FreightCar America (RAIL) 22 Mar 222021 Q4 Earnings call transcript

Greetings. Welcome to the FreightCar America’s Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Lisa Fortuna of Investor Relations.

You may begin.

welcome. and you Thank

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

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

that, freightcaramerica.com With our remarks. which today. was opening XX-Q Our earnings the over me release company’s opened to for the the fourth call earlier quarter and for the website filed XXXX is now posted at Jim on market turn before let

of strategic Chief XXXX. of call year team of comments. with we allows He XXXX. significant shareholder Officer. The truly very very remarkable drive with call in you who value. us with us past Because everything company quarter and much a last joined which I one. our have be years. am previously you Castaños now growing to Rogers, to thank we company, it Chief for year functions Good morning. has over very a I update had This finance joining hope the you Lisa. that him to Officer today. Mike for introduce yesterday, extend as became with And Mike sincere has pleased the Financial been I accomplished this new been who start served this to you effective as senior of we and promoted to changing recruited thank we today's serve to Riordan, company's This and guard all Thank instrumental morning Accounting the introduction the a our couple want the would has year have also have since last the you was member Controller team and complete, that get transition is past will day. full remain been manufacturing my opportunity briefer and Terry him proud notice America us a the a I into healthier, May. of of move Terry let's our but what to With still that, extremely get and accomplished part short year much on and the transformed until what we to FreightCar our month, started. this a guided to a was just will we was operations of in am when

versus we order book that believe year at Our Even up so, revenue end prior XX% just getting up was the XX% year end. year-over-year, was started. our and are we

our confident says lines. is make and in expand we are And FreightCar ability fabrication quality marketplace, continue We footprint continue shop about money added going and to customers. discussions competing the we production What the that winning and and and with future to wheel manufacturing with are large America have axle forward. capability, we to our that high this a additional about

As on as in were that gross This we for the February in you our third with line manufacturing positive included reported world. call. press quarter the well communicated our as income expectations positive results quarter we the margin of operating saw today, a in release fifth consecutive

was During year-over-year savings structure, capabilities XXX XXX the factory approximately U.S. fourth $XX cost and footprint expect of million improved XXXX of overall we the to year-over-year fixed and quarter, to annual forward. manufacturing going versus in the annual period our compete. up million XXXX. and delivered cost in a the cars footprint direct The to The Castaños result footprint versus prior full facility Castaños prior to the base at revenue savings and our rail fixed operating ability XX.X% we $XX same transition was above versus of base cost of translated U.S. remain improvement

Additionally, a labor on high Castaños footprint. based The cost the level. at is we XX% by running unit compared lowered in and well, XXXX our team our per U.S. previous performing average to is factory

Castaños been third the of is to date. on the essentially call, COVID-XX avoided vaccinated disruptions workplace largely team individuals COVID our stated from XXXX earnings have As and XXX% quarter and against nearly personal

Our workforce we believe our of that one out is from competitors. we the stand main reasons

as team our persistent and it relates cost raw been us in material collective chain inflation Additionally, has navigate superb to supply helping constraints particularly steel.

in continues we line growth out end environment across strengthen markets the laid and strategy all with XXXX. in return to demand the is So to our

increasing, capitalize see with cars in will environment more let on demand FreightCar demand details minutes. the positive year which expecting to heightened capacity to of the of an rail trends few I recovery cycle storage will dig a coming additional traffic XXXX. later into continuing this and America and ongoing Matt and in are across the industry, allow the We we with declining are increasingly specifically

summary, cash market. funding cushion, the conditions, to and funding the of We our term need is our is Castaños funding needs, car we tank complete of cost and and our entrance business have as eventually for confidence expect ensuring performing we our the facility we our and our made our structure partners future expansion full year fourth produced focused various on our we financial are capital well. and complete Turning the results cash quarter to results transformation, there capital. we progress that improve, and into appreciate have we on the providing pleased And the entire challenges. to the ample team the long in the lower are by to an to loan In and terms look ways liquidity improving inflationary despite improving current

we're and in I shaping we would and to now are said, our of. With that Mike confident that performance future where deliver of strong over that to the We expects the our like call a the year XXXX up financials. believe to be we everyone start is turn Mike? for growth to capable believe review

everyone. morning good and, Jim Thanks,

as very me position controller First the and well my new Officer. this has be excited role years Chief foremost, our in and I for team Financial company's as The to entire prepared and prepare helping thank past me for to I'm to working helping as of company. hard for role. in has few his this transform worked support the to mentorship also Terry want

rail quarter to of in $XX cars manufacturing full company XXXX delivered quarter fourth rail to million XXXX fourth totaled of We third results rail growth and the already in $XX.X quarter XXXX. XXX of of in cars compared quarter XXXX cars The the and the of fourth XXX fourth quarter third the quarter in XXX in with XXXX. and we fourth transition. have the revenues year Consolidated our significant million, the ahead progress financial million are compared $XX.X XXXX about for future the excited in XXXX made the highlight quarter the

of volumes quarter from income XX,XXX, and for Our down million the gross quarter the was reserve fourth $X.X in of an third XXXX and the loss stronger allowed quarter the margin in same million our all million $X.X the to of significantly for period million in the in XXXX, The the Operating an prior quarter of the for quarter operating in fourth and operating of the SG&A higher Gross fourth fourth income. positive by quarter gross and for consolidated business. the to administrative due third manufacturing other to $X.X $X.X was $X.X margin XXXX. the increase the the the million operating and We Castaños of consecutive leverage income $X.X manufacture the loss fifth of in in year. and quarter the in $X.X loss directly operating fourth fourth now primarily compared of in to quarter during Consolidated the quarter impacting fourth quarter was positive $X.X the quarter the by quarter from in higher increase driven quarter significantly manufacturing cars of loss. quarter sequential was railcar million, margin third totaled income, operating XXXX XXXX. million up third was million corporate income $X.X accrual for Manufacturing general the of was fourth compared of an quarter business for income million $X.X million in offset manufacturing in XXXX higher consecutive of million and XXXX and real of of the a $X.X operating operating operations bonuses. us XXXX. selling, in expenses third and partially operating

associated financial draw our Award liability of Now, and contingent again XXXX like each loan marked is our with November change impact to our quarter income share calculations. impact net delayed financing, the the financing the XXXX investors and May with fair the in I'd XXXX issued value our statements. a to how market per value in implication these warrants warrants remind to with December earnings and

million, XXXX the of of and the XXXX, change amortization includes million $X.X primarily discount the XXXX. our the the expense compared of in Further, to just fourth XXXX. quarter in was $X statement the value this stock on on charge of was liability the the non-cash expense fourth debt quarter fees, in million non-cash cash our and non-cash is fourth in quarter in reflecting fair non-cash quarter of a of Interest over Again, to million the of price $X.X quarter a quarter. PIK $X.X item, of compared the the of and third a XXXX charge third and during detailed For half fourth $X.X of interest. interest financing change quarter million warrant XXXX $X.X market fourth This on non-cash quarter in the is gain flows. million, is in of in

we EBITDA in As million. $X.X a few forecasted adjusted call positive of quarter weeks on our ago, the achieved

sheet. and of including XXXX. of third of million, end the the certificates $XX.X with Now, the We quarter compared of at moving finished and cash balance million restricted the to $XX.X cash deposit to quarter cash equivalents,

the manage and loan, under XXXX. subsequent draw progress we Also, any to can addition, our in be January half Through end have in of receivable related XXXX through the the In payments XXXX. first of drawn to of quarter VAT XX of received we $XX.X which today, refunds have have first million at quarter. approximately delayed made we $XX available made million fourth time the VAT significant the

effectively VAT upfront we pay applied month. refunded. Additionally, VAT our on earlier we be Mexico goods received this to that to This eliminate subsequently our certification into requirement will imported

As of $X a compared a to the and generate to XXXX the our our in and of levels working $X.X of XXXX for significant $XX million we monthly capital. fabrication lines for result expansion throughout increase Capital fiscal will and certification by VAT four in complete by generating of fourth and the both production be announced summary, the range previously fourth now respectively. process, requirements filing internal balance In refund end the anticipate quarter and administrative XXXX related million working VAT $XX certification CapEx end year down will from to XXXX XXXX. In million both capital reduce capabilities million of year-end $X.X million our approximately XXXX, to XXXX were mid-year the of the improvement by receivable three at improvement quarter XXXX. expenditures to

few to I'd We the to the the commercial With moving now review, a comments million Matt and expect quarter year. and turn Matt? it will range forward. like $X $X over related that for to financial call million between fourth for

Mike. Thanks

seeing that positive steel highlighted over to quarter update fourth cycle, by of over in in of Railcar fallen the improving show units Cars some fundamentals the XXXX higher these under ago, types car February nearly use, of gondolas, cars, demand reduction consistent which quarter were I have since key lightweight XXXX. of our both reduced As and continues and a car including and inquiry in Further designs that the the across and the remained or industry figures all this scrapping deliveries in customers improving, with in there the activity. designs mill over very to capacity call, utilization with cycle. July last railcar the We of despite led still of fleets XXXX increase have and XX two traffic XXX,XXX coil Today, by industry our portfolio. customers North America supply continue fleet near historical in weight demand see growth the peak QX for American high, a year-over-year rail exists assets. indicators rail storage chain Keep are continues with decades in last prioritize winds replacement and of pointing costs, head older our Leased orders XX opportunities cars year interests railcar and supported months. right a direction year-over-year is car FreightCar -- month-over-month momentum. in in for over last green signs and mind expect the improving are into XXX,XXX other rates in on demand cars. cars strengthening rates in also car design up cool storage. this improved annual real efficiencies railcar that the XXX% solid categories. efficient scrapping are less just for we sustainable diverse inquiries Since attributes XXX,XXX historically to XXXX. and and in lease. With offer outpaced Railcar, railcar, gaining fourth coupled are scrap rates are multiple these reporting across be demand retire versus as trend also We're our booked and XXXX hoarder Order today.

rail I'll Castaños remains this call remarks. Jim starting in closing this demand capitalize year. raw While And our with back few to the and uncertainties our material particularly improve. our to we there that, expect improved cars production which capabilities demand economic for to on will inflation, bring over around With continues chain global economy, a disruptions, footprint, manufacturing supply on additional turn fully some now Jim? the for

Matt. Thanks,

during everyone me out priorities that we let briefly for laid our our strategic XXXX and update Now, of remind February expectations call.

be to fiscal for profitable adjusted an full First, EBITDA we expect on XXXX. year basis the

shop the that online. shop Second, we will expansion foot and will mid-XXXX, we the Castaños we and expand square new have fabrication our to both and continue of expect facility. wheel By completed axle have our XXX,XXX

expect at in and approximately are of the also XXXX, on we will ready, be XXXX pace fourth units production doubled a line we to We fabrications expect also we have XXXX. units plan In most production to have as making in year line Also, line three ready number to have operating fifth have by previously per end that the sometime we house. we to the be our capacity of XXXX in our XXXX. year to and mentioned, the

all the enough house. from produced closing, to for to the business bear sharing to substantial it of prepared effects thank from That the savings just Q&A. remarks. to entire the In support. future fruit. the thank operator and America. producing team I I'll you work this the continued their with in expect continued FreightCar forward cost over our of are our And of seeing call beginning looking additional to and team. and of We're your efforts for our which And we benefit benefits for of With of turn acceleration date, the concludes scale And are comes enhancements you. the truly fabrications down these scaling hard units can't the profitability operational our

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

good Thanks and Morning.

Good morning, Justin.

on to on some can on where follow provide XQ I progressed And you basis commentary the XQ. the on more or provide year-to-date any levels are inquiry activity? sequential wanted year-over-year. in how color given comment order quarter-to-date up about improving Could we a quarter have you increases to

I but continue and characterize result obviously specifics, to the that levels order and improvement can won't Yes, inquiry And from what as levels the morning. to I of into just well. as guess starting quarter-to-quarter. share I activity they're is see up. to enquiries that, Justin, we we're get a good improved see of

to QX we seeing obviously, activity away we're a what And we'll saw occurred. on lot more at a similar of from Looking provide in QX, months order QX. some We're to of additional activity reporting clarity from have couple then. that

sounds the so, if saw say just correct, delivery clarify, like to orders just Maybe that helpful. in get is Okay, wanted And could color that's you guide? the raise, guidance that just we directionally to more reason be and it if first the just are the quarter around increased up. to that's why likely

is Matt this two our think point weeks we're already. Justin, said, months, probably than QX call less I more having this seven as Again, good Jim, like morning. from at away

save of of our and What it’s with a So we're do see that. now. as going this and of things to orders, things I say will going direct we happen right be forecasting reflection to guidance it's booked to delivery for opposed raising, where kind less to some where about

Understood.

car, decent about I per ask jumped the have up well. Second in a amount question, than sequentially, what backlog wanted as rail to currently you revenue higher it

that? general pricing anything there in quarter well. on was fourth unique you drove as comment So And related could just environment the mix to maybe that the

we build rebuilds. I can mean, time affects start that then Matt. quarter-to-quarter, top have, revenue, to time, know, from me And, mixed you Mike revenue. or obviously, to maybe also as the obviously, our moves. add schedule And something Let and that or line and

do that And more a quality probably the think kind and dynamics right in on of see do It the want you given of, in we're even pricing we're our for sudden you mix the more bit sure. to through I So, to what quarter. less with two backlog or that to Mike just and the marketplace production depends it's that? to change got all lines. more on Matt, with sort now, anything do just business running and add

touched I on mix. that you product A think things the referenced I think, you items key occurred, you had. couple of

I efficient, do being as lot with productive had more the a think and well. it in efficiencies plant to

revenue, question. their mixed that's really to a But

Right.

Okay.

production, later additions Okay. on the you share can of Got XXXX. you me, we're as once of objectives and it. at I a normalized think out it's you are or there profitability easier capacity that to guess and gross margin kind coming about kind one an rates? a a you're rate last know but Is just production on capacity more after percentage margin the don't year for I EBITDA anything margin percentage, these horizon the and of thinking the look how the ads, about into curious talk anticipate if to this targets, as

to probably weeks when I which QX from will year the have, say U.S. from to margin out the targets that the targets. gross Well more now U.S. I in obviously, mind away, footprint call of, under get be seven new And we accept. though, our What what capability it's to we we of -- first the didn't the to is and indication, all probably selective don't and I'll Mexico. I our can we you'll transitioning really and this It'll smaller we have we or business size have advantage that and are the think have is under translates an get prior think on of only planning. company best the running more that we specific be be about into forecasting business. tailor that the the want again, to turbulence

patience, more QX we So and and understanding. ask And wait better think have guess the let's I would you'll I the call. put on a for then, can your context I for

Sounds the good. I on new the time. congrats appreciate role. And Mike,

Thank you, Justin.

Justin. Thanks,

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

congratulations Good And on new morning. the Thank role. you. Mike,

XXXX? as the that about expect more in a going Or a quarter. you go for for first appreciated? be we is cadence Can fourth cars of your be the to first of color the deliveries? there year, higher a the talk the bit up starting will Should XXX kind half quarter on adjust delivered progressively you the footprint guys manufacturing number to any of with cadence You lighter of deliveries deliveries

Jim. quarters comment a where of we influenced call. far. middle can a And coming change on this to of the Obviously, how is bit a an day I, period we're also quarter, over the which capacity as obviously year. Matt, next those down on over me were quarter-by-quarter. think this increase. operating for to line year. changeover are year, it's in relates again, We're units mix, the the substantial multiple on impact. each lines. I meaningful off ultimately the We to year count We'll getting a two We're two it increase on one on maybe year. about Morning, you this still then quarter-by-quarter in a lines. next affected hard by too continue have talk a production production increase we're and without is last two trend this And determines on more many But substantial when we're the increase unit have as substantial We're of in a per drilling over, way by a a

will see in we're I us what -- call. is. first that quarter-to-quarter. the year if we out not the Let of little balance, more delivery can, quarter if But articulate full it's you And, a guidance horribly think on

would cadence. the But And the Jim. answer to you're Thanks, quarterly be imagine I for I know it. Got would EBITDA to year. a expecting it's then positive I imagine EBITDA full similar

little probably more discussions. yet. we and get the you we're kind type they'll quarter-by-quarter as there talking under full guidance that's bit Yes, think in shells from coming be cheek our type our I year shells know, of just that, comment out of not about into formation. coming out little We're before Matt And, of a I my to and tongue say a is, quite

some calling people back tell want switching there possible? Matt, I Or then it most can coming and placing even beyond orders deliveries the from? the cars [ph], And you are are And Is less soon to saying where understood. of gave us orders. are it are beyond? buyers maybe for as this XXXX is strategic orders orders that for insight, in shippers? year delivered or as you Yes,

years say morning. above Yes, activity mixed we're the pretty of -- Matt, has of read see the and also I I you to order driving into activity be between I continues all less would good tea demand been demand on orders. the to well close what's There that's railroads, longer but that to all you're seeing and the on delivered leaves this market And can, shippers, the for seeing it. placed year. spreading We're anticipate fronts, into we orders can more are basis. out term which demand do. we continue. year we that to we a cars that this can year, look at show orders you and wherever be next booking we

it. Got

the are need -- calling but what are as that of this even as are And right cars types the some maybe where shortages that mean, types, And people you beyond really experiencing the are soon people of some the other in some about possible? orders the strategic I cars, what year? what car Okay. talked now are

aging, the supply. at a the condition for it's you real age certain And the demand looks The but that industry of there longer been maybe Well, of getting the I'll same overall specifics, certainly, shortage widely flat that [ph] continue, for you fleet. I term, share are of you is gonds boxcars that without as are look to when publicized, and into of types could in with cars, well mill say be demand. in think

Okay.

three, are industry diversification probably of are also that would ability ones portfolio, at our a are you our say, those offering. demand. the do most Those look additional three, in broader brings if the But product for to in conversions most are opportunities think that I reporting

chip taking eventually has a will industry. be by there longer And, pent bit up in that I industry that been cycle a the you hampered term Do a of but production automotive know think shortages, view. could…

up? you breaking repeat that question? Can you’re you Matt, can

to we Matt, due line quality. you hear cannot the

hear sorry Can that. you about Oh, me now?

just got better. Thanks. It

could the you was longer hampered because starts been issues, has just saying when automotive production the for the railcar to next demand know, all that for question. great. you Okay, lead to cars the a pent the by accommodate semiconductor increased build to on term demand shortage. the I years, side? up in automotive When few of do The the industry think industry eventually

It Matt, would that would know tell do you I car But particular that that activity been some don't there's closely. seems that follow market. logical. very type I in we that

demand last of as fact you flaps As the of logical provided week late, see last improvement it years, few course been over the seems auto racks have it given some seems and there. the that or the few the logical that start to

industry, Matt. then about last Okay. question the one just And

think production do now, until with scrappage July huge lot this by end improvement flirting we that the is going builders XX% you of in the low the back not XXs XXXX. demand, of high and Based from freight which could be we is numbers recovering happen late rates think the improved to the in the utilization I a could by be of year, a especially larger this XXs year? the on

Matt, yourself. that. of and rates two I'd rates years then being the deliveries above speculating with the replacement at or Yes scrap Obviously, being be probably last like below

some as realities see entire the lease. help demand, are comments mentioned are. utilization You're solid my going that continue fleets utilized which I under are on There essentially a or customers their to but think, and I in bit little the front, to being will are

away. up a bumping seems long leave like way is I potential. -- at But it and number a that. a a higher like XX think it that seems utilization it that's likely seems I'll that's

We Okay, helpful. guys. Very Thank it great. you. appreciate

Thanks, Matt.

I'll the of have closing And session. [Operator Instructions] to over reached now Meyer the looks Jim the turn And call back we like end it question-and-answer for remarks.

Thank you all for call. joining today's

we We look the sustaining way our with well May term we of call. on growth. about the Have long and FreightCar forward day you truly believe are America and to a excited Thank you. future are talking on to great

today's disconnect concludes And for you at this this you time. line And may participation. your Thank conference. your