NYSE: GBX 3Q17 Earnings Slides & Supplemental Information Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com
Safe Harbor Statement UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This presentation may contain forward-looking statements, including any statements that are not purely statements of historical fact. Greenbrier uses words such as anticipates, believes, forecast, potential, goal, contemplates, expects, intends, plans, projects, hopes, seeks, estimates, strategy, could, would, should, likely, will, may, can, designed to, future, foreseeable future and similar expressions to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. Factors that might cause such a difference include, but are not limited to, reported backlog and awards that are not indicative of Greenbrier s financial results; uncertainty or changes in the credit markets and financial services industry; high levels of indebtedness and compliance with the terms of Greenbrier s indebtedness; write-downs of goodwill, intangibles and other assets in future periods; sufficient availability of borrowing capacity; fluctuations in demand for newly manufactured railcars or failure to obtain orders as anticipated in developing forecasts; loss of one or more significant customers; customer payment defaults or related issues; policies and priorities of the federal government regarding international trade and infrastructure; sovereign risk to contracts, exchange rates or property rights; actual future costs and the availability of materials and a trained workforce; failure to design or manufacture new products or technologies or to achieve certification or market acceptance of new products or technologies; steel or specialty component price fluctuations and availability and scrap surcharges; changes in product mix and the mix between segments; labor disputes, energy shortages or operating difficulties that might disrupt manufacturing operations or the flow of cargo; production difficulties and product delivery delays as a result of, among other matters, costs or inefficiencies associated with expansion, start-up, or changing of production lines or changes in production rates, changing technologies, transfer of production between facilities or non-performance of alliance partners, subcontractors or suppliers; ability to obtain suitable contracts for the sale of leased equipment and risks related to car hire and residual values; integration of current or future acquisitions and establishment of joint ventures; succession planning; discovery of defects in railcars or services resulting in increased warranty costs or litigation; physical damage or product or service liability claims that exceed Greenbrier s insurance coverage; train derailments or other accidents or claims that could subject Greenbrier to legal claims; actions or inactions by various regulatory agencies including potential environmental remediation obligations or changing tank car or other railcar or railroad regulation; and issues arising from investigations of whistleblower complaints; all as may be discussed in more detail under the headings Risk Factors and Forward Looking Statements in Greenbrier s Annual Report on Form 10-K for the fiscal year ended August 31, 2016 and Greenbrier s Quarterly Report on Form 10-Q for the fiscal quarter ended February 28, 2017, and Greenbrier s other reports on file with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management s opinions only as of the date hereof. Except as otherwise required by law, Greenbrier does not assume any obligation to update any forward-looking statements. 1
Integrated Business Model Greenbrier s integrated business model delivers superior value to customers by creating customized freight car solutions over the entire life of a railcar. Our diversified portfolio of quality products and services enhances our financial performance across the business cycle. Manufacturing Wheels, Repair and Parts Leasing and Services 2
Two Part Strategy Core North American Market International Diversification Continue product enhancements and new product development Expand to global markets where demand for railcars is growing Focus on profitability, cash flow and developing human capital Preserve and protect areas of unique competencies in engineering, manufacturing and services Partner creatively with strong local businesses Eastern Europe, Brazil, Eurasia, Gulf Cooperation Council (GCC) 3
Resulting in Revenue and Share Growth Revenue North American Industry Backlog $ in millions (% of Total Revenue) $3,000 $2,500 $2,000 $1,500 $1,000 $500 FY 2017 Guidance of $2.1 - $2.3 billion $943 $92 $102 $749 (10%) (11%) (79%) $2,680 $261 $322 $2,096 (12%) (10%) (78%) 100% 80% 60% 40% 20% Others, 16% TRN, 36% RAIL, 14% ARI, 21% Others, 13% TRN, 44% RAIL, 5% ARI, 6% GBX, 33% $- Leasing & Services 2006 2016 Wheels & Parts Manufacturing 0% GBX, 13% September 30, 2006* 100% = 88,116 units March 31, 2017 100% = 60,471 units * September 30, 2006 represents the prior industry backlog peak Source: RSI ARCI, public filings (April 2017) 4
Flexibility Key in Changing Demand Environment 90,000 80,000 70,000 Long-term average: ~50,000 units 60,000 50,000 40,000 30,000 20,000 10,000 0 2011A 2012A 2013A 2014A 2015A 2016A 2017F 2018F 2019F 2020F 2021F Covered hopper Boxcar Tanks Intermodal Flat cars (auto) Coal Other hoppers / gondolas 5 Source: FTR Associates Rail Equipment Outlook (June 2017)
Recent Strategic Initiatives Europe: Formation of Greenbrier-Astra Rail on June 1st Brazil: Expected annual accretion of $0.15 to $0.35 beginning in fiscal 2018 Increased ownership in railcar manufacturer Greenbrier-Maxion from 19.5% to 60% Increased ownership in castings and component maker Amsted-Maxion Cruzeiro from 19.5% to 24.5% Greenbrier and Mitsubishi UFJ Lease & Finance (MUL) Agreement: Agreement finalized on June 1st Provide 6,000 new railcars through calendar 2020 Deliveries will begin in fourth calendar quarter of 2017 MUL s exclusive new railcar builder through calendar 2023 Provide MUL a combination of lease syndications and used equipment Formed new asset management service entity with each company owning 50% Expected transaction value over $1 billion 6
Estimated European Freight Wagon Ownership in 2016 100% = 700,000 units State railroads own approximately 50-60% of the Western European freight fleet but this is expected to decrease Lessors / Shippers 25% Private Operators 15% State Railroads 60% State railroads under intense pressure due to increased competition from deregulation, stagnant economy, and the influence of low oil prices which favor transport on roads 62% Largely absent from the new wagon market since 2008 Expected to increase reliance on lessors Source: SCI Private rail operators playing an increasingly important role in the new wagon market Taking share from inefficient state railroads Adding new and more efficient equipment to their fleets, which further improves value proposition 7
European Deliveries Around Recent Long-term Average 8,000 7,000 6,000 2010-2016 Average: ~ 5,900 units Estimated Western European Deliveries 5,000 Units 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 Demand for freight wagons in Europe has not yet recovered to pre-recession levels of ~7,000 8,000 units Replacement demand for ~500,000 fleet with life of 40 years is estimated to be ~12,500 wagons annually Source: SCI 8
Greenbrier - ASTRA Rail Wagony Swidnica owned three manufacturing and repair facilities Astra owned three manufacturing and repair facilities Combination creates an end-toend Europe-based freight railcar manufacturing, engineering and repair business with good access to the emerging markets further east SWIDNICA Olawa ARAD Tarnobrzeg TURNU SEVERIN CARACAL 9
Brazilian Industry Deliveries 6,000 5,000 2010-2016 Average: ~3,900 units 4,000 Units 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 Greenbrier-Maxion has achieved an average market share of over 70% Excluding any large infrastructure investments, market demand is expected to be near average deliveries 10 Source: ABIFER (Brazilian Association of the Railroad Industry)
Brazil Market Outlook - Key Drivers Modal share projections 58% 56% 2005 2015 2025 ANTT projects a 10% growth in modal share for railroads 29% 26% 34% 29% 24% 12% 12% 4% 4% 5% 2% 2% 3% Roads Railraods Waterways Pipeline Air Freight Mode of Transportation Freight rail volumes are expected to increase substantially requiring significant infrastructure and railcar investment over the next several years Additionally, over 50% (~62,000) of the freight cars in 2016 had an age profile of 30 years and older 11 Source: ANTT (Brazil s Department of Transportation)
Consolidated Financial Trends ($ in millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- $(1.00) Revenue Adjusted EPS (1) $2,680 2010 2011 2012 2013 2014 2015 2016 FY 2017 Guidance (3) $3.45-$3.65 FY 2017 Guidance of $2.1 - $2.3 billion $5.73 2010 2011 2012 2013 2014 2015 2016 24.0 21.0 18.0 15.0 12.0 9.0 6.0 3.0 0.0 Deliveries (000 s of units) 20.3 2010 2011 2012 2013 2014 2015 2016 (1) Adjusted EPS & Adjusted EBITDA exclude Goodwill impairment, Restructuring charges and other Special Items (2) Net debt is defined as Gross debt plus debt discount less Cash (3) FY 2017 EPS Guidance excludes $0.17 of convertible interest expense 12 8.0x 6.0x 4.0x 2.0x 0.0x 5.5x 4.6x 2.7x 2.0x 1.1x FY 2017 Guidance ~15,000-16,000 units Net Debt (2) to Adj. EBITDA (1) Strong Liquidity Profile Continues 0.5x 0.2x 2010 2011 2012 2013 2014 2015 2016
Greenbrier s Railcar Backlog ($ in millions except per unit values) Provides Earnings Visibility $5,000 $140 Backlog Value ($ in millions) $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $69 $89 $87 $79 $80 $112 $106 $106 $3,330 $114 $4,710 $116 $115 $108 $3,190 $2,970 $2,440 $100 $3,100 $120 $100 $80 $60 $40 Average Sales Price/Unit ($ in thousands) $1,000 $500 $- $1,440 $1,520 $1,160 $1,230 $1,200 $830 $420 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1Q 17 2Q 17 3Q 17 $20 $- Backlog Units 12,100 16,200 13,400 5,300 15,400 10,700 14,400 31,500 41,300 27,500 25,800 22,600 31,000 Year to date through May 31, 2017, Greenbrier received orders for 14,100 units valued at ~$1.3 billion. Includes: 6,000 MUL units Excludes: Greenbrier-Maxion and Greenbrier-Astra Rail 13
3Q FY 2017 Key Metric Highlights Backlog 31,000 units valued at $3.10 billion Diverse backlog reflects a broad range of cartypes including various-sized covered hoppers, non-energy tank cars, boxcars, automotive carrying railcars, gondola cars and intermodal units Backlog includes approximately 1,000 units related to the formation of Greenbrier-Astra Rail, but does not reflect any backlog for Greenbrier-Maxion Backlog includes 6,000 units related to the MUL transaction Marine backlog of ~$63 Million Backlog 31,200 31,000 27,500 25,800 22,600 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Total Deliveries 4,300 4,600 4,000 3,900 2,600 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Syndicated Deliveries Deliveries of 2,600 units including syndication activity of 200 units 800 600 500 550 Decline primarily due to timing of railcar syndications as well as lower production rates for certain car types 200 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 14
3Q FY 2017 Income Statement Highlights Revenue to $439.2 million Revenue ($ millions) Gross margin of 20.4% $612.9 $595.2 $552.3 $566.3 $439.2 Robust margin performance on lower deliveries Adjusted EBITDA to $63.8 million Adjusted EBITDA margin of 14.5% 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Adjusted EBITDA ($ millions) $99.5 $104.4 $85.7 $94.5 $63.8 Diluted EPS of $1.03 Interest expense from February 2017 convertible note had an impact of $0.08 per share 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Diluted EPS $1.12 $1.06 $1.09 $1.03 $0.79 Continued focus on profitability and growth 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 15
3Q FY 2017 Balance Sheet & Cash Flow Highlights Operating Cash Outflow due to timing of railcar syndications Operating Cash Flow ($ millions) $137.0 $45.4 $52.9 $29.0 Quarterly dividend of $0.22 per share $(9.1) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 $885 million of available liquidity Net Capital Expenditure & Invest. In Unconsol. Affiliates (1) ($ millions) $73.6 $65.7 $16.8 $3.4 $(2.1) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Net Funded Debt (2) ($ millions) $92.4 $81.3 $68.4 $108.1 (1) Investment in Unconsolidated Affiliates included to reflect net investments in unconsolidated joint ventures (2) Excludes debt discounts and issuance costs $29.5 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 16
Manufacturing Quarterly Trends ($ in millions) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Revenues $ 458.5 $ 484.6 $ 454.0 $ 445.5 $ 317.1 Gross Margin $105.7 $101.7 $97.5 $98.9 $71.9 Gross Margin % 23.1% 21.0% 21.5% 22.2% 22.7% Operating Margin % 20.2% 18.5% 18.4% 19.2% 18.3% Capital Expenditures $12.9 $15.7 $9.0 $6.2 $11.5 New Railcar Backlog $3,620 $3,190 $2,970 $2,440 $3,100 3Q Business Conditions Lower deliveries reflect timing of railcar syndications and lower production rates for certain car types Margin % increase due to product mix and strong operating efficiency New Railcar Backlog (units) 31,200 27,500 25,800 22,600 31,000 Deliveries (units) 4,300 4,600 4,000 3,900 2,600 Revenue and Gross Margin % FY 17 Outlook $ in Billions $2.4 $2.0 $1.6 $1.2 $0.8 $0.4 $- 24% 20% 16% 12% 8% 4% 0% Deliveries of 15,000 to 16,000 units Capital expenditures are expected to be approximately $45 million, primarily related to enhancements of our existing manufacturing facilities Revenue Gross Margin 17
Wheels & Parts Quarterly Trends ($ in millions) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Revenues $78.4 $74.8 $69.6 $82.7 $85.2 Gross Margin $8.6 $5.2 $4.7 $7.2 $7.2 Gross Margin % 11.0% 7.0% 6.7% 8.7% 8.5% 3Q Business Conditions Revenue increase primarily attributable to increased scrap revenue Margin % decrease due to change in product mix Operating Margin % 7.4% 5.7% 4.2% 6.7% 5.0% Capital Expenditures $3.4 $4.4 $1.2 $0.7 $0.6 $ in Thousands $600 $500 $400 $300 $200 $100 $- Revenue and Gross Margin % (1) 12% 10% 8% 6% 4% 2% 0% FY 17 Outlook Expect these conditions will persist in the near term Capital expenditures are expected to be approximately $5 million for maintenance and enhancements of our existing facilities Revenue Gross Margin 18 (1) Pre-2014 results include legacy Repair operations which were contributed to GBW Railcar JV in July 2014
Leasing & Services Quarterly Trends ($ in millions) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Revenues $75.9 $35.8 $28.6 $38.1 $36.8 Gross Margin $12.8 $12.7 $10.6 $12.9 $10.6 Gross Margin % 16.8% 35.5% 37.1% 33.8% 28.7% 3Q Business Conditions Revenue reflects lower interim rent and externally sourced railcar syndications Margin % decrease primarily due to lower net interim rent Operating Margin % 10.9% 25.3% 25.8% 26.0% 19.2% Net Capital Expenditures ($0.8) $52.3 ($6.8) ($9.0) $20.1 Lease Fleet Utilization 94.9% 91.0% 94.2% 93.8% 93.6% Revenue and Gross Margin % FY 17 Outlook $ in Millions $300 $250 $200 $150 $100 $50 $- 70% 60% 50% 40% 30% 20% 10% 0% Capital expenditures (including corporate) expected to be ~$30 million Integration and growth of new Regulatory Services Group Revenue Gross Margin 19
GBW Railcar Services (1) Quarterly Trends ($ in millions) 3Q 16 4Q 16 1Q 17 2Q 17 3Q 17 Revenues $95.7 $84.1 $70.3 $64.2 $62.7 3Q Business Conditions Revenue and operating results reflect challenging operating environment, especially in general repair operations Earnings (loss) from operations $3.0 ($0.5) ($4.6) ($6.9) ($5.5) Total assets $255.4 $247.6 $238.3 $227.2 $218.8 Revenue FY 17 Outlook $ in millions $400 $300 $200 $100 Demand headwinds expected to persist in the near term $- 2015 2016 LTM 5/31/2017 (1) GBW Railcar Services reflected in the Earnings from Unconsolidated Affiliates line on the income statement 20
Appendix
Quarterly Adjusted EBITDA Reconciliation Supplemental Disclosure Reconciliation of Net Earnings to Adjusted EBITDA (In millions, unaudited) May 31, 2016 Aug. 31, 2016 Quarter Ending Nov. 30, 2016 Feb. 28, 2017 May 31, 2017 Net earnings $59.5 $60.4 $48.0 $49.0 $31.2 Interest and foreign exchange 3.7 2.9 1.7 5.7 7.9 Income tax expense 22.5 19.4 20.4 24.8 8.7 Depreciation and amortization 13.8 21.7 15.6 15.0 16.0 Adjusted EBITDA $99.5 $104.4 $85.7 $94.5 $63.8 See slide 25 for definition of Adjusted EBITDA 22
Annual Adjusted EBITDA Reconciliation Supplemental Disclosure Reconciliation of Net Earnings (loss) to Adjusted EBITDA (In millions, unaudited) Year Ending August 31, 2010 2011 2012 2013 2014 2015 2016 Net earnings (loss) $8.3 $8.4 $61.2 ($5.4) $149.8 $265.3 $284.8 Interest and foreign exchange 45.2 37.0 24.8 22.2 18.7 11.2 13.5 Income tax expense (benefit) (0.9) 3.5 32.4 25.1 72.4 112.2 112.3 Depreciation and amortization 37.5 38.3 42.4 41.4 40.4 45.1 63.4 Goodwill impairment - - - 76.9 - - - Gain on contribution to GBW - - - - (29.0) - - Loss (gain) on debt extinguishment (2.1) 15.7 - - - - - Special items (11.9) - - 2.7 1.5 - - Adjusted EBITDA $76.1 $102.9 $160.8 $162.9 $253.8 $433.8 $474.0 See slide 25 for definition of Adjusted EBITDA 23
Annual Adjusted EPS Reconciliation Supplemental Disclosure Reconciliation of Net Earnings (loss) Attributable to Greenbrier to Adjusted Net Earnings (loss) (In millions, except per share amounts, unaudited) Year Ending August 31, 2010 2011 2012 2013 2014 2015 2016 Net earnings (loss) attributable to Greenbrier $4.3 $6.5 $58.7 ($11.1) $111.9 $192.8 $183.2 Goodwill impairment (after-tax) - - - 71.8 - - - Gain on contribution to GBW (after-tax) Loss (gain) on debt extinguishment (after-tax) - - - - (13.6) - - (1.3) 9.4 - - - - - Special items (after-tax) (11.9) - - 1.8 1.0 - - Adjusted Net Earnings (loss) ($8.9) $15.9 $58.7 $62.5 $99.3 $192.8 $183.2 Weighted average diluted shares outstanding 20.2 26.5 33.7 34.2 34.2 33.3 32.5 Adjusted EPS ($0.44) $0.60 $1.91 $2.00 $3.07 $5.93 $5.73 See slide 25 for definition of Adjusted EPS 24
Adjusted Financial Metric Definition Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS are not financial measures under generally accepted accounting principles (GAAP). We define Adjusted Net Earnings (loss) as Net Earnings (loss) attributable to Greenbrier before goodwill impairment (after-tax), gain on contribution to GBW (after-tax), loss (gain) on debt extinguishment (after-tax) and special items (after-tax). We define Adjusted EBITDA as Net earnings (loss) before interest and foreign exchange, Income tax expense (benefit), goodwill impairment, gain on contribution to GBW, loss (gain) on debt extinguishment, special items, Depreciation and amortization. We define Adjusted EPS as Adjusted Net Earnings (loss) before interest and debt issuance costs (net of tax) on convertible notes divided by Weighted average diluted shares outstanding. We define Return on Invested Capital as Earnings from Operations less Cash paid for Income taxes, which is then annualized and divided by the sum of average Revolving notes plus Notes payable plus Total equity less Cash in excess of $40 million operating cash, which is averaged based on the quarterly ending balances. Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS are performance measurement tools used by rail supply companies and Greenbrier. We believe the presentation of Adjusted EBITDA provides useful information as it excludes the impact of financing, foreign exchange, income taxes and the accounting effects of capital spending. These items may vary for different companies for reasons unrelated to the overall operating performance of a company s core business. We believe Adjusted EBITDA assists investors in understanding our underlying core operating performance and improves the period to period comparability. You should not consider Adjusted Net Earnings (loss), Adjusted EBITDA, and Adjusted EPS in isolation or as a substitute for other financial statement data determined in accordance with GAAP. In addition, because Adjusted Net Earnings (loss), Adjusted EBITDA and Adjusted EPS are not measures of financial performance under GAAP and are susceptible to varying calculations, these measures presented may differ from and may not be comparable to similarly titled measures used by other companies. 25
NYSE: GBX 3Q17 Earnings Slides & Supplemental Information Investor Contact: Investor.Relations@gbrx.com Website: www.gbrx.com