Hello and welcome to The Greenbrier Companies Third Quarter of Fiscal Year 2020 Earnings Conference Call. Following today's presentation, we will conduct a question-and-answer session. Each analyst should limit themselves to only two questions. Until that time, all lines will be in a listen-only mode. At the request of The Greenbrier Companies, 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, Christy. Good morning, everyone, and welcome to our third quarter of fiscal 2020 conference call. On today's call, I'm joined by Greenbrier's Chairman and CEO, Bill Furman; Lorie Tekorius, President and COO; and Adrian Downes, Senior Vice President and CFO. Today, they will provide an update on Greenbrier's fiscal third quarter as well as our near term priorities during the pandemic and continued economic fallout. 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. Matters discussed on today's conference call 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 2020 and beyond to differ materially from those expressed in any forward-looking statement made by or on behalf of Greenbrier. And with that, I'll turn it over to Bill.

Thank you, Justin, and good morning, everyone. As we start this morning, I want to convey my sincere appreciation to our dedicated workforce who have been diligently working and achieving success under very challenging circumstances. We are thankful to our employees across every factory, office, and those working from home, as well as to our customers, business partners, and shareholders. These times have certainly been unprecedented. Greenbrier and its team are actively responding to these challenges, and we've adapted quickly. The rail industry and shipper traffic were already weakened by trade issues before the pandemic, and then we faced the oil shock and the pandemic. Recently, we've all been deeply affected by social and racial injustices, and perhaps the time spent in social distancing and isolation has allowed us to reflect. Since co-founding Greenbrier nearly 40 years ago with my partner, Alan James, our success has surpassed what we initially anticipated. It all started with a $5,000 investment each from my basement and a handshake deal based on mutual commitment. Today, we are one of the largest freight railcar transportation equipment service providers globally. From a fleet of 300 cars in Huntington, West Virginia, named after the Greenbrier Resort with its permission, we have grown into one of the most valuable franchises in the rail service sector. It has been a remarkable journey filled with contributions from countless individuals. This is not the first or the worst situation our industry has faced. We have a well-known playbook: respect for capital, maintaining liquidity, quick reactions, adjusting platforms, and recovering. Our industry has shown it is versatile and capable of a fast recovery, as seen in previous recessions. In light of the dual challenges posed by the pandemic and the economy, Greenbrier has taken swift and decisive, albeit difficult, actions. More challenges will arise in the coming months, but I am confident in our management team’s ability to rise to the occasion. I want to once again thank all of our employees, customers, and shareholders for their belief in us; we will not let you down. I am honored to lead Greenbrier during this critical time. As we begin, I would like to share my thoughts on recent social events that have occurred since our last call. These events have reminded us of longstanding social inequities in our country that existed long before the COVID-19 pandemic. We can find hope amid despair and engage in positive and necessary change. At Greenbrier, we will strive for change by embodying our core values. For over 40 years, respect for individuals has been integral to Greenbrier's culture. We value individuals for their uniqueness and the diverse insights they bring. Furthermore, we aim to do what is right — it’s both the moral and productive choice. Numerous productivity studies over the past century have shown that focusing on the workforce, whether through the Toyota Production System or similar initiatives like ours, yields significant benefits. We recognize that a diverse workforce enables us to better achieve our business goals. Bringing together employees from varied backgrounds and experiences allows us to address challenges more effectively and serve our customers better. While we acknowledge this reality, we also understand that corporations, including ourselves, must do more. Greenbrier is creating an internal framework to integrate efforts to address social inequities deeper into our core strategy. As a company, we are committed to tackling inequality and contributing to solutions around environmental issues, diversity, and inclusion. We will be driven by metrics in our efforts and welcome accountability as we pursue continuous improvement. Playing our part for society involves maintaining a successful business. Currently, we are focused on the priorities shared during our last earnings call: ensuring the safety and security of our workforce and securing our business's economic health. We have made good progress as we navigate a measured response tailored to the challenges we face. Our focus is on liquidity, cost reduction, capital preservation, and respect for capital, which is beginning to reflect in our numbers. In the upcoming quarters, as circumstances evolve, especially if the current situation persists without substantial improvement, we anticipate seeing those metrics improve further. We continue to monitor the health of our more than 13,000 employees worldwide. As you will hear from Lorie, we have protocols in place to address any potential COVID-19 exposure, which are promptly reported and managed. Our management enforces these protocols with a high level of discipline, resulting in a low experience rate of active cases among our workforce. Our recovery rate is impressive. We wish a full recovery to each employee affected and their families. To mitigate the virus's spread, our manufacturing plants are either meeting or exceeding CDC guidelines to protect our employees while continuing operations. Despite high virus spread levels in Mexico, Brazil, and most recently the U.S., our safety protocols and quick actions to identify cases have kept our exposure to plant-wide outbreaks low. We have acted quickly to prevent clusters and contain any outbreak. Unlike many businesses in the U.S. and worldwide, we have not experienced the same adverse incidents. Financially, we have met or exceeded our near-term targets. Our consolidated cash balances have risen by over $0.5 billion since the quarter began. We have reduced our net debt by nearly $200 million. Our swift actions to cut selling and administrative expenses have positively impacted our financial performance in the third quarter, even amid the closure of some manufacturing lines, which has obscured the full impact of our initiatives in that area. Nonetheless, selling and administrative expenses have decreased by almost 10% sequentially, with expectations for further reductions into the fourth quarter and into 2021. The advantages of our cost-cutting initiatives and our focus on preserving capital and ensuring liquidity while maintaining essential business operations worldwide will bolster the business and generate additional cash flow as the economy moves through this tough period and eventually recovers. The pandemic has prompted all businesses to contemplate leaner operations with lower overhead, leveraging the lessons learned from remote work and at-home operations. Our manufacturing model is designed for flexibility. Remember, even before the pandemic began, we had already started reducing our manufacturing footprint in Brazil, the U.S., and Mexico in anticipation of decreased demand for railcars and diminished aftermarket activity. Adjustments to production and staffing levels that began in September last year continued into the third quarter of this year, resulting in idling capacity in North American facilities and Greenbrier Rail Services locations. Since initiating that process, we have reduced our North American workforce by about 40%. Most separations occurred at two of our three Mexican operations before the third quarter. It is always difficult and emotional to part ways with colleagues and friends who possess significant talent and qualities. This time was no different. In the third quarter, we made the tough decision to suspend railcar manufacturing operations at Gunderson, our flagship facility in Portland, Oregon. The third quarter also saw Greenbrier eliminate various administrative roles across all business units and corporate departments. As a result, we reduced our North American employee count by 1,600 during the third fiscal quarter, adding to the nearly 4,000 positions that were previously eliminated since the beginning of our fiscal year in the first two quarters. All employees affected received severance benefits linked to their tenure, fully reflected in the quarter's financials, designed to support them as they transition into government programs. This practice aligns with our philosophy of respecting our workers. The severance bridge was necessary as public programs have often experienced unacceptable delays in delivering benefits to workers who, through no fault of their own, find themselves out of work. It was particularly difficult to let go of workers at Gunderson who have stood by us through numerous downturns and financial crises over the 35 years of our ownership of that operation, tracing back to the FMC Marine and Rail division and the Gunderson Brothers' original business from 1918. Greenbrier's Marine business, compliant with the Jones Act, continues at Gunderson, and we have a backlog that extends well into 2021, along with a strong pipeline for new vessel orders. Therefore, we will maintain operations at Gunderson on a much smaller scale. As I mentioned earlier, we’ve seen a significant amount happen in a short time. Fortunately, our experienced team has been well-prepared for this. No matter what lies ahead, Greenbrier is resilient and ready. If necessary, we are equipped to navigate the most challenging times. However, I believe we are not facing our worst times. Our industry has weathered tough recessions before, like in the 70s when only 5,000 cars were built annually, a time when we acquired Gunderson because we saw potential. As the great Carl Icahn noted, tough times present good opportunities. Greenbrier represents an excellent investment opportunity. We have developed an exceptional franchise in railcar engineering, manufacturing, leasing, and management services. Our loyal customers are globally spread. Our strong position in the North American market is supported by our efficient and flexible plants. We are involved in the management of one-quarter of the North American railcar fleet in various capacities. In the upcoming quarters, Greenbrier will continue to safeguard its financial stability, create significant liquidity for future investment opportunities, and maintain focus on our core businesses. We will work towards optimizing our operations and enhancing shareholder value as we move forward. Now, I’ll hand it over to Lorie.

Thank you, Bill. And good morning, everyone. Our fiscal third quarter was quite strong in the midst of the pandemic and resulting economic downturn. As Bill said, I'm very pleased with Greenbrier's ability to respond quickly and decisively to the world-altering events over the last several months. I'll spend a few minutes on the quarter and then provide an update on our COVID response. We delivered 5,900 railcars in the quarter, including the syndication of 1,600 units. As we stated previously, the timing of syndications can be lumpy and a higher number this quarter offsets the lower numbers that you saw in the first and second quarter of our fiscal year. This quarter, we received orders for 800 railcars valued at about $65 million. Orders originating from international sources accounted for over 50% of the activity of the quarter and this mix did impact the average sales price of order activity. Our backlog remained strong at 26,700 units valued at $2.7 billion. Our multiyear manufacturing backlog continues to be the source of stability in difficult times and provides us with the resilience and a bridge to when industry dynamics and economic conditions improve. We don't expect demand to recover overnight and the number of cars in storage represents the highest level of railcars stored on record. So we're nonetheless encouraged by the activities of our commercial team and conversations we have going on with several of our customers. And while orders in the quarter were clearly low by any standards, we have maintained momentum. And there's a reasonable amount of current activity that’s subject to documentation and final confirmation not reflected in the current backlog. Our North American manufacturing group performed resiliently in a uniquely challenging quarter. In addition to building several thousand high quality railcars efficiently, the management team enacted the various protocols needed to ensure employee safety, including daily temperature checks for thousands of employees, redesigning workflows and stations to allow for social distancing, and introducing heightened cleaning activity across the network. These actions have allowed our facilities to remain open while providing a safe working environment. I'm further pleased to report that the operating performance of our ARI manufacturing facilities continued to improve this quarter, reflecting the benefits of remedial actions taken in our first quarter. Performance in Europe and Brazil was in line with expectations. And as already stated the order activity internationally and specifically in Europe improved throughout the quarter and accounted for about half of this quarter's orders. Europe's economy is slowly reopening, although it will take several months before it's back to pre-COVID levels. Brazil's economy continues to struggle through the pandemic and we're working closely with our local management team to ensure the safety of all of our employees. Our wheels, repair, and parts operation revenue was impacted by lower rail traffic and fleet utilization, while continuing operating efficiency improvements in our repair business drove improved gross margins in the quarter. The management team did an excellent job enacting a response plan to COVID across the entire network, allowing employees to work safely, while providing essential services for the North American freight rail network. Our leasing and services group performed well in the quarter, even with traffic and commodity-driven headwinds. The earnings of the group were negatively impacted by a $4.3 million charge related to a few financially distressed sand companies. A portion of the charge was driven by the new lease accounting standard. God bless all the accountants. These charges were more one-time in nature and are not expected to repeat going forward. Our lease syndication capital markets team had a robust quarter, as I already said with 1,600 units syndicated, generating proceeds over $180 million. This is a very significant accomplishment given the volatile nature of the financial markets over the last several months. And now turning to our COVID response. Our incident response team continues to coordinate our efforts related to the pandemic. We're operating under a dual mandate of maintaining business continuity alongside ensuring employee health and safety. We've kept our factories and shops continuously operating through the pandemic. Whenever we have a COVID positive case appear at one of our locations, strict adherence to our coronavirus guidelines has ensured the health and well-being of Greenbrier employees while allowing our essential operations to continue. We've undertaken several hard decisions over the last several months in response to the crisis. And as part of our plan to increase liquidity, we've reduced capital expenditures by $50 million, we've reduced annual overhead expenses at our facilities by $65 million, and we've reduced annualized selling administrative expense by $30 million. This activity has caused us to part from some of our longtime colleagues and in many cases, friends. But these actions along with the necessary rationalizing of production capacity in North America will create a stronger Greenbrier in the long-term. Our business remains healthy, despite the current commercial environment and our leadership position in our core markets in North America, Europe, and Brazil is unchanged. This requires hard work and continuous focus. But it's not our first challenge or our first rodeo and it won't be our last. No matter how our fourth quarter or the remainder of 2020 plays out, we know our role in the transportation industry remains vital. The safe and efficient movement of goods is integral to economies around the world. It factors into any recovery, both near-term and longer term once a greater degree of stability and predictability has resumed. Now, I'll turn it over to Adrian.

Thank you, Lorie, and good morning, everyone. As a reminder, quarterly financial information is available in the press release and supplemental slides on our website. As you've heard from Bill and Lorie, we delivered strong results in the third quarter despite a challenging environment. Highlights include: revenue of $763 million; and deliveries of 5,900 units, which includes 500 units delivered in Brazil and 1,600 syndicated units; aggregate gross margin of 14.1%; selling and administrative expense of $49.5 million, almost a 10% reduction sequentially. The effective tax rate in the quarter increased to 41%, driven largely by a foreign currency related discrete tax item at our Mexican subsidiaries. This brought our year-to-date tax rate to 33%. As a background, for U.S. GAAP purposes, we keep the books for these entities in U.S. dollars. For Mexican tax purposes, the books are kept in pesos. Normally these results are similar. However, during the third quarter, there was a significant devaluation of the peso, which resulted in a disproportionate amount of peso taxable earnings and peso tax expense, when compared to our U.S. dollar earnings for the quarter. The impact of this item on our third quarter Mexican taxes is treated as a discrete tax item rather than many tax items, which are measured over the course of the year reducing volatility. Based on current foreign exchange rates, we expect a lower effective tax rate in the fourth quarter. Net earnings attributable to Greenbrier of $27.8 million or $0.83 per share, excluding approximately $7.3 million net of tax, or $0.22 per share of integration related and severance expenses. Adjusted net earnings attributable to Greenbrier are $35.1 million or $1.05 per share. Adjusted EBITDA in the quarter was $99.9 million, or 13.1% of revenue. One of the questions we've received regularly is to try to quantify the impact on the business from the pandemic. The longer-term impact is hard to know at this point, but we are able to quantify approximately $3.9 million of identifiable costs related to COVID-19 in the third quarter. These costs included items like personal protective equipment, additional labor expense, cleaning services, and additional interest expense from our precautionary revolver draw downs. We view these items as vital to ensure that our employees are protected and facilities remain open. Turning to synergies, we successfully achieved $5.6 million of pre-tax cost synergies related to the ARI acquisition in the quarter and $12.7 million year-to-date. We are pleased with the progress the integration team has achieved and continue to be optimistic about the long-term benefits from the acquisition. In the quarter, Greenbrier generated over $220 million of operating cash flow, reflecting robust syndication activity and reductions in working capital. As production rates moderate, working capital reverses and Greenbrier generates substantial cash. At May 31st, Greenbrier had cash balances of $735 million and additional borrowing capacity of $137 million. In combination with the spending reductions outlined by Lorie, we've achieved our liquidity target of $1 billion. We will continue to enhance Greenbrier's overall liquidity. And with no significant debt maturities until late fiscal 2023 and fiscal 2024, we are on the path to emerge from the pandemic as a stronger company. Greenbrier's Board of Directors remains committed to a balanced deployment of capital designed to protect the business and simultaneously create long-term shareholder value. Greenbrier has declared a quarterly dividend for 25 consecutive quarters with periodic increases. Today, we are announcing a dividend of $0.27 per share, representing a yield of 5% based on yesterday's closing stock price. We will now open it up for questions. Christy?

Thank you. Our first question will come from Justin Long with Stephens. Sir, your line is open.

Thanks. Good morning, and congrats on the quarter. Maybe to start with deliveries in the fiscal third quarter, Adrian, I think you mentioned about 500 units went to Brazil. But for the remaining deliveries, could you give the split between North America and Europe? And then also going forward, it sounds like you have pretty decent visibility in deliveries the next couple of quarters. So I was wondering if you could give us some kind of rough sense of how delivery should shake out in the next couple of quarters based on your backlog?

Sure. Justin here. Just to remind you, we are not providing specific guidance for the upcoming quarters at this time. We delivered approximately 700 units in our European operations during fiscal Q3, and we anticipate a similar number for fiscal Q4. However, the situation in the global railcar network remains quite dynamic.

Okay. That's helpful. And maybe to follow up on North America, do you think that North American deliveries can remain relatively flat sequentially in the fourth quarter as well?

I would expect, fourth quarter deliveries will be down somewhat from the third quarter.

I think some of this has to do with syndication volatility as well, as Lorie and Bill mentioned that our production rates, we continue to take a long, hard look at our rates and our burn rate out of our backlog going forward just to make sure we are managing things well and responsibly.

I'd like to add that we had extensive meetings on this subject yesterday, and it seems the remedial work we've done in sizing the facilities and stabilizing the lines, especially the ones in Mexico, has brought us close to balance with inflow and outflow. I'm honestly optimistic that we can maintain momentum on deliveries. However, it's difficult to predict the future as it depends on the incoming orders. As Lorie mentioned, we've been cautious in booking orders. We currently have a significant number of transactions in process, roughly three times the amount we booked in the quarter, with about half in Europe and half in the United States. I believe things will be clearer by the end of the upcoming quarter. Overall, I think we can expect a reasonably strong quarter given everything going into Q4 and the current situation.

Great. That's helpful. And maybe as my second question, I wanted to focus on S&A expense. Some nice progress there and some helpful commentary. There were some unusual items in the quarter, some charges. So could you give us a rough sense for where S&A should shake out on a run-rate basis after all the changes you've made?

So I'll take that one. As I think I said or Bill said, we do expect fourth quarter selling and administrative expense to tick down from what we saw in the third quarter. Part of that’s driven by, we did have some severance costs and alike that occurred in the third quarter. This management team is laser-focused on making certain that we manage our costs and manage our spending so that we are right-sizing and having the right folks on our team for when demand comes back. One of the things where it's easy to manage our costs right now is there is not a whole heck of a lot of travel going on or entertainment. But we're looking at every single part of our cost structure and reducing those, that will go into our fiscal '21 planning. As Justin continues to remind us, we are not giving guidance. But it is this team’s focus to maintain the momentum that we've achieved in the third quarter and continue that into fiscal '21.

Thank you. Our next question comes from Matt Elkott with Cowen. Sir, your line is open.

Good morning. Thank you. Reflecting on the manufacturing gross margins, they reached their highest point of nearly 24% in the first quarter of 2016. By contrast, at the beginning of 2011, they were in the mid-single digits following the Great Recession. As we look ahead to the next three years during the upcoming up-cycle and the current down cycle, considering the company's significant changes, could you provide some updates on the cyclical range of the gross margin?

Sure. Matt, there are many variables in this environment, making it hard to provide specific guidance, but I appreciate your request for a range. I believe we're aiming for margins to be in the low-double-digit area, with potential for them to be higher, and we will strive to ensure they do not decrease. As you've noted in the past, as the cycle improves, we have a significant opportunity to increase those margins back into the mid to upper teens.

And Lorie, what about in the current down cycle? Do you have like an internal floor that you like to not go below? Clearly the company is in a much, much better position now than it was even six or seven years ago.

It's a good question, Matt. Again, we have a strong team and we're focused on reducing our costs. I would expect that there's a chance that our margins will get into the single-digits, but I expect them to not drop as low as we've seen in past down cycles.

Okay. So I guess the targeted floor is high-single-digits in the down cycle?

I think that's fair. Yes.

I’d like to add to this. We are all experiencing similar challenges, but the major builders are implementing significant pricing discipline in their strategies. We also have an interesting flow of business to consider. It's important to remember that there are various types of freight cars, with some being more commodity-focused and having lower margins while others feature more proprietary elements, like some of the lines we have introduced at the ARI facilities. The average margin relies heavily on the mix of these products. This is something you should continue to focus on, as you do an excellent job with it.

And Matt, you're right. We're a very different company now. We've got much more diversity of products. So we're always able to service the parts of the markets that can be hot even in the down markets, and we've got a much lower cost footprint that allows us to be very efficient. So, that's one of the reasons why our low should not be low as what you've seen in our distant past.

And Bill, you mentioned pricing discipline, and not only are you guys different now than a few years ago, but the whole industry landscape is different because your competitor with whom you have 75% or more of the market share is really focusing primarily on leasing. So, you couple that with the fact that you just helped to consolidate the industry further and then rationalize your capacity, is that why we're seeing more pricing discipline in this down cycle relative to that down cycle, these steps are starting to see benefits?

You raised an important point about pricing in relation to capacity sizing. For much of my time in this industry, we've dealt with chronic overcapacity. With flex manufacturing becoming a key term in our sector, I expect our colleagues at Trinity to continue enhancing their facility efficiency and adjusting their capacities according to their plans. While they have a solid focus on leasing, they are also excellent manufacturers. Many factors contribute to this situation. Customers understand the importance of a robust supply industry; it's not only the car builders at the forefront but also the smaller component manufacturers who suffer during downturns like this. I anticipate that railroads and shippers will seize market opportunities wisely, avoiding a push toward breakeven cash pricing, which can occur. I believe sensible pricing strategies will emerge on the sell side, allowing margins that can sustain the industry's strength during this downturn. Moreover, we are actively pursuing legislation to tackle this issue aggressively. Although we have a significant number of cars stored, the situation isn't as dire as it appears. In 2018, we had a frictional level of storage of nearly 280,000 cars. This includes coal cars and under capacity covered hopper cars, along with almost 50,000 sand cars. It doesn't take much for a change in velocity; approximately 150,000 railcars are currently tied up in what is a temporarily high-velocity market that remains below industry traffic levels. As conditions improve, changes can happen quite rapidly. This underlying theme is one reason for our increased optimism.

Thank you. Our next question comes from Bascome Majors of Susquehanna. Thank you. Your line is open.

Hey, good morning. I was hoping that you could give us at least a directional look into a couple of other items that hadn't been discussed yet where you would seemingly have some visibility into or discretion in managing. And that would be any timing of further syndication activity or even a reduction in some of the finished railcar inventory that's not on lease, that's on the balance sheet, gains on railcar sales. And maybe on top of that, the relationship of the non-controlling interests and how that relates to manufacturing processes? That seems to look more favorable under this temporary arrangement with GIMSA. Thank you.

Yes, Bascome. From a syndication perspective, we will continue to syndicate railcars in our fiscal Q4 and into our fiscal 2021. Much of our syndication product is influenced by the types of cars that are in demand in North America, which will serve as a guideline as we move into 2021.

I would like to emphasize that, as we have discussed previously, we possess strong lease origination capabilities. Throughout the third quarter, and we anticipate this will continue into the current quarter and beyond, we will keep originating leases and manufacturing railcars. These railcars will be included in our railcars held for syndication and will contribute to the model mentioned by Justin.

And then with regards to gains on sale, we would expect that to move down into a more historical number going forward into fiscal 2021. Just as a reminder, this is the final year of our kind of agreement or alliance with Mitsubishi on that front. It was a three-year agreement to kind of work on our lease fleet and refresh it for reimbursement purposes, but also to allow them to build it out. So while we continue to have a strong ongoing multiyear agreement with them from a new railcar perspective, we would say that our historical gains on sale is a little more realistic going forward and we'll be more opportunistic based on activity in North America.

And the last piece about non-controlling interest in GIMSA. That looked a bit more favorable versus your overall profits this quarter. Trying to understand how durable that is? Thank you.

Yes. We had indicated in our last press release that we would have a benefit of $0.25 for the back half of the year. So you did see that pace in Q3 and should see continue into Q4. And then we will also have a benefit for the first six months under this arrangement next year and that will be at a lower rate. So we had indicated $0.40 over the 12-month period of the arrangement, $0.25 in the back half of this year. Part of that delivered in Q3 and then about $0.15 for the first half of next year. That's assuming various production levels.

Thank you, Adrian. And last one from me. Bill, congrats on officially marking the path to retirement here. You had made some comments earlier about, I think, quoting Carl Icahn, when things are tough, you want to look for good opportunities. Was this referring to you seeing value in your company shares here or were you actually suggesting that Greenbrier could go on the offensive and perhaps be more acquisitive in this downturn? Thank you.

It was not the latter. I believe the stock is strong given the franchise we’ve developed, the team's growth, and the positive momentum we have. We are concentrating on the right strategies right now, and I am confident we can generate significant cash flow. I purchased 100,000 shares during the last opportunity. I have come to an agreement that allows for stock as compensation instead of cash. I might continue to invest, as I am optimistic about Greenbrier. I have witnessed this cycle before, and while it can be perplexing to those outside the industry, it remains a robust, cyclical business. We have reliable competitors, and currently, we are not facing the overcapacity issues from the past. I genuinely believe we can pursue valuable opportunities cautiously. We are streamlining our operations and consolidating, and we are not considering new acquisitions during this crisis. Once we complete our first phase focused on liquidity, preserving capital, and reducing costs, we can explore potential growth. Our immediate objective is to maintain sufficient cash flow, and I expect us to exceed our $1 billion target. We will manage our capital wisely, including the possibility of returning cash to shareholders through dividends. We may consider stock buybacks when the opportunity arises, but it's premature to discuss that now. Overall, I believe the company is undervalued at its current price.

Thank you. Our next question comes from Steve Barger with KeyBanc Capital Markets. Sir, your line is open.

Hi. Remembering back to the wind down of the shale plays, your earnings were more resilient than some people expected. So do you think this down cycle will be the same? And just generally speaking, given all the cost cuts, what you see in backlog syndication opportunities international, would you expect a big decline in earnings next year versus this year or could that be stable plus or minus?

I think that's a great question. There is a lot of uncertainty, and I appreciate you highlighting the resilience we demonstrated when many doubted our ability to withstand challenges. If you examine the expectations from analysts covering Greenbrier, you'll notice a wide range of projections. I anticipate that we will align more closely with the groupings of those outlooks. While I expect a decrease in the number of railcars delivered in the coming period, I don't foresee us reporting losses. Instead, we will maintain a modest margin and continue to focus on managing our costs effectively.

So even if you expect a reported loss in a specific quarter, you wouldn't expect that for the year?

That would be my expectations, yes.

I don't think we should be quoted as expecting a loss in any quarter. That would mean trying to predict the future, and many experts out there have differing opinions on that, likely none of which are accurate. We will remain focused on our stated objectives and let the future unfold naturally. I am optimistic for many reasons that we've discussed, along with others that we don't have time to cover. When you consider the demographics and FTR's recovery rates, they are returning to levels of demand comparable to 2022. In this industry, due to demographic trends and the speed of change, situations can shift quickly, making predictions difficult. Therefore, we will not provide guidance, especially since we typically don't offer guidance in the third quarter. We usually wait until the fourth quarter if we decide to give guidance, which I doubt will happen unless there are significant changes in the upcoming months, like the end of COVID-19 with a vaccine, among other positive developments. What we're experiencing now is minor compared to past challenges, and although it's unfortunate, we will get through it together.

Got it. And to your point on small increase in velocity could unwind cars in storage pretty quickly. I'm curious if you think the industry needs to see a backlog contraction like we saw in 2009 or is there enough specific car type catalyst that the backlog doesn't need to get down to those kinds of levels?

It's difficult to predict the future. In this type of cycle, we usually see a decrease in backlog, but we have strategies in place to address that. Greenbrier tends to perform better due to its commercial approach during downturns. We have excellent long-term contracts with strong companies that are dedicated to multi-year partnerships. Therefore, it's hard to provide specific guidance. It's a great question, and while you all are trying to figure it out, we're navigating this situation like a challenging match. We're fully engaged, doing what’s necessary, and I believe we will emerge victorious in the end.

So, just one last follow-up to that. So, Bill, you've seen a lot of cycles. Is the primary thing you're looking at to kind of make you feel better about where we are just traffic levels or is there anything else that you would look to as kind of a leading indicator to moving into a more comfortable position?

I think the overall economy has taken a significant hit, with a GDP decline of 5% in 2020, which is probably slightly below consensus estimates. However, if we examine the statistics, there is potential for 4% growth in moderate scenarios. Looking at the data and projections from reputable economists, unemployment claims in March rose from 6,800 to a projected 1.8 billion in May as we reopen the economy, despite the ongoing challenges of COVID-19. This reopening will likely lead to increased income. Government subsidies have been beneficial, and depending on political preferences, more assistance may be forthcoming. While we've faced a substantial setback in both the economy and consumer confidence, it ultimately comes down to the numbers. The FTR estimates a recovery at 50,000 to 60,000 cars in 2022 and 2023, while our own projections are somewhat more optimistic for 2021. It all hinges on the data. Carloads are beginning to recover; although they're currently down 8%, that is an improvement compared to being down 12% in 2017 and earlier in 2020. We anticipate a swift recovery in carloads once the economic fundamentals are restored.

Yes, I think just to add on to that, Bill, it's looking at what's going on in the overall economy and then getting the manufacturers back up, the service providers that are going to transport goods on the rails, right, and getting that going again and that will then start compounding that rail traffic recovery, which will then result in increased demand again.

Yes, we have an industry coalition that is promoting and working with Congress on a Railcar Act. It would be an incentive and future stimulus to scrap and take out the inefficient cars in the storage statistics as just tons of frictional cars could be taken out. That would be a very attractive program. We've got wide parties of support for that. Whether that will get through this Congress in that form, hard to say, but we do expect the infrastructure build to come in. That will be a boost and if we could do something to help shippers and railroads address their obsolete cars, the stored cars, it would make the railroads and the shippers more efficient. It would help the economy, it would be green. It would be a socially good thing to do. And we've got a real strong team, interdisciplinary team through our supplier associations to address that. So there's plenty of things that can be done to address these issues that are quite rifle shots, specific. And I'm optimistic that we'll see better times in these, sooner than others think. It depends a lot, however, on COVID-19 and what's happening right now is not encouraging with spiking back.

Thank you. Our final question comes from Allison Poliniak of Wells Fargo. Ma'am, your line is open.

Hi, guys, good morning. Some nice efficiencies coming through on the Wheels, Repair & Parts business. Making the assumption that the worst in traffic is now behind us, how should we think about EBIT margin? Is that a decent one to build from or there are some nuances there that we need to be mindful of, going forward?

Yes, Allison, this is Justin. I would say, I think it's a good starting point and I think if traffic continues to improve, we believe that we would see improvements in that going forward. But I would say that, that is a business that has the most explicit exposure to traffic immediately. So, to the extent traffic kind of is volatile or moves up or down, that's what we would expect to see.

And it's that view of referring specifically to the wheel side, but it's also repair side where we want to see cars not going into storage but asset owners being interested in repairing their cars and that's where our management team is working very closely. And the management team of the repair group working very closely with our management services team, where Bill indicated, we manage a quarter of the North American fleet. And so it's looking at how can we capitalize leverage, that relationship we have of our customers who need their cars repaired and doing that in some of our shops if we can do it in an efficient and quality way.

Allison, I appreciate you bringing it up. I just want to highlight Lorie here. She has been leading that business unit along with Rick Turner for a year now. When she was promoted, she took on a very challenging assignment. We had given her one of the toughest tasks that existed, and she and Rick have really turned it around. We have a new team in place, and we have streamlined the network. Our repair business is actually generating profits now, which I didn't think I would see in my career given how it was going. Lorie faced significant challenges, but she has successfully steered the ship, and I want to congratulate her. I believe we will see even more positive developments from that area in the future.

That's great. I just need a clarification on one of the questions Bascome asked regarding GIMSA. You mentioned $0.25 in the latter half of this fiscal year concerning the restructured agreement. Is that more focused on Q3, or is it fairly distributed between both quarters? I'm trying to understand this for modeling purposes.

Balanced between both.

In both. Okay, perfect. Thank you.

Thank you. This does conclude today's conference. You may disconnect at this time and have a good day.