FreightCar America (RAIL) 11 May 202020 Q1 Earnings call transcript

Welcome to FreightCar America's First Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this conference is being recorded. An audio replay of the conference call will be available roughly 2:00 p.m. Eastern Time today until 12:00 a.m. XX, June on Time XXXX. Eastern replay, To XXX-XXX-XXXX. dial access the please is The code replay Pass XXXXXXX. of be call. call company's audio the An replay will X following website days available this earnings within the on

over Now to Please ahead. I'd Littman, turn call go like Investor to the Relations. Josh

you, welcome. and Thank

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

company's Our the www.freightcaramerica.com. at website earnings XXXX for release XX-K are XXXX and Form posted the first on of quarter

opening a With call me for to few remarks. let that, now the turn Jim over

these employees meeting commitment times. I you extending dedication thank Josh. for like you, a Thank morning, this our safety health you and and all us and Good by their of in to to would joining unprecedented thank to start for today. sincere

difficult. It's priority mettle continue for challenge to our a a true said more very X when to and company's team. especially get but statement employees. safety so in this can normal to for will have Not our is than make, it of now, more things our times, also the we easy As audience years be #X

Shoals including substantial to to requiring masks of X protect on ones We within assembly in workers, the the small every-other-day the reprocessing place protective employees daily of our basis, part separation, with cleaning employees provided ensure all massive zones have to work complex, list assigning to of protocols defogging goes new regimen, wear feet on of the health new new the the an as and on. lines

Our are adhering to new employees these in disciplines. united

To each recovered both date, to we've and report at are had I'm COVID-XX, employees us. of with back two happy cases Shoals, and

and as was that these those occurred at and safety before putting cases as X we to exposure, facility the our risk which for result was this considered in days protocol disinfected shutdown, we In first all the with of finished shut tested entire production remainder they X we place quarter. protocol. quarantine of end commitment lost to total, our at started the of effect, facility Our the immediately down the in a of

doing everything and cases been to This first. every employees are employees would continue the real decisions working which I in we easy But them. can am protect symptomatic our very, The being without handled to to of and people. home very the safety have day. send these made these our way handle proud situations way we the is

years lost move Company-wide, time last since on. now final we we we note accident. before are OSHA had safety on X.X One our at

evidence is the the that this we real period, operate type performs of facilities this a training perform a For company and values and commitment, our the dozen half of work at team. during of

cost to translates and quality. and and Our customers our reduced better for customers reduced -- this shareholders, downtime,

way to and we for the as the recent become has significantly stay future. which in uncertainties and assume unknowns the the due more this challenging environment, all recognize indefinite move months I forward pandemic, current will

speed the We our are a we to response both the focus to COVID make direction the uncertainties the deep are and adjustments, that on transformational liquidity ensure work have and us cycle down focused In to of to in forth position order years. couple be economy, in requires brought do industry the both -- benefits now what our planning must for by past of we the and economy of reap when for to prolonged, return. one on

have the which issues be was designed have for X-plus more to in to we the address years. stronger from challenges. X efforts put us last we This productivity navigate significantly adhered a principles and thankful and to footprint. to improve of today's over I Back position cannot successful Basics The much cost made all structure, developed strategy to legacy our these

fact, In more than is important work to ever before. now this us

both payment Over rent same X that facilities In frame, leased by Shoals years, material cost the than reduced $X,XXX time facility XX%. average of our exited and footage last shrunk at square more by we per railcar. future roughly X legacy manufacturing an coal our and we

per quarter $X recent cost closure this the year saving of we facility, Roanoke Through which year. of began fixed million in in are the roughly the first

at will agreement generate takes cash savings new which year, Shoals of starting of effect million January per the XXXX. facility Our $X

the and due weak line the combination end at lost very in weakness changeovers numbers. Our a the the the first some delivery quarter to and of days production minimal of was coronavirus. was result with timing of backlog, the obviously This quarter

our factory yet as into are lines entering we now stages third Two more light of and a is launches, is in the early back running, X complete production. startup. meaningful However,

at Shoals. available X reminder, a As have lines we production

order We building behind them. have do order and that firm a cancellations not any railcars have received are not any not

is of track. in manufacturing The still build-out our on Mexico plant

in the installation said take equipment will we the inside through we are last which As quarter, factory, phase June. us

for time to working is quarter. some the facility, are production first securing We the third our and on order start our during goal

competitive and the next available in capacity there be to marketplace more than downturn need a extremely However, at not Because a With we be will will for years. without we enter order. this, our near-historic we potentially ever. customer highs, Mexico several production entering an of in firm industry

included quarter cash and $XX of of million $XX and first cash. million unrestricted This with And $XX of deposit. finally, certificates restricted of ended we and cash equivalents million cash restricted the

We in will levers our consideration of protect continue and do sheet, we'll our all to so disposal. at balance

greater April, our In remarks. received discuss we Act are PPP loan, in applied liquidity for and in grateful we confident Chris position eligibility a which criteria. met for his and all CARES will both in detail current having

call are near-term opportunities. I be to to want first clear our Matt, reflective of turn Before not numbers our the I quarter over that

is facility Shoals Our building again. cars

adhere to and safe to protocols quality our up remain based keep our the efficiency to on year. we efforts we We deliveries ramp And and are what strict know safety continuing expect employees today, on product to production throughout our track.

With the quarter. turn first to the that, call Matt over to I'll for through results walk commercial our

Jim. Thanks,

update I Before would the give an on to market. like what our seeing commercial are discussing results, in we

we this look and we constant or we turnaround, encountered to an so customer we control from network the market rail to As are market challenging have relationships, timing value customer during rail and and well industry, the cannot environments. respond what can what patterns, solutions market Whether past offering We nor focused are positioned no downturn control, the of the certainty. stranger trends on needs. economic assets one demand are therefore, of strengthening COVID-XX, for demand importance does the closely recession cyclical remains, different but we remain an to global predict monitoring

scenarios, some daily We traffic with help commercial carload view -- temporary our as times, the orders them continue in customers levels. right. preparing through current of Year-over-year as their these for XXXX off segments on remains and in needs market a customers the declines. a quarter to we storage environment taking a of From Many meet double-digit inquiries at current customers the near-historic perspective, contact variety by remain was Further, to future. we'll X%, time be conservative and putting are experiencing the ready navigate with when and be fluid, are is over obviously are uncertain cars a hold. return-to-work first we

backlog. to Turning the

XXXX, XX, X,XXX compared order quarter. of consisted end fourth to railcars the Our X,XXX of of at railcars as backlog the March

Our $XXX $XXX backlog value estimated million. million, up has approximately sales of an sequentially from

building We XXXX, and orders quarter XXX delivered XXX we down of it. of railcars, all in quarter. XXXX, XXXX to year-over-year was first we in XXX XX compared sequentially Deliveries of XX the the quarter new to XXX mentioned, new of anything not behind of compared this same XXXX, XXXX quarter have This first orders first included does of which which in totaled to In and not Jim for firm orders railcars. previous a quarter new down compares XXX cars railcars. deliveries quarter that the order are were and the As the the XXX rebuilds. in fourth received

the the With that us first quarter? please said, you for walk Chris, through results can financial

Thanks, Matt.

compared financial in Turning for million to results. revenues just the quarter the result of lower that discussed. to our $X.X Consolidated year, of $XX.X totaled in last first deliveries million the quarter the the Matt first quarter

compared quarter margins last negative $X.X the a in million negative to of $X.X to a gross Our fell first million year.

gross reductions and carry of Similar associated fourth our with Roanoke a of fixed lower influenced largely costs. of ongoing the leverage quarter's with the variable Moving to by will carrying facility. partially wind-down forward, not cost operating deliveries, by XXXX, quarter margin our the this offset loss any were results associated operating costs in

from down $X.X million year-over-year SG&A the by for costs. decrease $X.X quarter million, of in The the driven XXXX. employment-related lower the totaled quarter was

lesser offset last the year. amortization of our in was the call a projects to quarterly retention decrease costs. on be rate program degree, SG&A the QX, mentioned special on would million unusual However, items. our the excluding and was partially I $X run and several project-specific the announced for noncash noncash management That by under a the that

the SG&A year to we the continue Excluding did costs. throughout in quarter, cut as our achieve and those that move goal, will amounts SG&A go-forward downward to we continue

our $XX.X XXXX loss for the charge associated to operating of loss $XX.X is $XXX,XXX of a operating quarter first of Roanoke restructuring facility. with loss an compared million in XXXX. million was the our the in Reflected first wind-down quarter operating final Consolidated

We QX investments during balance cash, million the in offset partially The March by $XX.X production for was roughly cash XX, and customer as position the driven to quarter, by million roughly the the ramp-up the deliveries our quarter XXXX XXXX. investments year-end of and inventory compared JV, and to in deposits. Mexican in the equivalents $XX $X a sheet. down as upfront cash compared with our decline restricted cash low position million, Moving finished to

economic Given manage the the conditions. in uncertainty resulted from pandemic, the to industry be liquidity line our priority will that has with

we against drawn our and million revolver against lease our asset-backed previous unchanged facility. $XX remains had facility X drawn as the fleet from Our quarter position lending

the under The As many industrial quarter's Paycheck the that received one Jim Protection were of mentioned, funds Program. applied we're after for end. received government's also companies and funds

As utilities. build-out basic used will Mexican to expenditures jobs in totaled entirety funding million, addition of of first of rent factory $X.X was the which facility. XXXX, quarter, funds of hundreds Capital intended, for the and quarter the the these be to our majority our related support to

on our if mentioned and our will an with in timed implies variability launch a be we cash call, spend schedules, change. is As optionality last align to spending those capital plans there Mexico which our to

will to earnings year progress throughout our everyone We on continue calls. update our on the

update our I'll XXXX. on an outlook end with for

with recovery markets, like announced lack for of current XXXX looks and visibility guidance deliveries the Given the the expenditures. previously withdrawing we are what our uncertainties into associated and our across capital COVID-XX

of markets, our guidance and economy we'll reassess the to as provision appropriate. our returns visibility As

Now back to Jim remarks. call few the I'd closing like a over to for turn

Thanks, Chris.

comfort over turn are COVID-XX summarize light and to evolving the the I taking in this give for environment. items Before some questions, in like of us that would we I call actions the

Our to emerging continues and will protocols, move to team practices. make adhere any to to to best align and swiftly we adjustments safety health continue with

and some in to cushion crisis. over put position from providing put last and a to pandemic. survive this forth needed this better our to cost toolkit Back strategic are efforts savings X.X business much initiatives the The Our Basics decisions of emerge have the years

track, we position for are the ramp today, table. consider Mexico Until the is facility and ever we production as cars it and Our we we the is our assume industry view in and product woods, years. the are will deliveries And continue production, need pure-play produce consider to prudent and competitive well manufacturer. quality have on remains to to what we to efficiency continue than as to to in preserve know up control our expect and out and of off be of progressing remains several railcar important The Mexico to ability cost a our capital through we franchise. will all highly Shoals The more on both nothing initiatives the the options in next will protect year. place build-out and bolster based we finally, factory wise

again like their employees ever-changing commitment and circumstances. ability to for react quickly I to would to their health our safety thank these to and

I turn and will the like that, the to With our call operator for to remarks over conclude prepared Q&A.

[Operator Instructions].

question will from Stephens. Justin Long from line first of Our come the

Just you little to color have how ramp give in progress could And a little sequential I question expect year you a on in. the any rest on was backlog, for the over what but of you backlog how much locked bit wanted units. to more a start the of delivery wondering production, if can a provide ramp there with that you is already Is on in about talked XXXX? X,XXX on color that allocated you based

Justin, this is Matt Tonn.

think mentioned backlog. on not to as guidance has for going we're current had well, our provide As I Chris specific mentioned, Jim XXXX

Okay. us through backlog how But much of maybe think the is this versus year? help next year for

going this se, -- not it's but the As how of year. this into dissect safe to before, And majority into as unit specifically much. for to the have we gets giving to year. we're mentioned part are of going slightly But planning backlog to And we but that backlog we get call around of the backlog that again, that we're moving year. guidance specifically kind do related the the more on is per say not

thinking But for as Okay. just recently. whole. just market, you a Understood. was varies about there could type. on I then pause obviously, And new any the hit big button I a was the things wondering by here car if railcar industry know have provide pricing And it color

mix where at we you just very new you would are dependent. blended of average, today? pricing say to trended look the it's to the environment has were railcar if So But how kind pre-COVID

is this Matt. bit So of Justin, Maybe to add. little color a

for safe that say think we I downward on face it's you're to new the conditions pricing. starting railcars, demand car the to economic current given see some pressure and

pressure anticipate it's side new future. significant I will for -- where the you're seeing what the the seeing the on we're market, we next type of pressure rates. we car on think on foreseeable see lease that of for lease following that And prices

I what there Makes of kind sense. kind way pullback rough XX%, mean, XX%? just that that a is Is magnitude? the What's to ballpark of has been?

say specifics looking would But very car that I you're it's specific. type in percentages, on you're at, without the... the probably giving

need don't we be giving -- on not guidance We're to that.

at Jim. is It's quickly. And speculate relatively been frankly, the this into difficult will happened pricing Justin, this translate how to marketplace has best. is, Obviously, highly disrupted.

you of how is to comments transitioning way perspective business Maybe things the of and cost But like out think can take Okay. there. It to going are G&A in mentioned of sounds that the to from and sequentially, the like move savings lower. there some a was this? in quarter of from about much a the incremental to much then Roanoke, in being $X quarter. versus in that the started first XQ hit million How beyond? realized on downturn a first And you

Chris. Sure Justin, this thing is

Just a questions. of things couple on your

as relates in not the the Roanoke, it them. all but majority First, quarter, to actually savings of were the of

have operations up dissection the going we -- down the before specific if been but think not to you quarter, about winding towards I'm closed it, So of end of then. that. give But were the costs

the quarter. cost from rent went majority biggest you've of which probably perspective, itself So piece, but again, got a the the was the pure through

through to the more the as that still P&L next in about on meat think you So come quarter. it, bone there's

the still at comfortable gave being with around the SG&A we guidance run $X number as far a under year-end goes, million rate. we're As

company take there the as to situation As required we'll P&L., the demands. and to specific. always, more going a the on additional is But situation you as as do and actions SG&A. always, to back as of and part requires, the that going go ability we not go back have address give I'm

that, the you going for the in position how And of on the X of this business commentary helpful. when years? look to of lastly, back do kind balance X bump That's for kind along the to downturn that another bottom multiyear Okay. you about around managing and kind then that. we a the One, being feel at sheet, X case liquidity here the questions

a secondly, And that anything is discussed prolonged versus now would in what there strategically, that context considering you're of be right the different you've historically downturn?

we in year mentioned, not year, give comments talked strategies as through the of do, other but think I continue things the additional remain. you we couple of to to throughout the I the happens mean, the going do calls there. to as down out mentioned, in we'll to what opportunity still time liquidity Right. taking savings as had infrastructure over obviously, this obviously, cash question. definitely next items when this about on -- previous kind make All will about on some Thanks guidance depending us its expand additional environment. investments and is we're But of a for for get company

think it's evaluate. kind to always of this I to liquidity any some specifics there stay going around -- in things we'll time, But So away continue safe that say anything to of plans kind other from and at point I'm are else.

is this would I options liquidity. We're order in just our to considering Jim. -- add all preserve

the for match Basics I the we're to started in past. the earlier, And we said continue to to work we're As that to thankful costs schedule. Back very going sometime production

[Operator Instructions].

Matt line Cowen. from from question of a Elkott have We the

past, the in the think, quarters, help unit I in $XXX,XXX, XXs plus the way XXs. and several guys last it's it's think of in delivery? been revenue than the per me you versus it's been manufacturing Can higher understand I

that to is. I'm understand So why just trying

such, number. as a that number low Yes. parts delivery the very a bit. had Obviously, is little And influencing we

there's that car So again, around forward, not go usually, an issue more of you get of you'll there a that unit specific couple when it's things such going to down are -- actual low But -- kind number. a that a number, washes more in that. But out. noise other that see traditional

order you That Are flexibility makes active positioned manufacturing some small, And way is cars on in my take for be XX? take absence they that's potentially a can sporadic in of larger may something builders to hesitant in next have to small, that then lines may instead not in is want you any advantage and And larger orders. sense. sporadic downturn to of builders that? XXX guys be question someone Do a where Okay. orders -- advantage that more the you participating that downturn, in some market? take in of

Matt, question. certainly yes, the believe to is, this the your question answer that. short Thanks for Jim. is we guess I

feel making As objective. best of that we've quick of X at we've in do configurations about calls, new towards been manner it is whether business is investments talked in conducting cover or the line in In with that the tooling to is our the a a goal achieving to specific of part is product. process to part manner and flexible parcel we at changeover. we've both placing and and design manage We and we execute substantial progress made the variety where which with in and car a the focus in our which be couple changeovers

part heavily process we we the been in we've will to smaller excel tooling, forward so And do of see flexible somewhat going orders. very is much where in and very ability these investing and

had adjusted cancellations, be percent said But make backlog ladder you sense. That encouraging. to deliveries? no your Great. your Okay. to is what guys which of does you that And had

is Matt Tonn. this Matt, Yes,

time customers. to at We any deliveries due haven't from adjustments requests had in this cancellations or point on

deferred a So none X year years has of been backlog the out or out? to

No. No.

correct. That's

further Meyer. At in ahead. this like it queue. turn to time, questions there go over are to Jim I'd no back Please

to all, great day, time as for to support. a stay your again safe. you always, and progress. update Have look Thank Thank and continuing forward your continued you our We on please today you.

AT&T for today. Executive will and that your and our Ladies Thank you. participation conclude Thank conference for for Teleconference. gentlemen, using

may disconnect. You now