FreightCar America (RAIL) 27 Feb 192018 Q4 Earnings call transcript

Welcome to Freight America's Fourth Quarter 2018 Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode.

For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note this conference is being recorded. An audio replay of the conference will be available from roughly 1:00 p.m. XX:XX until today Time p.m. Eastern March Eastern XXXX. Time on XX, dial access the please replay, To X-XXX-XXX-XXXX. is replay XXXXXX. The passcode replay the this audio website An of within the available two company's on days following earnings call call. will be Chief like to conference Matt America. I would Financial turn FreightCar now Officer, over the to Kohnke,

Thank you, and welcome.

risks, future Officer; this the the like expressly Joining Participants everyone to which otherwise. the of are control are directed Executive duty those that President some future outside Act conference future Reform Chief to Baun, updates performance, the to differ statements that and Meyer, to forward-looking company today result be of Ted or statements. of Securities We information, expected Private disclaim whether forward-looking as a Commercial or FreightCar America's XXXX business XX-K during call prospects remind may of or company's Form relating may cause me in plans events XXXX. Litigation Chief a the new from for to under statements made materially statements, future Jim and any business Officer. actual I'd defined as may expressed our results events forward-looking provide certain description to of include

me XXXX remarks. let opening posted now quarter earnings few turn on to Our Form call for www.freightcaramerica.com. release are a that, and the fourth of the at XXXX XX-K for the With company's Jim Jim? website over

this quick, more relevant today's stating a expressed strong is multiple past. science. into marketplace on performer history And is not rocket you, the it will Thank and comments company is than macro-centric competitive that conviction occasions Matt. I with have not also I in of my transforming but a century a begin in by that

will right in on on which and on on plan the expect all can Back the cost about be sell, and year produce as earn so in to our we business quality. about right of to time, complete what to we what in right work. operations we XXXX this transformation a to business is This Basics from XXXX, profit is what was it the cost much having sell about and products Our which the

our this of business but to not the our strengthening our underdeveloped Shoals significant improve taking dissimilar facility XXXX pay that our like also control to transformation. change sourcing Navistar. performance operations in our procurement the thereby It started was third to and order of quarter, forward continued manufacturing quarter long-term processes included the cohabitation position. quarter. financial included resolving and inefficient functions. needed We that the Our progress improving work that business the disappointing, were issue third our in to This by and at several we make of competitive areas fabrication and on from going Also and

made critical start to exiting we driven the changing and process efforts of culture, significant the in new Lastly, hires workforce. investing our by

cost. We major not their Once delivery out. expanded an accomplish traction the right about include and steadfast fixed And choice from want We for we the operations. choices our this supplier more, want there and products, design remain our product a FreightCar price. respect customization, Back in with and competitor. role rebuild companies, Railcar cost framed customers we our capable us and in beliefs a to also in of important certain that to work also America our Basics As business portfolio the financing strategic more case our to today's to to is they manufacturing that and is market. where work ourselves our improvements initiative, design the then having focus these is inside as gained in was areas, and plant to right

how we Let about then accomplish a to what XXXX you in plan we year-end. discussion results, and positioned QX me expect to and talk in through accomplished on walk what we the after be XXXX at

we of of included at talent facility. and Directors our Shoals assets people This In control through hired physical and operating management and acquisition relevant you we and by assets, at many other not we the all First, operations invest the Shoals our our invest and you quality really transaction us parallel, Shoals simplifying equipment to the BMW, Navistar's existing business backgrounds Toyota, dozen control. fixing started what year, key the structure fix workforce people of allowed needed mean than These in take Presidents. to new all Managers’, operations, Vice to do XXX% manufacturers. Last systems. Danaher manufacturing This XXXX Shoals. started have team. and I training cost alone, from well-known equally heavy more in attracting in a and and cannot

by As April, redesigned are to our have productivity. to XX% this will weld a reduction achieved more this things worker recent In for the And the in-plant the quality program. scores these an end improved employee Collectively, any by factory, than and twofold. curriculum most completed safety, internal Shoals consecutive production on example of accidents that actions training, quality, out most our second for the matter in-house XX-month year period, three new for every have school. the paying our we

car productivity. to have examples same that our dramatically run, two two builds for XX will of in type, the to we weeks order time first production one at per multiple one one nearly process. run process long was but is build necessary is each completed completed productivity second new one the a of see first progress. we first this delivered apart. car would us second all and all we essentially hour extremely of comparison, undertake comparison this time, we This occasions the is that a with our of we of approximately for once phase. the purpose to said a time. compared times model instances relatively two are we through In run productivity, the Shoals We've to early number the comparisons went the first five launch the as the the improve through have gain car cost our same produce measure year This relaunching a it will the unit improvements types in labor treating completely our different encouraging. As build data, approach, to cars on an now run, We to make car and type new the first The results our run on of of from that model have also which produced progress, comparison such type. the achieved launch three several said back-to-back essentially we same the but which In which

Let during me next direct cost summarize XXXX. more savings specifically our

is in not and compared showed in little larger product quarter which a savings per quarter number prevented for have of of all realized labor flow-through material. making gains $X,XXX been the us amount re-launches the although when to results a XXXX. quarter plus changeovers $X,XXX the of if The This essentially is fourth from we efficiencies. much could results unit the over capturing fourth Our are fourth good start, the

in over let or call important during also other to on the touch we Matt, XXXX. me initiative one Ted turning invested Before that

capability place date, have creating are of the other a within in leasing many put in out and functions. leadership the company. To we back new We excellent office process built

provide available in means the as undertaking deals. a plagued Our issues conclude will a a not addressing customers time and our this to size many now. we to manufacturing use that a of means leasing own we legacy more goal that these us, this we fund have is progress become grow whereby to be business would our To of company much incremental to not recap balance to made rather XXXX, efficient to a to otherwise our than competitor for an sheet long incremental

We the you have do, commercial and and the work this Ted of to you can work fourth a through for quarter results. lot after walk please? Ted, discuss fourth please I our talk XXXX results Matt remaining quarter us through and will still

Thanks, Jim.

of all of XXXX new quarter received the our compares new were XXX were and of same Sequentially, the XXX which to deliveries railcar the year in the Moving new railcars, new to totaled orders cars cars comprised which leased X,XXX and the rebuilds to quarter railcars. deliveries were This XXX railcar to up new up cars, received XXXX. same the This last XXX Deliveries XX included in which XXX previous orders we XX of compared in orders the quarter figures We XXX and for of fourth third commercial the is to received cars. quarter rebuilds. XXX compared railcars compared rebuilds. quarter. delivered were XX during in for quarter XXX up the fourth XXX new during and railcars

XX, an sales our $XXX at X,XXX with of of XXXX, of Our compared railcars, value estimated X,XXX million, sales the order to backlog consisted of as value of which with sequentially railcars, consisted estimated end approximately third million. backlog of down $XXX quarter, the an total total December approximately

cars types heavily Our quarter-end mix quarter XX. are non-tank where backlog within to of product the volumes. of atypical an ending for Industry-wide order car We a segments More strong, quarter broadly railcars. key December we fourth car not figure at consists concentrated XX% from competitive. car received which orders a the share fully we're was industry entirely select lower orders the reasonable increased of XX,XXX towards non-tank albeit the the in new

us to product these fully than here, less development our performance optimistic are that complete our with we give ability complete we the pleased in work when While markets. will are

to I as expect future improvements remain growth inquiry modest levels expect in categories turn and by railcars respect will to he traffic by results. and our be to offset will going but these in call believe currently railroads will car I average to and flat this cars their well-positioned near underway see offline. gondolas. We hoppers, at With desire detail operating continue Matt outlook anticipate to that, be take interest such at grow pace continued With would and to forward, over the quarter industry rail We types at fourth of an financial railroad's Class the levels to the to efficiency covered many we like year-end. in railcar the

$XX.X new last quarter million Thanks, quarter the attributable for in quarter. revenue number Ted. compared of is the the in a and fourth to million of totaled direct increase of the in larger year $XX XXXX. for quarter fourth delivered the fourth third Consolidated to railcars million The revenues $XX.X XXXX sale

sourcing Navistar the third of fourth consolidated and loss in to million the negative well transferred in quarter for depreciation on $X.X XXXX. accelerated third $X.X elimination totaled unfavorable the quarter the the from an the quarter railcars Our $XX.X year-ago of lease fleet of The on fourth in third million of was X.X% one-time operating as into a the negative essentially as XXXX. $XX.X to of loss railcars in higher as long-term function. essentially loss flat An incentive of million. SG&A our X.X%. short-term the to sequential million incurred of quarter totaled $X.X of unfavorable our margin compared in of result mix costs the of to gross is inventory operating on which related equivalent operating accrual This consolidated delivered million previous the for lease quarter the classification additional our material period integration the a was the we compares quarter basis compensation quarter

of G&A expectations. expenses in-line expenditures which quarter level forward. reflects was normalized our the fourth for with $X.X the Our million, going totaled more quarter Capital

certificates financial end cash remained as restricted equivalents, marketable of deposit cash, Our cash December and anticipated changeovers of on number of described. XXXX. hand deliveries strong securities equivalents, outstanding debt primarily came relaunches Jim no the and the at million the The we fewer in form with the than restricted of result in cash than previously as lower position due and to XX, $XX year of the expected had of

expecting. we As a result, we were higher than were levels that had inventory

long-term portfolio $XX strategy, was in million the of which $XX quarter. fleet. these as our we that at from XXXX, million move XXXX. end the also cars We in on note will Consistent down and lease during important the new determine leasing our available our is best expect to lease short-term for with fit railcars of future we transferred to we inventory had levels fourth It invested our come roughly of through these

assets deferred Accounting diluted our recorded As per separate need allowance of share million the over can taxes and or we several a losses, expense given the tax business the which carried to $XX.X to item, a against these valuation tax years. net income be the when offset historical guidance quarter a will fourth and against last operating dictates the during to provide of of tax assets $X.XX of A reserve asset return deferred future forward losses the profitability. significant operating portion we relate XXXX. cash

to Looking be turn spending capital between and million With I XXXX would out and we support our improvements. back XXXX, which brief between expect forward to portfolio $X that, anticipate like making X,XXX and closing $X X,XXX for Jim million, delivery to We railcars. facility product to to will our necessary call remarks. total the building some

this further Back of expanding to started want of of priorities our we portfolio, to has and footprint. and by in XXXX, product our the the for complete started, the or I Basics expect the specifically XXXX, we Matt. already to today's phase will and final Thanks, manufacturing to share fixed XXXX. in outlining plan work discussion work by end close it lion's XXXX. and add complete In and cost This

$X,XXX $X,XXX savings targeting of will savings cost material two with XXXX. between basis over labor of This on achieved expect year savings to run we $X,XXX the and still savings, We the by that goals of railcar the XXXX achieve are productivity top is of we car per direct an $X,XXX period that additional on in our year. rate when This end per our to material the new XXXX. combined $X,XXX total to material a put

manufacturing and/or manufacturing continuing In consisted evaluate lease level and our approximately current XXXX. the end years extends announced my to flexibility XX over to call months our footprint. future of key are facilities. ago, ramp to we footprint as Very agreement our addition railcar December new first our Next, three commencing you, and we of ago, we with to address for finalized the to up this XX% this permanent our Today, continue of the world-class sale year facility. products. agreement agreement recently the more of enhanced idling an facility, facility provides landlord sharing with shrink with Back of Danville to have with Shoals final in then the that presence, and this of lease control us this we're we The you our the a importantly, work with Basics is steps. facility, Two

and under on on the cost you XXXX we to benefit that work the this XX having by coal much we perspective end portfolio types. in of expected But some we Our getting product in right, car the aggressive. being realignment more competitive be excluding proper work structure. cars, give to XXXX, end ourselves is types complete very enter by competitive XXXX XX expect car a portfolio assessing plan To can build

to the these Some that of several of remarks. made new higher volume types referred Ted car India models in his include

end At products is the on our of as price our and of quality to the need receiving our job aware, right complete and costs Shoals fully grow at are customers care the time. of the right the next backlog. about greatest and delivered our size We we the improving transforming both overall, day,

more will effectively in lifting the full. expect So Back year Basics this of light the for there we at employees to to to much of past. but than FreightCar year give poised going very this tunnel XXXX compete America that to the is be complete is all us be at of in end heavy end the that another

that direction, scope in turnaround size take As one will to said progress the success the future. before without our company the us our midst transformation teams for enormous we be the and and will to I hick-ups finish. position our confident that in date the A are in have will we are of not but continued and an

we At this will from question-and-answer will ahead. Instructions] Justin [Operator line And our a the Long. of and first session. question time, conduct go come Stephens Please

morning. good and Thanks

So Jim end. the question you into to on the some the portfolio maybe I of start the could comments product tie at made with

ramping you market and car portfolio you product But can number with where the what of of at to well? I begin end today address see currently you you percentage can then point actually successfully can what orders year? that for these with the delivering car that understand how new them manufacturers you that percentage expect help of us And going. also curious your other that's You some and types was this by gave types secure the as and compete of

Sure Justin, its Ted.

in two will example those that cars. pellet to in me about say And jump stat it address one generally is and hoppers. into it segments We're covered covered and Let that what that try types questions. hoppers the to the specific to but going flat suffice -- within car was plastic not was get

to in investments work in that will order in that and car the designs have and investments jigs to facility fixtures, engineering, include marketplace by position sourcing, compete our We better tooling, refine type better long-term. plans in to manufacturing, and us the

that one just smattering except complete, tank be types. we a obviously to speaking, Broadly are cars with everything to example of when able and for design you that's address can So today. going car we share freight just

Okay.

Hello Justin. This again. Jim is

being that non-tank the full closer in So complete in coverage started to take year course speaking year to providing work the qualitatively much from a qualitative was car of -- will today's us much, last market. that this partial way getting very coverage over will

by have do understate car of get please it how it's designed. significant. work important new any is done a getting means railcars bunch need both. So of we quite do cost a a meets this we this can very type the defined in by mind then in have I necessarily In competitive other. to car And new product the customer and it type some to is right have but correctly. not We get keep the do. whole can't it build frankly is couple offering we done not cases, we A cases, requirements one, other And that structure? the under

-- bit long But taking last it your again the of on orders order we secure this don't question your on future already specifics how will get to lot orders. terms some us that. In a of into on we've these started of of take cars, of

on macro that helpful. strong there's bit that the secondly, that expect Trinity comment the from seeing placing some still today. the as but That's relates order Great. environment wanted ask inquiry call I in more you And hesitancy mentioned the Are seeing levels been orders customers a they're to you increase, you Okay. to And I about well? it market actually think made to of with XXXX, uncertainties. average as continue. their in

So, in should saw stay orders we with be XXXX thinking about the expectation consistent your for fourth quarter? we what that

Yeah, still source made call true of we on customers you pause probably believe I in in that it's see few decisions A mode earnings Justin. in that have of railcars. been select again, number Ted sort it's this on haven't have. We and and with commented that QX and line is referenced. just the the that And a do it's really

with get at want America customers and intimately is here hard just those investments. done. out those time only There's FreightCar the concentrated. railcars The try of had when exactly the concentrated, how a still those were So figuring talking to equally highly customers of to what base who types a day. was team It's to every type within make railcar that out there, but not to broader customer they familiar we're sales

average an is don't do either. going doom and by we of what of We maintain also pace. sort levels. not But scenario fire going we're it's gloom stretch. I world to we average inquiry on It's sort the go any see a think, see So, to going think to light as forward

time. live will it I I that. and And appreciate the Thanks. go ahead

Elkott. of and Company, go Thank we the ahead. line Cowen you. from Then to Please next go Matt

for how months on Adam first is This I year. the of guys. the has order Matt. the guess question this wondering received inquiring you demand. I two activity thus railcar year? orders Hey, far first on in Have was been

we not activity Ted. do and Adam, so on done it's haven't We past. Hey, the -- post quarter comment in order

see still end, those delivery we're mentioned what inquiry. the say inquiries. So, will And is active to the actively we pursuing going not level we're in comfortable an guidance XXXX hear. of we But I that We're earlier. with

cadence your Got it. And by for deliveries little quarter about that? expectations What for is a bit talk maybe this guys' if the you of year? could

Good Kohnke. Matt morning. it's Adam,

of versus We expect the half than the and first third starting less be second second quarter increase in an quarter to We deliveries half. the first more levels. see

you about maybe as bit a could could And it. if and one months? in last well. here, quickly how Got just I talk if last few it's a the sneak in trended pricing just Maybe little

extremely prices but tells raise Pricing it's Yes. Obviously, It's that remains different each proven in. the remains Hey, competitive. difficult the in type slightly whole story, Adam, car again. current Ted us environment to we're pricing competitive. on

much Really for time. it. Well, Got. thank so appreciate you

Thanks, Adam.

we'll Then to line next Please Matt go of from ahead. go Brooklier. Buckingham Research, the

Yes. Thanks morning. good and

So of you've product. lease talked kind your the lease furthering about in business,

work little sits in could that. some of XXXX? the commentary fleet a fleet terms lease you can in provide where done You've and for of you terms infrastructure getting in of lease grow think the kind where the you in today bit Maybe place of

lease of Hey, there vast Matt out Kohnke. we is on about The out in it's XXX fleet are lease that them lease today. that units fleet. are long-term majority now have our Matt, The

follow that years. do not Jim would We're as start then run and over going future railcars the looking the of incremental we next to crawl, in able XXXX been we're would program Again, the terms indicated to and opportunities -- grow for the we're make that -- fashion. to with to future. going slowly make we several have in volumes a In walk, that

our success key So that that in platform. is to

XXXX in this How from cars to Okay. we the your incorporate range many does of And railcars XXXX. that fleet? from the just a then as expanding if look at delivery follow-up XXXX lease

now a what the that of expect of portion lease small to small fleet. right a we portion is It's delivery deliver

about PSR just a one then from And Okay. rails. heard the I one if lot last We've I Class could.

is near-term you potential feel in on thoughts impact. the thoughts impact you wanted to hear railcar Just on market share to more want longer-term the potential as free your equipment think terms of impact share. what to your But its

here. of at look When get you railroading an costs operating Ted, precision under to they're Matt. implementing some their all Sure, control. form the effort in railroads

term, short what obviously whole. But thing term it's are Longer for techniques. rail that I the by precision a in going it's have here question these to mark. So near-term to we assess derived good implementing the the is think probably freight from be a are on what them railroading benefits

increasing it's dwell them time its and taking cases reducing terminal some velocity, in offline cars For it's on and themselves. putting onus the shipper the

So with it's buying give way or other following. they are staying dynamic equipment. close by have I differently. Their can't are buying it we'll the out. still we're the equipment it to you all railroads. step-in just a and make just how should railroads They're the And good But than whether we're answer a shippers real evaluating see shakes purchases leases.

So staying situation. all the close parties those to monitoring and we're

pretty lease the thoughts is manage that the potential onus I part FreightCar the thought at to more PSR Is railroad on is process the shippers grow Yeah. on the equipment. fleet? And guess just the America to of

lease into and pitched different railroading, did Yeah. fleet, prefer as to merits we fact number opposed really we several to the just When of own. within the without of shippers that precision and so thinking to categories vast a lease decided of get the it,

some be probably more So owning would a of wanted precision lease those our as and to to shippers railroading, cars customers and could responsive benefit growth shippers provide there to Certainly, opposed result we to as purchase. to be incremental manufacturing.

that benefit. think is I So a

the Okay, great. Appreciate thoughts.

Thank you.

of from The Please you. Global, Willard ahead. Seaport we'll Thank go to Milby. the go next line

footage the now? footprint are to Hey, going good right you of What that little over that take the took Shoals, to potentially up I noting actual it morning, percentage right down of You operations now? everybody. I noted you bit a the it get to wanted there. XX%. about using What's obviously guess, talk square XX% reduction? to XXX% you that Where are down shrinking to in

out then operation. million use It's encompasses. the entirety of X-plus we the feet today laid occupy that the the much very to equipment Well, square building all

it, reducing When on the have will of advanced what developing operating In the investing going be footprint. now, full improvements of we'll efficiencies the this we're I'll cars additional pick operation, number line out I by out square we're of capability. facilities. to footprint there. railcar We're think look quote numbers basis, our not I we in produced kind Roanoke right of emphasize, terms shrinking in up outline of our per find much in And very be useful some we will maintain is fact, we'll stages at you don't what facility in of competitor to foot the and with lines. with

So we we than space we have need. more know

it, our it's XX% footprint as good be distance. just let's people economics the so traveling, And said shrinking long not importantly, secures equally -- and call for haul, it less it it the as we but then will also -- by

be are traveling to less going parts XX% distance. Our

pick this as operational up improvement as there's of So well. part to

savings of curious I kind railcars are in if source XXXX? of we're the you're doing capital of planning And these changes into XXXX? equate these, some guess that spending coming the out the baked with Just of of updates some of changes or the part for maybe in kind

a large will that We have project footprint changes make a number a number the Shoal's very of -- within footprint. of

of on smaller to of footprint. course One a is which getting

part projects is CapEx, Some commence of and year require that the this do spending. of that those

and spending, part going of the there's in. equipment capital and more different a As those layout the facilitization to build enhanced you of online bringing if efficiently, products will products there's new some

doing thought overall shrinkage of plan the on we lease to will the facility be this the year. modifications So approach. a current period, of through a between we bit the and will end quite And now then then do carefully

but color I profitability, not I as thought XXXX. price could to might If back that I obviously, to having the per coming there. the railcar equate up a at the Okay. here, to backlog, average look shift big appreciate necessarily

I think cars here production, manufactured half competitive more there with the some XXXX. and getting in profitable were some back QX in cars of lumpiness maybe price with some more

pricing profitable getting versus Is I more some quarter towards the there noted of backlog, the weighted in more half of another? another? one one versus As And to waiting in you guess on overall that and line, pricing versus on look at -- or any XXXX related quarters the you there delivered maybe another with the second changeovers cars deliveries in production half. one lumpiness is quarter less flat

Kohnke. Matt morning. Good it's Will,

along right. In deliver depending to of going the terms the railcars, naturally car that there's the and some that When goes be of with type upon you're type that. yes, lumpiness, lumpiness we

to we XXXX. As much we said, continues saw we certainly environment and challenged pricing that in be look forward, improve the

first lot will some first of challenged the half having first half that of The impact will more production year the a and what changeovers runs, the shorter quarter specifically. with be

also examples guess, of I Okay. you the two on second And designs. runs mentioned of, backlog

look the us you hours types can you're kind talk maybe backlog, you where ballpark might of three of pulling, currently? can backlog production included to you of that there cars current there manufacturing a a its run of what's percentage give I compressed your at XX think, that noted or Is efficiencies? you be second the As in the times gains

runs or some as I second think types there's well car that. as even a longer than new of healthy some mix

exactly. I percentage the cars. So mix really can't those there's a of give

appreciate I time. back I’ll Thanks. in Okay. queue. hop the

Will. Thanks,

other no you. are with queue. Thank that, there the Then in questioners

you. and company. day. I great you update on today progress. you Thank look our your our Have continuing to in support forward again Thank to your time a for continued

and and Services. And using Teleconference for gentlemen, Thank that conclude conference. for AT&T does ladies participation your you the

disconnect. now You may