FreightCar America (RAIL) 17 May 212021 Q1 Earnings call transcript

Greetings, and welcome to FreightCar America's First Quarter 2021 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] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lisa Fortuna, Investor Relations. you. Thank

begin. may You

welcome. and you Thank

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 materially a certain conference result differ 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

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

spent highest the transform the as time North a XXXX months we FreightCar of set and America, thank today. most results producer discussing reported year the you full fundamentally XXXX Thank all considerable you, for transformation how we company for future. When and quality few our Lisa. just ago, in a us Good ambitions us us and XXXX would our to morning joining railcar become and up America, efficient

we industry an in recovery the of the position ahead for of get to done was start pole believe ourselves and goal Our have we that. put and upturn,

we up scheduled that consecutive operationally margin were first the plan executed year-over-year, our against and for build we quarter we of also completed XXXX, the positive footprint. closure out an of For Castaños did and delivered gross directly period the production production of Shoals to while second difficult wind-down during quarter. the the so ramp achieved stages revenues as the and We significantly up final plant, continuing and

early are we would dedicated direction thank in growth. still is of And renewed it are key accomplishing. are we what for our believe will confident we this be to who talented days, employees all our While the I and what our pace and to like

we and been early shop. The plan, Last fabrication of bring well the talent addition to allow new which believe quarter, moving and and no own Our as will efficiencies. wheel XX had will of fabrications base we fully longer. never our announced next we in-house these to later our Board the additions construction approved starting facility our to us be operational is months, as according expect make that along axle Each has majority additional also year. than project within an of shop, our capability to large

discussed the industry have facility we was market as as purposefully and Mexico and addition, built expand In dictate. to before, the of dynamics

on is expect I quarter the third be early and be of additional do the or timeline discuss this lines. stages It to a details position costs the second almost planning however, in premature now of expansion, next to to for certainly calls. will what the are on in phase outline We for more topic

we need double these pressures. find there we time than high to over prices Steel year ways to facing. mitigate continue and very at remain the side, operational in levels cost to headwinds and that to work are supply more the On both all are the hard industry protect, past

tight and the The orders recovery continues to that to supply, seems are news increasing addition to is good In gaining anxious and expensive their competitive intense steel the momentum. fill landscape factories. with to manufacturers demand be be

the and us cost Castaños reason even margins facility. begin near meantime, be during in the on to balance. to fall until put will However, pressure term, things there intensity is pricing to the into back be pleased more steel In for

in about costs encouraged to detail exit call across and one-time our and move that to right and significant traffic our costs, activity higher. are will As speak headwind Order in the the the declining, macro and is business. impacted margins our continued the transition we but from environment discuss the earnings rail and today's dynamics our it first we there note in to the previously details, on be is main would by his the quarter, industry these this for storage we was Shoals call, during with to will have quarter. even Matt positive continue of broader increasing. railcars noted last important more the but trends we seeing these positive results associated Terry Castaños were seeing conversion with part are direction, increasingly the and without in starting been

since back by sales enquiries year. in also the the of noted are March, encouraged the we number very of start new As we

starting up close now pick new also pace. are orders with activity We to to continuing

new start support over the growth the the delivery up between in and provide very forward. to of XXXX, to new on move are a the turn of from result, expansion raised We're We railcars. original operation our that guidance is believe we to profitable have XXXX of in more the to now pleased our we structure all performing, chain. The with detail call Terry good cost financials. I'll and outlook a position year how new most about winning. between is as XXXX and XXXX XXXX momentum railcars XXXX As we building

building believe we Jim's we Thanks, our is to are Jim. Good To clearly to beginning and of the only potential everyone. the true echo morning business see momentum facility. opening Castaños remarks,

company to the quarter $X.X fourth of quarter first were in first XXXX Turning XXXX in results, quarter in of compared million the the XXX and the quarter XXXX XXX million and The XX XXXX. of of our $XX.X to quarter compared XXXX $XX.X railcars railcars quarter XXXX. in in financial consolidated of first delivered to first fourth million of in the railcars revenues the

gross first was fourth the in quarter quarter $X.X profit Gross second for the lower consecutive of $X.X margins Our as was quarter Jim million business positive previously gross XXXX. margin noted. in to the compared million,

with quarter from Castaños the fourth the the costs Shoals. to includes However, final move associated transition

our accruals the Importantly, increase and of million XXXX. attributable compensation a in from quarter financial $X.X as gross in quarter rise up we SG&A quarter positive company's to $X.X professional million, to in margin the fees. on fourth well last SG&A for three in and is third focused only and $X.X momentum. totaled non-cash The first higher in quarter this this remained as maintaining the half stock the first was the million of related the price, years

restructuring on largely November included Namely an $X.X related fourth loss the for change Consolidated move million XXXX. remainder to warrant have The value $X.X marked XXXX financing and railcars, XXXX of that Last liability non-cash issue to the of charges. for our manufacturing quarter value of $XX the million I charges our XXXX of impairment million offset of loss million with in market the impact earnings XXXX. with million lease of calculations. the We leased the $XX XXXX, financial of operating each of for facility first to by as at expect impairment impacting first loss quarter quarter our XXXX the net quarter fourth share in the million quarter you XXXX. related was the the of quarter in partially expenses of would $XX.X quarter be of restructuring $X.X including we during $X compared million included walked in first was be the operating quarter, the gains loss the quarter charges. of and the throughout Shoals first to restructuring loss in XXXX Operating income million, included approximately termination to forward. will statements of operating per quarter fourth and per of Operating which operating loss SG&A $XX.X of warrant fair an

quarter compared first million XXXX, the quarter of value change of the to X.X loss XX.X the XXXX. in of market For in fair liability was on fourth million warrant

stock the item the quarter reflecting expense is quarter fourth reflects As of our in Interest and XXXX of quarter. during million the Higher debt agreements million, appreciation the a first of new expense fourth in of $X.X quarter XXXX. reminder, XXXX. the close $X.X the price the compared to in interest was first million first quarter non $X.X a the in cash this

forward higher I speak interest historical on last funding the expected levels additional to those changes which Going and structure expense through our than shortly. year capital will at remain is to based

cash loss, million, to on first loss mentioned, the was loss quarter loss adjusted consolidated of items. for the last of that as by a and was the impacted positive fourth adjusted operating adjusting million, just same items EBITDA other warrant discussed $X.X compared quarter, The large adjustments non unchanging for fair as $XX.X the adjusted generally first quarter our market the recurring the million of adjusted liability noted. loss XXXX the when was well previously EBITDA also non-cash reporting In operating of EBITDA XXXX, $X.X non that EBITDA or was Like non-operating quarter when previously XXXX. value of impacted

sheet, end cash at finished of cash deposit $XX.X including Moving million, certificates of we balance the now cash to the with million restricted $XX.X compared to and equivalents, the XXXX. of quarter and

$X.X periods. for to and $X.X The $XX.X collect quarter now first in investments end complete. obtain largely make we to for well partner totaled lock Mexico, at the in of brought current of the prior these million in balance compared to to our was of the approximately lift the cash as of tax and year phase and certification expenses account we is Shoals as XXXX future VAT sure Mexico for heavy out labor X decrease paid to our expenditures can million as facility receivable a Mexico, manner, drivers discussed, million were closed recover main move completed targets. of process in expenditures of added expects increased is The the and expenses previously and as million Mexico, capital $X.X transition approximately working or with physical once of meet value freight As future production associated time in incurred included declined paid review in One the the Capital the prices. VAT X made, funds million that equipment quarter facility company timely the steel period mainly a return complete. the which application million first prepaid was we've in the the

As XXXX full significantly we stated that to earnings smaller XXXX million. will footprint lower and our at $X our to compared between year be million in range $X given forecasts we expect and XXXX CapEx our call,

increased financial partner as a today, Finally, in term to press of XX provide we release with million we our financing. noted our additional loan have an

with financial believe lenders that of a local with XX qualify financing this We primary that in maintain VAT ABL. for a assets steps will Mexico be more will These new million great will do momentum. we be operations. domestic Mexico, to appropriately and and last the continues and will process Our to the inventory work in our over facility FreightCar our growing allow aligned and partner us to through help have secure incremental not which currently funds us refund finalize temporary our

in future months. more will few Mexico have ultimately hope that to next We So complete be process the within efficient. financing

structure the it In March repaid the amended are XXXX will of loan, require equity terms bonds consideration. new of XX additional not the term by

We the loan than faster are aiming to that. repay

an we the financing As aggressive establish Mexico operations. direct funds our VAT discussed, to and recover have we just for plan

overview, comments for We to expect and commercial the related moving Matt that that like year. a I'd Matt? quarter over this will later first forward. to the resolved call With to be few turn financial now

Terry. Thanks,

an signs railcar car trends, freight for industry groups, traffic industry including of commodity and planning the increasingly mentioned, has key all positive and most storage, railcars seen As of ratio. the in continued Jim recovery. first improved of positive rail indicators reduction quarter increasingly compared and stronger of an XXXX. of creativity seeing and XXXX, railcars booked railcars We're first XXXX fourth we XX quarter in In XXX quarter booked-to-build XXX in improved and the to the the utilization

inquiry levels conversions. railcar in in last As double with quarter the all first examples, good a diversity year were types, of including of

is of customer railcar positive The other good types. which across sentiment the is majority sign

have out. expectations positions our quarter, on selective our last manufacturing from an more noted aggressive to us orders. high we market costs Thankfully, XXXX playing As in be footprint pressure and steel pricing is environment

of overall In comparatively not run years chemicals believe of has to last FreightCar with we deliver pickup replacement a lower improved the rail of the the life an environment. end low change scrapping Castaños been These addition, railcars types steel obsolete the facilities. are demand We further scrap portfolio, there's with commodities railcar volumes a efficiently ripe to continue is end activity historically of activity below and prices. sector but other coupled in high Portions and and nearing fleet railcar all itself also signs designed industrials, quickly due demand. the improved increased efficient dynamics broad expected to only in than are that of footprint two metals, of factors lends of serve, the more positive for to past is product markets strong car at flexibility order

railcar space and expansion of our step engineering targeted to with right demand. already including in both Further, Jim XXXX the our deliveries expertise. XXXX XXXX leader have as relatively average. Castaños remains in at manufacturing industry we offerings The Castaños to that for plant changes conversions, railcars. Well, infrastructure future up market investments expectation the our expansion initial of direction our XXXX our react flexibility outlook and this was clearly mentioned, the historical railcar and and in As continue between below well a raised to between of will designed levering is capabilities this from we quick XXXX in

the For generate opportunities or cars assets them. underutilized longer latest that to fleets or surplus revenue provides solutions solid car real our new revenue customers provide upgrade who into have that designs no FreightCar the lease returns, for America

the our back XXXX, well. to conversion performing over that, call for closing Jim? I’ll in With turn a far few is Jim So very business now remarks.

now improved profile for transformation manufacturing positioned our largely complete, are significantly and With we have well growth. future Matt. Thanks, we our competitive our

continue long of to the We XXXX. enhanced cash term for will the profitability, the that optimistic put are early a in flow will us XXXX This shareholder position into drive and free in momentum year significantly and balance value.

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

comes Stephens. question. Justin question with your Please first proceed from Our of Instructions] with [Operator the line Long

good morning. and Thanks

you the So anticipation was if you the to any about up. that inquiry to to willing on you ahead. you'd I quarter levels the wanted know orders quantify? talked end that increased delivery orders XXXX better of start quarter orders guidance. Curious that or the be a And than first picking subsequent then better function being receive thought I of

jump this Justin, Hi, good morning, then on. Matt go first Jim, is I'll can and

increase led any to quarter. guidance saying So number that us orders the first we're is about in already of to is inquiry rate and relates also beyond specificity in anything new pace trends up really talked that producing. to not online factory the general as of a and of activity, all, is they the preview we've first the we're What and going come positive marketplace, which the at it increase things continued our

side. full-year we're have that'll for demand orders So of the production, we opportunity in initially seeing us two a and forecasted with than footprint the taken for is more what marketplace, have really a terms things we there's support One we trends on now occur. more what and in

the with So made. we feel comfortable we increase just very

maybe inquiries? car that you're Anything around bit seeing any different the stands inquiry digging types there increase. those little a the into level in out? And color that Okay. deeper Is

Matt. it up will the won't significantly seeing it's it and these across in number half this we we what to I start think think that's in year when second line what the I the consistent a picking with with that at board, I things forecasts diverse various inquiries. seeing we're a of anticipated, levels all way Yes, Justin, is in of of is we're on get the put levels but overall, specifics inquiries into types. car look

Okay. year. rest look And of we should or the be level, around that rest that, so be the closer where the likely quarter, getting what of in fourth inflation and the it for of I they like guidance deliveries railcar On because we'll back be the will price commodity thinking the if me, the gross slightly lastly you the fourth margins average, you below were level quarter the it about mentioned maybe competitiveness we to year that? at that and X% saw from pricing seems implies below. about Thinking in to

specific Castaños, Yes, take see would we're to percentage we forward, obviously advantage performance that the give from no do and a cost and the not what of confident our to but gross margin guidance performance we going we going in new levels we'll structure starting we guidance. we're to on have but feel new specific expect the in expect continue

question comes your with Elkott proceed next of line Our with Cowen. Matt from Please questions. the

Good Thank in morning, about orders first guys. sorry, if you had I'm it, you XXX I you. missed say the quarter? would

for our was first activity No, XXX order cars. quarter

so right, All it. no got cancellations. Okay,

No.

of time pass that Got all of increase impact were the acquiring orders prices on bit a of price have more any at the you margins? talk in you steel last at fixed it. about taken in or do can if your both your and year? And I guys a through steel the then the contracts disruption mean, any

a in a as were the challenge industry we'd handful that fixed the contracts what with But if it'll also for and clauses seeing moving opportunities. the of at prices. prices, locked the metal well. to be the we're have as continue price market escalation and we of price Most higher forward have we're There of in our various certainly looking deals

to Got And if say you ahead. sorry. it. would I'm you obtain had Go

when industry Jim. a manage and I'm side, from an well supply because period extraordinarily near recession with bring both is full which But Matt, high add a extremely steel elevated get we're of these term kind this that and know, just able their to the directions. coming steel thankfully we steel availability you centers, is replenish wanting - back time strong it's under we prices that all as pressure work our all to of We're as also are days, with steel of the going of have the dealing piece - mill the everybody distribution from. our have manufacturers relationships we flip and both as out majority industry workers factories. of on to to

So pricing have steel other from side, on also pressure side. you on yes, the the one pressure have from you but the

as going it's things for kind would back work. to but the level be a bit true, next get balance people and So out couple to challenging most of of the out quarters little we likely, that's expect

you will a premium does railcar type, the that can insight… Jim that - to and or to steel on by put of does And give say railcar, price vary you guys XX% any depend - added that prices a or have XX% us if so,

disposal. the too, thing share as we're or and can buying our ability, tool proud advantage at steel only taking contracting steel to others of managing the sure you best are I'm I every our of availability, vast Yes, is, of with

Matt managing already it's is, business escalation has what ourselves we and or customers. the So know protect has case, majority and lock And suggested, our do. for as best best supply that and our for in is, the about Terry, for we in we that been always of secure pricing the do can

with of Majors Group. question Financial comes question. next Please Our Bascome proceed with your Susquehanna the line from

boat. here. conversation, got to alluded the to you Yes, good guys questions as to place larger my located to taking prior you up, the as and Wanted thank we ramping expand realized, that, you are in well morning, competitors on for your the very same close Castaños you've

You into been different anecdotal be in standing factor gating I without a Is talk that this a with you talk necessarily expand? shared get the about to you really there Although to should that the what stuck, timeline some to? year, alluded where can capacity, versus be in bit that that's but is for of you bit with us to just or little helpful? you're getting situation re-ramping a one new later is in little Is in demand context you think labor time, really steel it could put on continue would components, anything a going it supply? facility better

just a created our deep a the back it significantly prolonged as way become Well, what of Meyer write today. you come that to recession. nice joining sized all such And When speak by the thoughtful thanks environment And bigger Jim the out industry we Bascome, our in and what undersized for expand better in historical a can of and it's footprint that we're where was things footprint and using, ourselves as intentionally COVID. way manner fact come by all the took we for recession footprint, industry out smaller on done in we're to company way. actually call created we This we back our then we only a but paying certainly a back Mexico, with past. were in we that advantage is with up it was a

of no footprint. And the it of right or is on have the would people to time about expect all which frankly than prevent managing correctly to manage, things of we the did we more year with is on us, manage not one assembly what namely it's also timing as forward lines, and the what timed So original additional to properly, are correctly. now, correctly, you different go bringing it gate facility, bringing the going we increments us new creation have aspects would what's last it's which

sales it's good comes new now is to this and pretty all growing at. activity bringing backlog. facilities luckily we've orchestration. industry facilities, gotten And it's the And predicated So something online, and it when on about

gate held fundamentals constrained let but don't factors. what by to want other industry being external the from anticipate we So us, back or do we're going to we

point, this not in imply at So that you your to an remarks? trying weren't shortage, feeling acute you're labor or prepared

be we with what of part continuing more I we to we the And on new who don't of It's footprint. our thrilled really we it's the couldn't No, built no, we are. bring team challenges one mean, assets, and anticipate honestly, in quality they're five talented of a people people. the and This had probably the in that Mexico. all XXX. we're thereabouts year need. numbers think at people, Today, we And incredibly time, I employees, or about about we down ago,

So this in is worked being the luckily, when one others of significantly our of came And industry. ramping the is of down. it and of advantage. the great industry heart the this were started advantages where part to up manufacturing in the wasn’t in We

marketplace? that the But for to those end the next. prepared constructive you pass I'd it how kind and Just to and Are one conversion be then you. fairly may on thoughts said car remarks the more, owners you any in Thank business. conversion? around of types add like this there on pushed by towards into types non-traditional any of being Thank commentary that some evolving context. car the

level perspective, optionality add longer we there even experience our when Tonn. is when little we've last go the from of provide customers. on But well to now, we're assets kidded in provides overall, multiple a opportunities - right positioned back two and isn't a me, really I'll now this think Matt conversion Bascome, some industry any over available on perfected fleets, our decades, multiple of Right wraps given limitations underutilized we something that the that I the car for there bit cars. car to types just to it's excuse age types.

like questions management queue. back hand call I'd further closing to no remarks. for the in are the There to

your for time Thank you again today.

about and forward of the evolves. the future and industry recovery of We America. and continued momentum seeing benefits have strategy, great Already FreightCar a the as continue encouraged day. are Thank be to to the we positive you excited transformation our look

gentlemen, and does today's your Thank teleconference. Ladies for participation. you this conclude

You this wonderful and day. lines may have disconnect at time a your