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Uncertainties and obstacles ahead for Greenbrier’s new CEO

‘We do not expect the market recovery to follow a smooth, straight line’

Greenbrier reported fourth-quarter 2021 earnings. (Photo: Greenbrier)

Railcar manufacturer Greenbrier on Tuesday named its next CEO and announced its fiscal year fourth-quarter 2021 results amid a backdrop of returning market demand, contrasted with uncertainties over the COVID-19 pandemic and global supply chain disruptions.

Greenbrier names Lorie Tekorius as next CEO

Lorie Tekorius will be the next CEO for Greenbrier (NYSE: GBX), effective March 1, 2022. She will succeed current CEO Bill Furman, who will become an executive chair for the company until he retires in September 2022. 

Tekorius is currently Greenbrier’s chief operating officer. She joined the company in 1995, moving through the ranks and becoming senior vice president and CFO before being appointed as Greenbrier’s COO in 2019. She also had key roles working with Greenbrier’s commercial and manufacturing units. 

Furman will remain on Greenbrier’s board of directors until January 2024.

“I am confident that she is a leader who will take Greenbrier boldly into the future and as CEO will drive our business forward,” Furman said. “Lorie and I have worked together toward this goal for a long time. I know she is well prepared for all that lies ahead. I am very proud that Lorie will be our next CEO.”

Lead director retired Navy Adm. Thomas B. Fargo said, “Working closely with Bill, the board evaluated a range of options over several years for an eventual CEO transition. It became evident that Lorie is by far the best candidate to serve as Greenbrier’s next CEO. The race for talent across industries is very real. Our board is pleased we have been able to advance to CEO an internal candidate with Lorie’s range and record of service. We are confident Greenbrier will be well served by her knowledge, experience and leadership.”

In addition to her time at Greenbrier, Tekoris serves in the broader community as president of the Providence St. Vincent Medical Foundation Council of Trustees. She holds a bachelor’s degree in accounting from Texas A&M University and is a certified public accountant.

“It has been a privilege to devote the bulk of my career to Greenbrier, growing and learning every day,” Tekorius said. “I am truly honored and humbled to follow Bill as only the second CEO in Greenbrier’s history. I am confident that working collaboratively with our senior management team, we will meet the high expectations of all our stakeholders.”

Expect a bumpy ride

Although Greenbrier faces a number of market headwinds — the COVID-19 pandemic, supply chain disruptions and associated labor shortages, and volatile commodity markets — as it enters its 2022 fiscal year, the company is upbeat about its prospects in 2022.

“The demand outlook is strong. It is strong in all of our markets globally, notwithstanding the impact of elevated steel and other input prices to our customers’ decision-making processes,”  Furman said in a quarterly earnings call with investors on Tuesday. Greenbrier’s fourth quarter ended Aug. 31.

That upbeat attitude also comes with expectations that there could be some bumps on the road to market recovery, according to Furman. 

“I would like to remind our listeners that we do not expect the market recovery to follow a smooth straight line. Our industry is still recovering from the shock caused by the pandemic. Uncertainties and obstacles do remain,” Furman said. “It is clear, however, that our strategy has produced and is producing results, and I believe we are well on the other side of where we have been. We are also pleased to recently increase the scale of our leasing fleet through our GBX Leasing joint venture.”

Greenbrier’s strategies for navigating 2021 and 2022 include maintaining a strong liquidity base and balance sheet, operating its factories safely while still generating cash flow through its new leasing venture and having a flexible approach to scaling manufacturing capacity with market demand, executives said.

“Volatility seems to be the new norm and Greenbrier’s employees rose to the challenge. The resiliency, flexibility and focus allowed Greenbrier to produce great results in addition to providing excellent levels of service and the production of quality railcars,” Tekorius said. She noted that Greenbrier delivered 4,500 railcars in its fourth quarter of 2021, including 400 units in Brazil. The fourth-quarter figure is 36% higher than the third quarter of 2021, “reflecting manufacturing’s successful ramping of production over the last six months.”

Fourth-quarter 2021 financial results

Furman noted that the spread of the delta variant of the COVID-19 virus worldwide contributes to making the pace of any economic and market recovery “unpredictable.” 

Nonetheless, “the recovery in our end markets is gaining momentum. Our fiscal fourth quarter was Greenbrier’s strongest quarter of the year,” Furman said. “Greenbrier’s fiscal fourth quarter was in fact our fifth quarter in a row with increased new railcar order activity.”

Fourth-quarter net earnings were $32 million, or 95 cents per diluted share, compared with $23 million, or 69 cents per diluted share, in the third quarter of 2021.

In the fourth quarter, Greenbrier received new railcar orders totaling 6,700 units and valued at $665 million. It also delivered 4,500 units. Meanwhile, its railcar backlog was 26,000 units with an estimated value of $2.8 billion. 

The company also contributed nearly $70 million of assets into its leasing venture, GBX Leasing, which it formed in April “to create stable, tax-advantaged cash flows.” 

Looking ahead, Greenbrier expects to deliver between 16,000 and 18,000 units in its 2022 fiscal year, which includes approximately 1,500 units in Brazil. It anticipates selling and administrative expenses to be between $200 million and $210 million, with capital expenditures consisting of $275 million for leasing and service, $55 million for manufacturing and $10 million for wheels, repairs and parts. 

“We’re not the only company out there that is in the midst of ramping up to respond to improving demand, but [we’re] also being mindful that we’re doing that on the back of our workforce. So we need to be mindful of that workforce and making certain we don’t push too hard,” Tekorius said during the earnings call.

She continued, “That’s part of why we’re not giving explicit guidance because we think that as things move through the year, as more people get vaccinated, as the supply chain starts to loosening up and improving, there could be a number of factors that will allow us to be more positive than the guidance that we’ve given, which is part of growth off of where we have been. … [That’s] why we are giving the guidance that we’ve talked about.”

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.