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Annual Report THE GREENBRIER COMPANIES 2015 ANNUAL REPORT www.gbrx.com LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER TO OUR SHAREHOLDERS: Greenbrier just completed the most successful year in our history. In fiscal year 2015, our diversified product offerings, benefits of past capital investments and execution on our integrated business model led to record results for deliveries, revenue, adjusted EBITDA, net earnings and diluted EPS. Our Return on Invested Capital for the year grew to 23.7%. Gross margins in all of our business segments increased and we ended the year with record margins in our Manufacturing and Leasing & Services businesses. We received orders for over 32,000 railcars in 2015 and ended the year with a diversified railcar backlog of over 41,000 railcars, valued at nearly $5 billion. This backlog spans almost all railcar types, and represents 30% market share in North America, more than double our share during the last cycle. This backlog, which contains favorable pricing, provides a good tailwind, with some of this backlog stretching into 2020. During 2015, Greenbrier substantially broadened our international presence. We expanded into South American markets through our investment in a new railcar manufacturing venture in Brazil, now known as Greenbrier- Maxion. We also announced our entry into markets in the Middle East with an order for Saudi Railway Company (SAR). Greenbrier’s participation in global transportation equipment markets will continue to be a vital source of growth in the years ahead. These global initiatives complement our engineering and manufacturing expertise and provide business diversification and growth opportunities over the longer term. Also during 2015, the Department of Transportation and Transport Canada issued a new design for railroad tank cars that transport flammable liquids. Known as the DOT-117, the standard adopted by the two governments follows Greenbrier’s design. Greenbrier’s “Tank Car of the Future”, launched in early 2014, is a design that is more than 6 times safer for crude oil and ethanol service and the transport of other hazardous materials. Thousands of our newer, safer tank cars have joined the North American railcar fleet even before the DOT-117 has become fully effective as the new standard. Our GBW Railcar Services joint venture with Watco Companies, formed in 2014, is assisting legacy tank car owners with tank car recertifications and retrofit solutions that meet the DOT-117 standard. Manufacturing In 2015, we completed our multi-year capital projects to build out our low-cost, flexible manufacturing operations in North America and to increase vertical integration. Specifically, we executed the transition from Plant 1, our leased manufacturing space in Mexico, to our newer Plant 2, and to our latest state of the art Plant 3, a wholly-owned production facility in Tlaxcala, Mexico, with no disruption to our railcar output. We also grew our operations at our GIMSA joint venture, adding new manufacturing lines and capability. Gunderson, our flagship American manufacturing operation, also enjoyed renewed strength in marine and rail manufacturing in 2015. Coupled with our engineering expertise, we are capable of nimbly producing virtually all railcar types at competitive costs. We maintain focus on efficiency improvements and margin enhancement. To support our international expansion in Brazil and to serve new markets in Saudi Arabia, Greenbrier Manufacturing Operations have been reorganized into a newly-formed Global Manufacturing Operations. This allows all of Greenbrier’s global manufacturing activities to operate under common leadership and utilize shared best-practices manufacturing systems. Leasing & Services Our commercial organization and Leasing & Services segment continue to execute well on our strategy to drive more volume through our lease origination and syndication model. This approach to the market enhances our current margins and creates future multi-year income through management services provided by Greenbrier. The aggregate transaction volume of business conducted through our lease underwriting and asset management platform grew to $800 million during 2015. This is more than double the volume of just two years ago. Nearly one-third of our new railcar builds went to market through Greenbrier’s leasing programs during fiscal year 2015. We also doubled our investor base of leasing syndication partners over the past 12 months. Our asset management capabilities continue to increase in scale and scope. We are offering more rolling stock operating solutions to leading shippers, railroads and other railcar owners and investors than ever before, with an owned and managed fleet of nearly 270,000 railcars. Wheels & Parts/ GBW Railcar Services, LLC Our Wheels & Parts business remains an important component to Greenbrier’s business model of providing comprehensive, lifetime products and services to railcar owners. Wheels & Parts was unfavorably impacted by the scrap price for steel in the second half of fiscal year 2015. Despite this, Wheels & Parts nearly met its annual revenue goal for fiscal year 2015 and is progressing toward an aggressive goal to achieve 15% ROIC by the end of fiscal year 2016. Related to this goal, Wheels & Parts has also embarked on several expansion opportunities at existing locations and is exploring strategic ventures that we expect will bear fruit later in 2016. Greenbrier’s former railcar repair, refurbishment and maintenance business now operates independently as part of GBW Railcar Services, LLC, a 50/50 joint venture with Watco Companies. GBW operates 33 shops in the US and Canada, including 12 tank car repair shops ready to meet regulatory and market-driven demand for tank car recertifications, repairs and retrofits. GBW expects to be active with tank car recertifications in 2016 and is seeing growing activity for tank car retrofits and other railcar refurbishment and maintenance work, all of which we expect will increase its contributions to Greenbrier’s performance during the fiscal year. Our People Our Board of Directors and I could not be more proud of the dedication and accomplishments of our more than 10,000 employees worldwide. During an extremely busy year, Greenbrier’s people strived to achieve, and ultimately delivered, outstanding results. Their hard work and ingenuity have created significant value, making Greenbrier stronger. Workplace safety and fostering a safety-first consciousness across Greenbrier is always our top priority. We were pleased that in a year of record manufacturing activity, we improved across a range of safety metrics, but this work is never finished. Investing in human capital continues as a key priority for Greenbrier. We are advancing the organization through our development programs for high potential managers and in 2015 expanded this program to a broader group of Greenbrier’s key contributors. Additionally in 2016, as our business expands across international borders, we are investing in programs to help our employees to better understand the cultures of the communities where we operate as we work together to forge a shared culture of business achievement. The Year Ahead We intend to build on the operating momentum achieved in 2015, and expect another solid year of earnings and free cash flow in 2016. We remain optimistic about the long-term fundamentals and drivers of demand for our products and services. We are an agile company and, if needed, we are ready to adapt quickly to changing market conditions. Our strategy to diversify our product offerings, create efficient, flexible manufacturing capacity in low-cost facilities, drive more value through our lease syndication and asset management model, and increase revenue diversity in international markets, will position us well. Greenbrier has a strong balance sheet and significant liquidity. We will continue our balanced approach to investing in projects that generate high rates of return, seeking growth opportunities in our core competencies, and returning capital to shareholders. Since October 2013, we have returned nearly $150 million of capital to shareholders in the form of share repurchases and dividends. Recently, we increased our quarterly dividend by 33% to $.20 per share and authorized an additional $100 million share repurchase program. Board of Directors 2015 was a year of transition on our Board of Directors. In May, we were pleased to welcome Kelly Williams to our Board. Kelly’s extensive background in law and finance adds to Greenbrier’s strategic planning process. In July, Admiral Tom Fargo joined the Board. Admiral Fargo helps Greenbrier understand the broader geopolitical environment as we examine emerging markets and assess competitive threats across the globe. Shortly after the end of fiscal year 2015, our director Victoria McManus left the Board to become Greenbrier’s Executive Vice President and Chief Strategic Officer. We look forward to Victoria’s contributions to Greenbrier in her new role. Finally, A. Daniel O’Neal, who has served Greenbrier for more than 30 years, as a director since we became a publicly-traded company in 1994 and as a former board member of our Gunderson manufacturing subsidiary, is completing his service on our Board of Directors at the end of his board term this year. We deeply appreciate Dan’s dedication to Greenbrier and are pleased to recognize his service later in this Annual Report. 2015 was an exceptional year for Greenbrier. The success we enjoyed in 2015 will not be easily replicated
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