FreightCar America (RAIL) 24 Mar 212020 Q4 Earnings call transcript

Greetings, and welcome to FreightCar America Fourth Quarter and Full Year Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I would now like to turn the conference over to your host, Lisa Fortuna of Investor Relations.

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welcome. and Thank you

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

morning. U.S. today's GAAP. Accepted comparable During will a to be of Accounting items are included the measures there GAAP release that non-GAAP conform this not Principles press also some or measures these issued Reconciliations do directly of discussion to call, Generally most the in

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

the on many of year a transformation essentially aspects was a was century it the for the all both in thank different finished the was In business XXXX levels, Lisa. XXXX company. America what great of set truly highly today. Thank but It and deep you, the and Good downturn once accomplished. and pandemic, of future. finished most midst terms us you the morning challenging a a unique industry was in for FreightCar our so year. challenging the table also team joining remaking

progress you some why We our introduce new potential will share Financial I Officer, our also the Rogers. Chief we are company. new of excited and the to to of the to believe reasons Terry today in share

quality, back car facility to as all lot. So, foot get am appreciable the that produce, challenges originally of build them started. we the And future. cost given employee our for thank day. completed according that a dedication report Shoals to no plan. returned last the overruns. Shoals. I exit last facility, owner quite successfully Everything continued planned. let's time, And very we it from facility and the associated to had happy as Alabama, I to the down a retirement day million is with of on We with we their to our square to systems for We final operational completed X-plus the of closing best our the went want February saying the last One over wish

large costs Today, were started while quality. in exceeding Shoals. the where customer or If back a produced Castaños a a disadvantaged extremely and meeting time, types we building at we years we cars team half plus for consider July shipping facility to step all customers new on ago, with take facilities, Castaños Muscle company Our in November. just in expectations and and were legacy three two started car different three has

position were less costs and our not were uncompetitive. produce survive to And to costs variable in much profitable. year we X,XXX to a be to needed fixed X,XXX when. per We Our units

manufacturing today, and organization could resurgence to that the cars. appropriately a to. streamline when and a under need facility for in That newest the Fast-forward are scale it we for and is the In coal moment the see North need sized condition has of controls flexibility purpose-built to facility fact, now when America. the we we

have to our year variable fixed per to XXXX. quality. $XX costs in have We we are as improved lead compared industry we an in million And cost, we of believe the terms removed of excess ready and

now In is lifting the line producer of will complete, company we industry and fact, to fair our in is on year, compared we say can production transformation the of that have the fulfill most is and shift we produce this a ready after At vision scaling with highest finished X,XXX very the old of moment, some and plant. changeovers. focus towards America, breakeven are production we and It to Castaños to per capacity growth. depending railcars that two-thirds our cost-effective, the the approximately start heaviest to our heavy two reduced levels by mix to are to now number the become FreightCar quality we our of that

with the that believe going to new this business scale upcycle will We come. we is

a footprint the expansion to two We future one and stake. currently of our which majority the fabrications of was currently prior to acquiring As their consists accommodate lines, paint wheel much partner a a reminder, shop, designed our receive JV larger from Castaños' shop. Fasemex, assembly axle

in-house XX amongst Related to capability and this a just of than approved facility fabrication our this, starting majority the efficiencies. future us our that make workforce allow attest hired own Board which experienced to This will of more the of construction already and best within additional our large months, that bring shop. all the our the the to operation. will a fact. to is of The larger fabrications performance qualified have very industry results the and opinion is, in We write at team

driven XX market ways onerous and additional topic, Between substantial past the inquiry Matt that and pressure prices, and sales cost The to in to ability and as have continued starting Mexico will doubled the steel will these still for now and associated time will more activity And near gauge the time increases selective pricing is is are very months downturn the capacity. smaller of by on must pressure overcapacity news, construction pressure with a we mitigate wholly the margins we on currently We lines the have at business highs. to that On modestly pursue. be the all size, are improving discuss, under remains, find industry to which that we be over with increase. short-term. order a we the levels assembly

have build the people. in the highly As from size received and to of new scalable company impressed workforce feedback and the the facility, and on highly by we and who experienced positive to around They have encouraged assembled focus the we Castaños continue facility. are start growth, are we we the footprint toured absolutely efficient culture new with the the and of morale trained the have customers

since the are We year as start increases the of increasingly sales well. encouraged new the number of by

for XXXX. guidance is is of the delivery railcars, X,XXX Our year X,XXX which our deliveries to range a for approximately two-times

below That having We delivery introduce nearly the downturn significantly the and professional expansion completed is X,XXX Transportation this it about expansion. finance noted where and ride to on phase you have the breakeven and Ryerson. next that includes physical guidance closed XX pleasure years of While the will XXXX our we out now. stage new and last new with to is our business it conclude, held is level, as CFO. forward. our experience. believe of flexibility Terry roughly railcars transformation we momentum allow capitalize of of brief positions FreightCar CFO its new we America. Roadrunner is is With move on Heico support is building us To overview, my profitable and industry's of right Shoals door Terry to Rogers, growth our the at with a true as the of the Systems, part industry of aligned the

Terry? on fortunate We to him are have very team. the

my months growth I'm of to excited built group the as Jim. to leader pending first enjoyed be work to organization. FreightCar few and and team, return the profitability. a support cited We financial and here deep and financial our Thanks,

million quarter of revenues for up for million, total to million Fourth XXXX our included third XXXX fourth $XX.X XXXX XXXX. of XXXX railcars quarter in to compared in fourth the financial the Turning revenues were me, compared results. $XX.X to XXX the of XX% quarter the XXX railcars XXX in We quarter delivered fourth $XX.X third fourth in $XX.X Consolidated XXXX. of quarter quarter to quarter compared million. -- railcars of revenues the XXXX excuse and

and despite the the As you results, of to manufacturing that Castaños. operational third our pandemic guidance our our pleased had the transition both XXXX XXXX are challenges for report to we updated created target deliveries, at by and Shoals XXX recall achieved delivery from we quarter

million in in quarter and XXXX, is half fourth bonuses last quarter successful it's of our payments quarter fourth achieved profit XXXX. of in in retention gross $X.X XXXX. meaningfully Our to SG&A positive million up to to SG&A of related to $X.X years. compared paid was the since the the attributed had financings. for and $X.X fourth the quarter increase the the to gross fourth the and The quarter negative of positive the totaled second margin June improved a three from performance This related quarter first $X.XX we Shoals gross million in shutdown only profit the

by loss quarter to included of related a to fourth of quarter the of to Shoals the benefits lease. Consolidated approximately offset partially the XXXX. included $X non-cash XXX of from expenses, for fourth operating the million the termination the the attributed in retirement XXXX. non-cash the largely XXXX gain $X million XXXX. $X Virginia a impairment million gain to in non-cash restructuring costs of in of fourth at quarter on restructuring and be lease termination $XX.X the million lease previously related a $X fleet, gains, lease quarter quarter expect loss $X the related SG&A $X.X in loss a operating facility of Operating our loss The to restructuring manufacturing was Roanoke, XXXX compared million of loss related sale a million railcars, $X.X for million post to gain in on largely held plan, a to was $X.X facility of And fourth the million the railcars charges We quarter the excluding quarter, the that fourth net per first charge million million in of of $XX termination

statements, item few non-cash fair And earnings net $X.X we as appreciation value recent forward. calculations. a the discussing on to our it per financial market change the market spend obviously an in on loss impact will warrant warrant of marked part and each the quarter. price value our million, be There's November, the Let's change share the have quarter, issued value liability impact reflects implications move our will of liability in which issuance stock since as the income is last past minutes year thus will we our more as a was financing, fair warrant and This XXXX. in of the of

As fourth liability a quarter our EBITDA million of measures for to agreements versus financial non-operating, quarter $X.X have reflecting adjusted EBITDA evaluate expense quarter non-cash the million warrant $X.X XXXX, fourth fourth the metric of non-recurring provided to our meaningful the financial to was compared fourth in result was the provides debt fourth believe investors $XX.X performance. changes and the close Interest a new we calculation million in information million results. and another GAAP of of the in of to additional EBITDA quarter in We XXXX. of of loss XXXX impacts, other in loss this $X.X quarter the the or addition XXXX. operational the

that of or liability, adjusting million value and the debt will our agreements. historical above generally in was loss, non-recurring loss quarter noted. expense Fourth operating when recent also other the large adjustments previously interest a these was impacted just change adjusted market fair same EBITDA remain positive non-operating items non-cash new items. addition $X.X levels that for non-cash because XXXX on in impacted forward, EBITDA I to by Going is mentioned the the consolidated of discussed warrant previously

XXXX. expenditures quarter the and of $XX.X cash included restricted provides completed to XXXX cash to largely the first from Total compared and and million Shoals XXXX the facility transition $XX Cash the cash including from year finished completed XXXX, up the year at the the the February to $X.X related to as loan to balances $XX.X November, than equivalents, We meet sheet. capital we our the and support million and to $XX Mexico balance million Capital of of the second XX, transition of and to $XX.X with $X.X was Moving in of the due million that targets. closure capital Castaños, facility to higher cash fourth transition Shoals the December of notably of Inventories new of as full ramp inventory quarter the December Castaños. levels the strategy XXXX, to transition to quarter working were higher Castaños end complete million decline our for primarily secured production deposit operation of proceeds million term million Mexico. to the on XXXX from will certificates manufacturing build quarter. in execute in and the during increased XX, production in as of the

opportunity leading $X be Castaños, million. in the at a forecast XXXX inherited finance footprint, call like forward our a forward. and incredible again, value, history. Given and growth return I'm staff. and drive team I and great to to looking a in currently tremendous Matt did to function. I'd truly between to thrilled to and commercial few to the $X Jim range FreightCar helping And quarter the I'm transitions related our smallest an we for its long-term and the over to to moving Matt? fluxion comments job we turn achieve vision to million Once fourth the have to am profitability. believe company we're at CapEx to a exciting I our a point expect drop

Thanks, Terry.

the car and railcar demand XXX for for year since orders year seen full XXXX, of lowest XX compared railcars the In respectively. industry fourth XXXX. XXXX, X,XXX and booked the cycle challenges quarter As the for of to Jim freight fourth XXX the navigate mentioned, to we railcars quarter continues the and

Although, rail the market improvements for seen positive throughout substance new beginnings second railcars. by were we continued to inquiries recovery. order in the in XXXX, activity that of new an key as and as the half a growth car fourth was number Year-over-year ultimately quarter of of relatively encouraged well XXXX, indicators economic demand the of drive quiet, sign traffic

bringing Although, car down groups, and industrial improvement the numbers in intermodal commodity other we fleet to Reductions loadings car outpaced consecutive economy five see loadings. in in associated expect railcar all to the sequential the months throughout in of the XXXX. do XXXX, trend steel scraps early second continued in part and reductions We increased in this expect cars half pricing of XXXX. support store storage

We are in level vaccinations. the increased sentiment, factories. the fill and are new strong reported inquiries of to last in our COVID builders encouraged car reduction other with days, order along We as XX by real customer improved well car as like cases anxious a

selective financial be steel also more We two-times smaller us are satisfy in are an XXXX it have our sits, the Thankfully, that on that and we anticipate aggressive and currently created year we to market close footprint, the acceptable careful to environment increase orders. pricing However, our targets. positions costs orders headwinds. as last in additional us in do

between still in below Our railcars, historic double average. well X,XXX is while achieved XXXX XXXX and delivery X,XXX what guidance we our of

will As mentioned, of second do become anticipating whether anticipate expected levels support in when steeper will order inquiry gradual and at be low we of is start XXXX. given that substance, activity, earnest unknown a makes in will being we sense in recovery. I it there the whether instead nature. heavily which in it industry The are the This weighted a half but and bigger recovery point or increases not

as expansion run car engineering capabilities manufacturing both types Castaños of expertise. efficient Castaños deliver Castaños efficiently will supported our to more the our investments this along leads broad change noted, lower to improve the and industry facility dynamics. is footprint already designed with quickly is The including we not itself position what already space, competitive leveraging to and targeted but market an offerings, by portfolio, only and benefits of generally Further continue our infrastructure, transition the flexibility of with early at volumes than to Jim leader our railcar manufacturers. product and are seeing other the believe As conversions, we of in the new will

that virtual within entire visits provide sitting were car events and reviews customer builder. remarks. anecdote responses of look on customers. the For thorough upgrade wanted to latest Jim? our rail to for meeting the to there the closing, With technology closing generate lingering, customer production leads now provides purpose-built how since of under opportunities plant the into top designs new I show getting on events customers to final approach overwhelmingly few hold from assets of build revenue of Using was with virtual a been virtual our surplus most When customers, no a virtual Jim for reactions call cars professional face-to-face COVID any we to we were received is at and America quality painting provide just type have car the the a the and Castaños share Feedback them. taken or car has utilized back number latest and longer commenced that or opportunity to and that, that are one sample over ever as in and returns. tours Castaños. if FreightCar supports these some turn inspection. restrictions fleets firsthand one have manufactured their the sample fabrications have we you and solid revenue you sub-assemblies In This with in-person I'll positive, we video, the solution our lighting at freight cars and process. travel of a

Thanks, Matt.

destiny. manufacturing control largely our we complete, now is and transformation taken own of Our have

one all and so If the list. the about now drive enhanced work to pieces flow, getting top left is XXXX right with significantly in profitability, XXXX and able building right and value. win. We doing do this profile competitive that leveraging sales company the of new so beyond that our free will to about the to places, new in XXXX cash repositioned have at was created building -- momentum about is dramatically company, have be certainly long-term momentum We shareholder key a

journey We call concludes the support. I'll thank turn are and Q&A. to you our continued looking for remarks. forward prepared for to That of all the operator now with over And sharing that your you

Long be first time, this from Justin session. we Stephens. with with Our proceed question will At a [Operator Please is your conducting question-and-answer question. Instructions]

Good working forward. forward the new Thanks. going congrats to with on And role. you Terry, Look morning.

you. Thank

to bridge to Can maybe improvements margins just a positive think the margins sequentially So, would looked to and thinking be should second the half a difference of there were know and were with just XXXX, help similar I gross in improvement level be both about. back we this start quarter, because have I buckets that XQ, of a operating lot break there such improvements been was business. X%. you deliveries, helpful year-over-year. gross notable the negative XX% in When but of But major cost the down us I we there? it

It going the able and in attractive very think And structure well-priced of processing forward just be of see were order through efficient in to and cost the Castaños structure. through, improved future. a more more which cost it's efficient we we go in that I order was as fourth you'll had fixed a primarily that a that we management quarter of most

causing XXXX, steel gross you going gross guessing territory? Okay. positive else be maybe margins do prices pressure. can a be but us near know sequentially or Is run-up the share modeling margins into in down, margins some term still gross help of from And negative there will mentioned forward, anything to in I back I'm you standpoint? throughout to terms expect you

terms providing a on going in certainly to financial we avoid structure. want of sort more We of the guidance forward forecast, attractive but a cost feel we any financial have

at Matt to want much prices. positioned we to specific higher going feel level guidance a we are As mentioned, we for forward, profitable XXXX. steel operate headwinds do really more providing facing the don't ourselves we get now but it of into But

you inquiry standpoint in received you more just Okay. help provide from XXXX? up any from so magnitude have bit understand you perspective, lastly, an could pickup And the that And picked us color mentioned seen? orders you've an to things year-to-date. then a the far inquiry of Have little maybe

a car I we talk -- but on you tell So, call. about Justin, I are next will levels to marketplace I what is update which this will at substantive a can't what more the broader the and a overall we've ton. that our are specifically orders of year, in I received seen make a -- from won't industry, type there think the seeing be in point, inquiry indicative perspective is much last starting the broader

leave I'll at the it Thanks. that. appreciate time. I Okay.

Yeah.

Jim. this Justin, is

has were the new gross several the on the years new improvement cost also maybe your Shoals. to recently a also quickly competitive that Castaños put footprints new from But of and efficiency. to margin Just than reductions, the ramped the is from Shoals in new internal the reasonably us quarter I'd little the We footprint we expectations. to And benefited cost of production more XXXX footprint more of that well. own have around the surpassed the how our on old for fact towards including benefiting up both color for ran XXXX. the and one part trill It's things, the and was that we've is material say Castaños the our from first questions obviously fact several footprint matter closed the and

that sense future footprint. confident the in forward, in looking capability we feel of very delivery So, and the new

Appreciate Jim. thoughts. those Thanks Great.

And is your proceed Elkott question Please with with next question. from our Cowen. Matt

months several Jim Good number. and improvement Matt Justin's Thank you. on question. also, order the We've maybe order to utilization of in follow-up just morning. had on

a do you is an guys a multiple and -- think units utilization that Rail XXX,XXX July. already? the be of activity We created have a we positives. disruptions events up two surprised order summer, or could see down possible network more think gone traffic kind since picked that Are are I you that orders weather has since where it equipment. that the reflected abrupt storage in the that than And cars to? in it had because quarter has for driver where and rise has has we'll of will not number rail

Matt. Yeah. Good morning,

to very other think, of of an the stage But the as we're we're which I traffic, of something. we're I as Without all customers, getting storage it, stage. turning think is into some order the numbers, piece you're include mentioned, in to to you takes positively, increase are specifics, car think timing broader with I level for lead into on to that seeing, some a that. activity, their levels, the a that order number all previously, a and order probably mentioned large go to the we from onto second hearing year. the of inquiries types of inquiry see the the see based of activity. steps through not I going half of processes It in while portion order go from but And again, the falling activity inquiry just increased the of

points prevailed. your So, are

Okay.

was I I leases from mean, last being? to because the to leasing trigger to seems term and the for trying of see year major has instead quarters. anything fourth COVID X% manufacturing think, but the of -- pulling improvements or of on uncertainty lagged. Do and I'm late order quarter last I on the just before the started at so metrics, side, leasing activity wait year to just had order short sequential perspective. the it the like in worst with you So, it rates the get quarter orders the couple of do manifestation think more that But people me, looking for I think political in an if correct lessors time wanting mean, and been manufacturing the -- saw to maybe definitely maybe the going we might've

it's available say some car to available. number out that were across types fleets there lease pretty think there I Well, of rates safe a and broad aggressive

of To the is and impact no the of spending, vaccinations beginning and customer with is get your that definitely health to sentiment, overall first. economy going COVID an decision-making and typically So, economy, and et cetera, that sentiment doubt deems on those consumed seeing COVID, consumer are the that point election had uncertainty to and overall some customer on improved. that where the we're associated

we So, but about definitely seen the now, improved talk course of -- and last sentiment we've our to compare over quarter a the we'll QX in significant if has earnings call, first XX change in the more it days.

Matt, this I would the at business. at once Jim. to easy almost entire world. chaos the least in to internally of rate so It's on is we've a add the because with been a in this, midst we're forget reconstructing fact century a America, bit little just about on focused FreightCar that still this pandemic the

cost it the We what more recovery. to we of wish kind And and going nature we said knew. the going month, more quick it's it's about with as economic, all are this hang key the indicators like new we we fantastic. storage, it. our sudden, if And given more like can new where this every point think is If business there it structure, will footprint, the be jolting in gradual? on Matt if -- turn. at macro general But do indicators, bit better comments, gradual, not already else, about a you So, correctly -- our strong of all you can know. be sudden a railcars I'm and and bit his that's and as to all it's sure we It's if, now, in is layer everyone improving. that are like, top I of is was look know as what a getting is or a railcar we don't recession, industry at That's it's

small lines. So, still does back. we're assembly begin be there it while want to figuring be to watching do But the is very come for on to self-out. right internally when us, now we obviously is industry we the pull It's additional when carefully and very trigger the -- good small its

break ground to the our the on new And so on footprint. moment when at engaging additional of more capacity of attention is

company you a has Jim, change of Are different that profile. new is with sales and you you your a -- mean, you makes wondering a Can different all focusing done focusing many there's far, on if now. railcar? sense. All of sales efforts type I mean, so your of you've Just target customer? type customer levels kind are kind guys on about a right the I weak? talk been effort the there changes on of a that outreach different guys Are to

of out but more couple with -- then add it. I'm let a start maybe going I'll Matt ideas, to I'll to

If think you think and in small the a between. marketplace biggest then really two guys, the in room competitors, you the there's of lot about about

so, for us from very standpoint, picture we a nice And in conceptual between. see a big spot

said consider to we be the the lends we're end not very well business. in a leasing We us to player that As partner of pure-play ourselves leasing significant before, going companies. with the a manufacturer

of sort natural customer perspective. see there we a fit partnership so a relationship And from perspective or

we've things efficient small always model need to been We've been look, a of -- In changeovers. company. be engineering at at a company. and to with order small be changes terms for. like need that, We sizes we're known good We

modify they to that customers, and are us and their And with very our maintain strengths for ability so, it's meet work our to absolute important strength to requirements.

we've profit certified and AAR building new about certified, at three we To in months in receiving model August. if we you on to changeovers. delivering look then we four You November, in we talk started quarter. October. run our July, and before this purpose-built started We affect done, positive able material Castaños be point, for we've to were smaller And We gross now the what deliver in started done in literally were just quantities hear just footprint. us and

engineering customer So, money -- be. flexible of side the changeovers on might -- invested do we're whether to in We've on how whatever we're lot we model very continue on focused the they're changes very of and to we've a commented focus past, meaning, it, tooling. they efficiently. requirements going And engineering

experienced the have complete the more are we the faster obviously, team now we're And getting conduct partial because We that of a even shortened we instead those leverage Castaños, which when we -- have physical we is changeovers do So very change, in of because time more and highly structure. cost economically, changeovers workforce. can that all ones. some they're and

do hopefully add to want that? that you question. texture But So, to to your gives some Matt,

partner -- say versus them. and leasing the all feedback position think opportunities, I'll We're not that customer items our you value our but marketplace, covered proposition going hold in lease to, here. compete competitors. just believe some a better of Jim, to key with we would the add I with I on the confirms partners pure-play we

smaller it customers, like the that do to to a have capacity. our we number we to we ability minimal and production Castaños, the of very shippers, manufacturing Jim's make the think leasing have facility As to at and us those companies, interruptions well with and competitively relates runs purpose-built point, have very positions I volume flexibility, where changes efficiently with

we I have our with from to think So, customers I Jim's perspective think, the to purpose customers. point, -- than serve we're little some in the capability more we I here. play competitors think of a But multiple market

for the congratulations guys. Terry, And role. it. insights Thanks so much Appreciate Got the on it. new

forward Thank you. meeting you. Look to

Matt. Thanks,

And I'll with the to this, we end Meyer now of over call turn have for closing session. remarks. Jim And the question-and-answer reached the

the again excited today. of for your Thank We're time you the truly about future business.

we continue and very growth Have to pivot largely much. complete. are And build to we to now the is beginning as a great process you XXXX. transformation in day thank momentum Our

Thank this lines at conference, This your your participation. concludes for today's disconnect and may you you time.