engineering, mechanical and technical capabilities on 3 separate continents as well as our experienced commercial personnel to assist our cultures -- our customers, to improve our culture and bring new ideas into the firm for the benefit of our customers. We deliver superior value to customers by creating solutions to the entire life of a railcar -- throughout the entire life of the railcar. In short, we solve our customers' problems, we listen to our customers, and we respond to any issues that arise. Our $2.35 billion new car backlog -- new railcar backlog provides multiyear visibility. We have a significant focus on liquidity and spending reductions due to the pandemic and the global economic crisis. Earlier last year, we set and achieved a $1 billion liquidity goal. All of this has been successful and has positioned Greenbrier for strong performance postcrisis and indeed survival through the crisis and to be in a very strong position for the future. We're proud of reaching our lowest recordable injury rate in fiscal 2020. We know our work here is never done. Establishing and adhering to strict COVID-19 protective protocols has kept Greenbrier operating safely as an essential infrastructure supplier in 2020. And it is an extension of our long-term commitment to safety and to the welfare of our workforce and also one of our core values, which is respect for people. Our response, looking to Slide 3, has been to ensure the safety of our employees. We meet and exceed all CDC recommendations at every facility worldwide, to attain infrastructure -- official infrastructure and business status in every jurisdiction in which we operate and to ensure that our operating network remains online safely, carrying cash flow to strengthen the balance sheet of Greenbrier. And indeed, this has been done. And thirdly, to preserve our financial well-being. We've taken swift action to rationalize production capacity globally, reducing our spending, including executive compensation tied to performance, and to increase our liquidity. We've also taken societal measures to continue to grow our commitment to the communities in which we operate and to diversity and inclusion. I'm very proud of what has been accomplished over the last several years and the last several months. And we remain vigilant as the impact of the pandemic remains upon us. Turning to Slide 4, you'll see several of Greenbrier's accomplishments in 2020. We've successfully achieved a multiyear strategy to increase the scale of our platforms across 3 continents. We grew or maintained market share in all geographies where we operate. We integrated the operations of ARI, the largest acquisition in company history, in the states of Arkansas and Texas and other Midwestern states, giving our company one of the strongest U.S. footprints in addition to our footprints in Mexico, Brazil and Europe. We achieved strong financial performance despite COVID-19 challenges. We maintained our focus -- our constant focus on talent pipeline and development. And we expanded our diversity, equity and inclusion commitment to deepen our core value of respect for people. Adrian Downes, our Chief Financial Officer, will now spend a few minutes discussing Greenbrier's financial performance. Adrian?

Thank you, Bill, and I'm on Slide 5. Today, Greenbrier reported fiscal Q1 results, including revenue of $403 million, deliveries of 3,100 units and net loss per share of $0.30. Despite a weak North American freight railcar market, Greenbrier secured worldwide orders of 2,900 units valued at $260 million during the first quarter. We have a robust backlog of 23,900 units valued at $2.35 billion, now spanning almost all railcar types and reaching more geographical markets. As a point of reference, our current backlog is more than 5x higher than during the last significant industry downturn in 2010. Moving to Slide 6. Greenbrier's balance sheet and liquidity remains strong and provides flexibility in these uncertain times. For the last 12-month period ending November 30, net funded debt to EBITDA was 1.5x. We have a strong liquidity profile that includes $725 million of cash and $85 million of additional borrowing capacity. Additionally, we have $150 million of initiatives still in progress. Greenbrier's Board of Directors is focused on balanced deployment of capital to create long-term shareholder value. One of the means is through Greenbrier's quarterly dividend. Today, we announced a quarterly dividend of $0.27 per share, which also happens to be our 27th consecutive quarterly dividend. This demonstrates the high confidence the Board and management has in our ability to execute on our long-term strategy. Currently, our annual dividend represents a dividend yield of approximately 3%. Since 2014, Greenbrier has returned nearly $315 million to shareholders through dividends and share repurchases. Quarterly dividends are up by approximately 80% from $0.15 per share to $0.27 per share since 2014. Moving to Slide 7. You can see Greenbrier's extensive transformation over the last decade to become more financially nimble and to diversify operationally. This has been a key factor as we successfully weathered the ongoing storm of COVID-19. Financially, we are well positioned to take advantage of opportunities that will accompany an economic recovery and an expected upturn in our markets. Next, Lorie Tekorius, President and Chief Operating Officer, will spend a few minutes discussing Greenbrier's core values and provide an update on our ESG and diversity, equity and inclusion initiatives.

Thank you, Adrian. On this slide are the core values we set 40 years ago. Safety is our top priority. It's vital to us that our people go home safely at night. And as has been stated by Bill, recent safety statistics are the best that we've posted to date. Regarding the environment and sustainability, freight rail is one of the most sustainable forms of transport in the world and will be one of the tools used to address climate change. Regarding our community responsibility, it's important, and we are proud of the financial and volunteer support provided to all our communities around the world especially during these challenging times. We believe business has a responsibility to serve society beyond our bottom line, and we take that responsibility seriously. As part of our governance value, we remain committed to workforce diversity at all levels of the company, top to bottom. As we've said a couple of times today, respect for people, our employees, customers and suppliers are central to Greenbrier's past, present and future. And turning to the next slide, on ESG. Our second annual report, which aligns with the Sustainable Accounting Standards Board or SASB, was published in August -- October 2020 and can be found on our website. This report puts our core values on display for all of our stakeholders. Our report focused on 4 areas, first being governance and ethics, which includes Board leadership and diversity, risk management consistent with our overall corporate strategy and stakeholder engagement. Second focus is putting people first in areas such as workplace safety, employee development, workforce retention and diversity, equity and inclusion. The third focus was for environmental sustainability. We track environmental metrics, including disclosure of greenhouse gas emissions, water usage and energy consumption, to meet or exceed requirements in the geographies we operate. And the fourth focus is contributing to our communities through community outreach, charitable donations and global volunteer hours. We want to be a good neighbor. And now turning to diversity, equity and inclusion. We are using IDEAL to summarize our platform. IDEAL stands for inclusion, diversity, equity, access and leadership. All of these are very key, but we wanted to highlight that leadership, meaning tone at the top, is very important to us at Greenbrier. And this is not an initiative, a campaign or a project. There's no end date or finish line. This is a formal commitment to enhance our culture over time, building on an already strong foundation of respect for people. Our near-term focus includes awareness and education opportunities for our leaders and implementing measurable and attainable success targets. Longer-term objectives include honoring the differences among each of us at Greenbrier and providing an inviting and a supportive workplace for all, fostering an environment that's attractive to prospective employees, improving operational performance and optimizing financial business results because we believe diverse teams create higher-quality work. Another long-term objective is to nurture creativity, innovation and a variety of perspectives that leaves everyone feeling prouder to work at Greenbrier. We want to enhance our corporate reputation and open opportunities to work with customers, which prioritize IDEAL-focused suppliers for awards of new business. And now I'll turn it back to you, Bill, to finish the presentation by discussing our outlook and priorities.

Very good. Thank you, Lorie. As Lorie suggested, we have near- and longer-term priorities. We believe in managing the company through cycles to become stronger and stronger. And we take a long-term view of shareholder value, and our goal is to produce shareholder value. In the near term, our focus remains unchanged. We will continue to execute on all of our COVID-19 strategy until the pandemic is beaten. Greenbrier's aggressive response in the early days of the pandemic have allowed us to navigate the crisis successfully while positioning ourselves for growth on the other side of the crisis. And we achieved this by leading from our core values. Among our core values is to serve our shareholders by returning capital and by listening to them. We want to thank you for your commentary in our investor outreach and in other ways. A crisis highlights where we are weak and where we are strong. COVID-19 is no different. We will use what we've learned to continue building a stronger and more diversified Greenbrier. We will focus on our values and strategic goals to maximize value for our shareholders and other stakeholders. We thank all current and future stakeholders, employees, suppliers and communities in which we operate for having confidence in Greenbrier and continuing to help us succeed. Longer term, we will continue to diversify our product portfolio and concentrating on creating shareholder value by dampening the effects of the railcar and economic cycle. We will do this by creating longer-term revenue streams that are sustainable, using the increased scale and market capacities and insights we have gained. Thank you very much for listening to this shareholder overview -- or this economic overview. Now that all proposals have been presented and everyone has had the opportunity to vote, I declare the polls closed. I understand the votes have been counted. Christian Lucky, can you please present the preliminary result and report of the inspector of elections?

Thank you, Bill. One, all of the director nominees have been elected. Two, the compensation of the company's named executive officers has been approved. Three, the 2021 Stock Incentive Plan has been approved. Four, ratification of KPMG as the company's independent auditors has been approved. And five, the shareholder proposal has not been approved. We will file an 8-K to report confirmed voting results. I turn the meeting back to you, Bill.

Thank you very much for that report, Christian.

Now I'd like to discuss the questions we received via the Web portal. Justin Roberts, our Treasurer and VP of Corporate Finance, will be reading the questions. You may please proceed, Justin.

Thank you, Bill. The first question is, when will the next barge be launched out of Gunderson?

We have a very good backlog into 2022. And we believe that in January -- no later than February, will not be open to the public unfortunately. It's quite a spectacle. We will have our -- this event videoed and available on our website.

And that will conclude our Q&A session. With that, I will turn the meeting back to you, Bill.

All right. Thank you, Justin, for hosting the questions, and thank you for everyone on the call for the questions you asked. If you have follow-up questions, please contact us through the various means that we publish. We truly appreciate your interest in the company. This concludes Greenbrier's 2021 Annual Meeting. Since there are no other matters to properly before -- come before the meeting, I will now adjourn it. Again, thank you for joining us today, and we appreciate your continued support. Stay safe in this environment. Be well.

This now concludes today's meeting. Thank you for joining, and have a pleasant day.