Trinity Industries (TRN) 30 Apr 202020 Q1 Earnings call transcript

Good day everyone and welcome to the Trinity Industries First Quarter Results Conference Call. And at this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Please note this call maybe recorded and I will be standing by, if you should need any assistance.

predictions forward-looking Act defined statements of estimates, intentions contains Securities the as call performance. expectations, Reform financial Litigation XXXX and conference statements by as Private to Today's future of and includes Statements that forward-looking. facts not are historical are

Trinity's issues materially the are business results other SEC of risks, or cause from actual a in change outcomes XX-K filings Participants Form statements. and differ a those for expressed forward-looking to description could to directed and certain in which

today's ahead. turn of to over pleasure to Communications, President my now is Vice conference Investor Jessica your It Greiner. and Relations Please go

Thank everyone. for conference President Trinity. Vice and quarter for you, Communications you call. of appreciate first David, results us joining good I'm Jessica financial We and the morning, Investor Relations company's Greiner, XXXX

comments Chief prepared Trinity's Officer. provide President, Officer with Lovett, will and Officer by new our Administrative the our highlights. Savage; Chief Executive Company's Financial We Jean the begin Chief followed Eric will financial Marchetto, Melendy from remarks

session remarks We a the from team. of will Q&A the leaders hold following prepared

Joining under portion we along earnings www.trin.net. supplemental highlighting These the to points refer on key & today, Events event be call will a site first discussion. slides are can found IR slides link. few website of These accessible our of at the the Presentation materials quarter call with the

now It's to over my pleasure to call turn Jean. the

morning Thank you, and everyone. good Jessica,

response men surrounding the action the as governmental extremely are the by essential designated unprecedented. of Coronavirus TrinityRail business federal and North the events economic The authority. women from an at is I'm proud American and Trinity. And

dedication safety, business for We excellence, culture chains employees which of for reflect critical strong and keeping would foremost first continuity, your heart to our and team all to spirit, your operational. their health commend leadership to Trinity. commitment executive The I, your and you to and and service the work, thank to and and supply like

stay our working safe to all the our also of suppliers We'd and of needs. ensure our like and access customers, to all daily communities businesses to thank have

all we COVID-XX. grateful of want course, for fighting the deepest for on appreciation and most those Of your commitment service. frontlines to in express our We're

function employees in sustaining Not planet preserving American sustainable rail an perform of industry important our as and transportation, our our in role mode play proud the North does the rail our of We're livelihood the land-based only of the is transportation most economy. communities. the railcars

through chain. critical and generating on Railcars of daily energy the nearly chain market. water, product. food, are part supply medical of commodities, every We supply all the treated rail goods delivered grade a All depend

going the and Trinity's prove will the going. get our again tough, platform to believe tough crisis. When an gets I commitment the withstand excellence ability economic once to rail

cover Trinity's my actions of it; and prepared remarks address main points, market cost our performance the structure scenario manage team want our three decisions to to today, allocation In through Trinity's amid this on our COVID-XX capital platform, business and railcar our business, and our I of resiliency financial position liquidity and the and for leadership managing the assumptions uncertainty. of crisis; strength impact to

next of materials of the efforts Slide cost these response months COVID-XX purpose which and two to a first the go-forward supplemental which on the executing on highlighted have our our was capital our we first was actions cost the structure decrease marketplace. are improve communicated The of in of the number optimization our X. In of market. address Certain accelerate competitiveness in to to Trinity quarter, previously efforts, I'll

and support which to leaders surrounding COVID-XX implications operate. of the we in the employees took our to of safety significant began gravity live the unfold, health the steps to protect As Trinity's and and communities

remote our manufacturing work procedures for methods. arrangements distancing, restricting have work -- social guidelines to cleaning corporate travel most employee workforce. to visitation WHO and instituted customer and of and that sanitizing, our our adhere shifted We We interactions for and virtual and at services and establishing policies restricted CDC facilities

have or services ongoing understand our our We maintained not continue to work needs. and customers their experienced delays we with to products our delivering operations. closely have any in customers production To-date, to we

Procurement teams And pleased have have today. for I'm continuity able that our also monitored chain they potential supply been operations ensure to disruptions. of

America goods based suppliers Our first to from are flow of the other tier significantly be yet countries. predominantly restrictive North in and by affected have

see to and We have supply established third-tier second we plan our should contingency network. major in begin disruptions

we the seeing reevaluated March, near-term. the the we and equipment In railcar rightsizing from actions in lower in potential slowdown demand demand we from decline our On in call, impacts last began railcar for the conference as and XXXX. discussed anticipated the we industrial COVID-XX, volumes

a we believe, our result, manufacturing our and align capacity. workforce from action reduced by to manufacturing to sized customers. took visibility, our further our our year-end production on As additional XX% we is current Based with backlog serve appropriately platform

to sure financial today is the model. address wanted our of business belief in be Trinity's resiliency The second we I point

During against as financial and and prepared experienced scenarios our balance during remarks. the crisis XXXX go in deep we and our into models analysis the later in liquidity various testing sheet actions, deeper on COVID-XX or extensively reviewed our the more stress detail preparedness XXXX. financial those We'll assumption, than

and release are contracts the disruptions from relative and highly the flow Trinity's During aspects company the leasing business. our operational There the capital of company. structure flow long-term of in protect nature the variable to of from are critical cycles, stability of working the cash short-term countercyclical our also given generation cash railcar cost market business down manufacturing

tax our model company manufacturing is our business. creation value for and leasing come efficiencies that Another combining from driver business significant the of our

to carried businesses. grow offset taxable our railcars The are income the the operating fleet, then depreciation of taxable continue from lease income. generated other forward we future accelerated reduce As losses net to generally

with we accelerated the lease $XXX million CARES the enhances the primarily years receive fleet tax recently our By associated taxes in of in investment to in year-end, resulting refunds platform. to provisions in tax carryback paid the loss XXXX tax prior recover will rates. rail depreciation from utilize generated expect legislation. at the higher The tax passed and synergies Trinity Act further losses XXXX from

I could few through I economic have company first not new would markets of as great financial months imagined crisis be that our CEO, the Trinity's and seen. in one leading biggest my this have

leadership team managing experience in deep Our hand. has for volatility through cycle prepared at rail challenge the they're and

of Based withstand we capability on we take our conditions, analysis opportunities pandemic find. cash and value-creation and current the of market Trinity's generation knowledge and believe advantage can may platform global

deliver rail and our world-class expect returns to society, value with and customers, creation also a we to is solutions, service built emerge champion that deliver and at I deliver innovative deliver, and through products, all, shareholders. to prove that goods to a to platform to will to spirit long-term essential

Lovett assumption. through I'll more our to now operational go-forward detail, remarks closing my with our in over the financial Melendy and turn on call business final before talk to point

Jean, everyone. you, good morning, Thank and

execution performance. quarter commitment to and a actions to first the results of reflect rail Our taken strategy company's improve our the and on align number business with go-forward organization

the our we priorities challenging, financial not recognize current longer-term lost sight our make environment accomplishing of will While more goals. have we

protect a employees continuity health capital safety are business Our to of and to team and leadership and ensure primary our preservation. objectives as the

to and amid actions optimize taking advantageous steps crisis. company's COVID-XX needed were the the given the we Fortunately, cost were structure timely

to the fourth businesses In of action the across in included the $X services the quarter and operations we the $XX $XX to logistics took employee administrative million million which call, on company into equipment organization. target Rail $XX totaling announced of Group. the consolidation During company's quarter, first million our earnings costs of million a reductions savings Products reduction the and

cost more million. facility. It charge to also location disposition These decision the a to approximately $X.X in included relocate the a of corporate resulted a effective restructuring our and actions campus non-operational of

savings million to that the organization administrative $XX costs. take Additionally, management few action streamline we expect during as next million to we support has and realign on $XX identified quarters our of

cost platform efficient optimization the and and taken in the million. saving of effective actions are of through and We're accelerating administrative When alignment provide through to reductions progress our other combined the will updates year. SE&A throughout performance on cost $XX our we total XXXX, the nearing costs committed organization with

Another of our has for our the the optimization our leveraging sheet of been priority key cost of lease through lower to the capital. company balance fleet

process, redemption an secondary $XXX transaction. leasing market optimization was to XXXX time balance recapitalization a This a debt of coupon TRL through opportunity. securitization remaining this The quarter-end. of approximately the as on these coupon available million value had our X% of X.X%. at weighted redemption, through wholly-owned was now rate of V monetized As principal this of book million. securitization just average These the the or net under early assets part the redemption of our identified and With railcars are at of be we approximately $XXX assets

million our X.X $XX.X quarter weeks approximately fourth purchased call. The conference company also in the for million following shares

current the of authorization. quarter, As end approximately of under $XX the has million our first amended company the remaining

and collaborated has of the served management the closely as our Coronavirus Trinity's we confidence that to I organization our aligning investors. the stakeholders rail-focused year last and company setting been we're Trinity's to to potential and for my shareholders have and once customers our CFO get It's great strategic emerge performance to priorities our know together value unlock honor Trinity accelerate organization. shareholder as over the a and in to serve serve better to pandemic. leadership many very and from

This this our company has rail he face industry a and be well. seamless our a and familiar transition a his been in Eric will team been business investors has as for throughout career. key for the leaders, and our leader to

discuss I'll Eric now performance. turn to to over detail our call the of more financial

and Melendy, Thank good everyone. you, morning,

upon continue assuming to effectiveness as company. XX our platform to after be forward of I CFO of improve to I'm enhanced we to drive performance in our honored efficiency with the and role, stakeholders to this look and opportunities. service the position value-creation and the working both years

without we've With our measures the the daily operations. to thus COVID-XX outbreak, implemented preventative of interruptions onset far significant

be will that our there impact to However, we we adjust negative and financial will accordingly. business, expect

While the Trinity's there operational than performance our of were items, were better number pieces products moving railcar a results, line the consolidated in expectations. quarter within and slightly businesses first and leasing internal the corporate of

depreciation and from segment the The and profit operations increase in due to in to Leasing the contributed the Group's our growth lease lease fleet year-over-year also grew policy margin. primarily to The average profit rates. change revenue higher

ROE our we a in railcar state of assets to heightened partners the small with sale attached, market demonstrating completed first quarter, one even financial leases of During of value the portfolio disruptions. a

capacity over delivered production Group just X,XXX railcars facilities. first quarter, while the Products in reducing within our manufacturing Rail

inefficiencies mentioned our headcount. call, on manufacturing and the slowing we production in capacity I margin these As our from headwinds our expected February and earnings reducing

the evolving for were and industrial to fleet X,XXX utilization Lease loadings. by railcar XX.X% the market we American railcar the Commercially, quarter uncertainty totaled North impacted railcars. orders declined new within lower and

businesses essential other by as infrastructure operate support customers our many the and of as authorities XX% these of approximately defined and customers our believe, we supply analysis, chain. indirectly within our By governmental businesses

indicator which a Given of on railcar not the primary environment the demand come prevalence in loadings is public business, shift our for for as railcar data equipment did a surprise.

volumes, seen We've declines underutilized to significant lead equipment. rail which in railcar ultimately

as sectors spot equipment few in we markets, asset railcars near-term due of a market demand. are that there However, the relatively utilization. and agricultural rail to present of best will be The high specific a fertilizers, to the opportunity, age fleet bright believe, for and grains

team market demand. specific one and to not in forecasts trajectory, market. our economic dynamics. all to fleet markets experienced railcar of management in several markets. one monitoring of each the recovery is railcar shifts drivers closely their rapid our demand There own in We're for responding Regardless railcars, There is of are

approximately since issues energy orders were the the the service to drastic prices go crude cars decline created customer's markets. made. In They're quarter tank the primarily in from crude surrounding into expected historic removed because our changed in condition materially had XXX a the response, Compounding first has backlog. quarter oil financial we jolt COVID-XX, first to the

oil sand widely Our the markets have Lease longer sand and for These are serves numerous over that railcars X% acknowledged. said, crude structural With any the the service. in includes or approximately challenges mining shifts portfolio, market. last market, no brown and approximately crude by backlog sand service frac currently years few Trinity's oil the decade, of frac the past the experienced spurred serves X%

frac protect risk mitigate the return and expect vulnerable. We lead we're And developments and investment. monitoring industry market closely in the could to financially collapse shale production on the our oil this continually sand

criteria this how customers have at Trinity of the for our relief financial implemented environment. time. current we'll percentage evaluate support certain Where customers. our small payment in And also terms we appropriate, A extending can requested continue has for to customers

from starting financial of Trinity strength. is As it position, pertains we to a believe, Trinity's position

markets Trinity's financial of our the was on and several strength to our the our assumptions, to rapid the flows sheet all balance the analysis Following of of due resilient. scenario deterioration COVID-XX, liquidity. Through company evaluate tested platform cash

X balance A and the is summary of our materials. of liquidity Slide supplemental on sheet provided

As company $XXX of the available of end million. had of the first quarter, committed the liquidity

expect to in carryback loss tax this Act. tax we of addition, the receive In million CARES reinstatement refunds year $XXX provisions from resulting in

The cash reflects tax platform. our significant synergies financial benefit the within

and providing total revenue businesses, and to-date the We in billion liquidity our solid as base have When maintain we a of billion. includes committed considering fleet scenario. approximately from fee well of maintenance diverse lease expect relative which visibility, of a Trinity value with generate $X.X XXX,XXX to stability cash highway to market XXXX, position flow case backlog lease our and our and as railcar a railcars, income $X.X

or approximately $X.X maturity profile, available levers unlock we market enables we to When transactions. additional believe to and have navigate for leverage considering the further our the the financial of and through company billion As options, pandemic. the monetization company's assets unencumbered sheet debt COVID-XX balance secondary strength has capital, liquidity Trinity

continue cash commercial and reach these the flow navigate will the using unusual market maximize our We knowledge times. committed while business to to from

company's sheet to we course As action long-term priorities monitoring we as the to needs COVID-XX, balance available our of the sheet decline to our our balance amid our result shifting closely liquidity of determine manage through ratios We're year. balance and our may anticipate and capital go goal optimization. a of leverage

built is sustain. deliver that and demonstrating is platform Our to

for closing the turn back comments. Jean call over to now I'll

Eric. you, Thank

structure doing can from see We're quarter steps performance our plan to our our you demand performance, longer-term is environment. accordance environment our accelerate and challenging cost the taking with to Trinity cycle. first to Trinity's amid align current As this through market in

stemming predict businesses. COVID-XX and financial this customers the the Given guidance cannot the Coronavirus, on the suppliers at companies the we're collapse this have energy of in time at we from in or our Like not business our impact limited numerous other visibility market or to stated, time. prices the providing impact and duration

focused on business and highly position. contingency preserving our analysis, We're bolstering liquidity and scenario planning continuity, and

can size long disruption we Trinity backlog that in duration a which against Fortunately, flex contracts solid right and demand. capacity lease protect market for our has to

hope our do forth October. We put on framework quarter broader for Trinity's strategic in to third a roadmap call

the to company and we analysis, being, time context give it as guideposts. some thought the financial be behind we position However, a condition would for you helpful scenario the performed as on

capital Slide to the also X improve economy the loadings reopens to near-term or the scenario supplemental quarter. The a the in materials provide case framework the assumes third of environment. of a current guide summary around begin provide inputs scenarios in decisions and our this the in railcar analysis. market to sometime allocation base These

of delivers SE&A would fleet we XX%, In lease modest this a that portfolio environment, our transact approximately type target. of achieve amount our utilization as backlog expect remains our and optimization leased we that sales railcar

COVID-XX our if transact market, utilization of the the XX%, either flows. in market. modeled the and backlog, inability of potential to railcar we synergies of we have scenario, cash drop to for scenario, the restrict stress case rail operating financial below our deferrals positive sales continues In the yield expect platform to recovery to the In the secondary

our continued financial framework capital performance in base scenario; business. more and our reflects will our our towards allocation allocation performance case shift preservation. our closer capital investment resembles The will stress The the scenario; our enable case prudent

This facilities million current in plans service year. to our progress new CapEx growing approximately due fairly construction for required lease XXXX be to manufacturing the for $XXX is Trinity's estimated corporate for Today's is fleet. spend to and in maintenance committed

ranged ability rail to in business proving million per million year has the spend $X from pull historically CapEx our in However, the to $XX manufacturing significantly, downturn, necessary. for if

to for of As these be the $XXX lower backlog of sales our scenarios. a potential scenarios, XXXX in market investment million million $XXX railcars customers, of between in we lease leasing believe could our result in in secondary either range various net and the fleet

as cash confidence has our While for shareholder a shown be its Trinity's will Again, supports to major the the economic ramifications our in returns. either feat, platforms in historically scenario combating commitment dividends. COVID-XX of generation maintained Trinity

our will out company the XXXth Today pay quarterly dividend. consecutive

board of in of returns enable meaningful capital rail reinvestment platform directors the substantial of that support business, aligned the our the the are and expectation to Management while synergies to shareholders. in continuing

floor, place, and team and And the of spent Trinity's shop I our from on of stakeholders, be the months could dedicated to time my that CEO, board. as to the service we our have first welders customers few the in not experienced men proud I leadership support and business women team the more our

our to We our to are align continuing performance. and operations maximize organization

the and regardless ourselves, in point being hurdle find key Trinity's and overcome has the goals. operational X of our goals. of the cash flow challenging and financial supplemental created That said, of material shareholders. the are driving recaps creation behind Slide cycle, generation pursuit the platform the longer-term a rail for Coronavirus our value the in engine The to in synergies we

is Our to environment platform long-term built a deliver believe our we the position and current are market we in withstand and value to shareholders. to deliver

from take Operator, now we listeners. will questions our

[Operator Instructions].

go Poliniak first from our Fargo. with take We'll Wells Please ahead. Allison question

Your line open. is

Hi deserved. well on the guys, congrats my appointment, and thanks taking question Eric for

Was commentary to they want the I trending things you are lease how pretty in through guess U.S.? the for were you those unique to here talk maybe go can Just as accelerates there to pandemic around this, QX. cars rates; back know something favorable and

Eric, is This I'll Allison. you, Thank that. take

our we portfolio sold fleet our average we increase ins the was and to more by in fleet. rates the in added what the impacted what is to that terms portfolio and of of say that in So lease I lease our rates would the outs the

are like in lease last headwinds we trending loadings railcar I'd on seeing our trend near-term. way that we this in with terms still rates, In are, lease continue we're expect rates said call, of and the to absolute they

pretty selling dynamic seek here, thoughts market, that? given into the concerns some be color and It among the macro could from smaller there been Any switching. Understood active on any consolidation you've you it. could that secondary side the players obviously just seems or even

Eric This again. Sure. is

especially of that the -- height in we first $XXX the March in about million So and was have -- we the did that worth quarter. in uncertainty, the thought, volatility of we those sold kind sold market. equity I was the railcars of

So I we that able were pleased to was execute.

a I portfolios know prices where as stress in not cases, into may some market, we’ve and for portfolios. Jean seller's that in scenario goes expecting don't many the it of go-forward, a buyer's situations, market, that -- in of and are our turn going is in sell just market transact, mentioned, I'm and that not ability order longer near-term our we not the if changes. does that see people a if it's stressed As to clearing those this to but maybe are distressed to the

understand then what scenario, Obviously, from here? in just Great. utilization this rates, and utilization but between you better want Trinity of one last me, philosophy on? lease are lease or is your kind like both, in to that balancing we'd focused how Are you rates. And question more just focusing

renewing may And railcars. go-forward, there expiring more expect not would we're then this going our -- not on rate say is this be are to that. down, though. renew We're we a right The year. needed. headwinds a cars again. if Even customer to will some the less Eric focused rate does railcars railcars maintains utilization extent focused be on utilization. continue to with still we leases need as the utilization on Yes, There that we’re I now

with We'll Stephens. from go our Please question next ahead. Long take Justin

open. Your line is

timing understand provide to withdrawn to taking one update I start could with on this wanted for target being target. was totally but XX%. you Maybe my XX% on you Thanks of wondering but that XXXX return target have that three-year ROE did guidance and questions. for the if an

and to assumptions that are build specific normalize a that normalize think lease in the XX% you rates you get return we enough that there market? rates company getting do replacement can about are XX%, in that see hit the a below that to levers have or we to As to there, embedded need target, to pull to even

Justin. Jean. question, Thanks This for is the

would challenging, While now, targets bit make targets still little. headwinds uncertainty a course. we're we it'll a expect, in if the our current the little timeframe to long-term environment that push market us with these longer right committed out the original the could extremely that in have the keep in decide but will achieving to track, achieving levers on think take due that I I will

in $XX this on $X headcount the and of that the a you target beyond that million? $XX million there you downturn savings savings million called million, think the about may Okay. outlined be cost and that within you is million as incremental take you've what to stress And case $XX to scenario way of SE&A that costs the could included think $XX on, to that mentioned out to slide is you and number $XX out had about million you

have it's to Justin, $X remarks the that in quarter. Yes, remarks, $XX complete goal $XX identified as million to we million Melendy. year. mentioned fourth I announced included my said this prepared $XX we in $XX that million to to plan And in and million goal is prepared million that the the million I my in Hello, $XX

the further laid we the COVID-XX As we situation to we see we're if contraction, reductions. extended, if stress further in case, make see out prepared

on also And in flow talk operating capital that's within one for about does positive Okay. working could guidance the benefit you that quick that guidance? Maybe include $XXX one be this just last you million change mentioned? to the tax year, cash assumed the

Hey Justin, Eric. is this

We've working working through But some be gains flow there about run well. cycles natural our declined, as up capital production previous that's pick volumes we decline. talk as operating you we that our give year capital when experienced as to rates cash specific So that in typical. I'm not the going And guidance. will

included, part is will the that part operating flow. that that refund our -- cash And and of be in terms of is

Act, we year. flow we without CARES previously, positive the expect the even talked a would As operating for about cash

We're we plan sure plan, We're year. maintain we focused going maintain have we liquidity on said the on my pull that. to to, comments, And in we liquidity. make as throughout to that I levers

to my as million million to maintain And I our remarks, fleet and in manufacturing we're million shareholder $XXX in now between lease share $XXX additions, and million million new mentioned returns repurchases potential the dividends we're expecting in to still right and going $XXX CapEx, have $XXX $XXX and through in liquidity.

We'll take our next question from Gordon go Johnson with ahead. GLJ Research. Please

Your open. line is

is Hi Thanks taking everyone. This James for Bardowski questions. for my Gordon. on

balance I So on leasing, one and optimization Group. have first the utilization Leasing the sheet program,

So, the as fleet of program, fleet, depends your the of targeted ahead. the of me the wrong, it correct I'm sheet as in XX% on size XX% leverage to expected if your size years your balance well on optimization

to So last XX.X%, believe I utilization quarter knowing it fell that was.

weaker you there's relative. rates while did acknowledge weak been that on Now said loadings little -- are are weak, leasing that effect customers, you

recovery, future before do fleet sharper don't if to tied but would your of any tolerate to was see How utilization you cancel customers an down to kind fall low L-shaped guiding manage to expected into leverage that growth. we it's fleet taking So action and start recovery, of more fleet orders.

is Gordon, this Hey, Eric.

below modeled, business try And XX%. expected that, case well when the take performed that. at or thought through the there, I'm to utilization I get stress the and we we we me performed case and even environment, Let sorry, we James, adequate we saw our within a stress and cycle. look utilization in know

think In you're is preserve Is sell terms that we in just? assets off of would I asking would leverage. to we that order start, what

Exactly.

Yes, believe that liquidity. is fleet that unencumbered that's or we assets to large us financial because of to assets gives lever maintain sell certainly a as have we we flexibility I billion, mentioned where -- finance such that's expand lease certainly lot have or $X.X a either a

-- not of that's utilization centric. necessarily so and And kind

that that very is Okay, helpful.

there's not fleet, accelerate a set to -- say, So start out target lease fell there's let's if of where XX%? the not sales to would you basically

assets, to because things be state it's assume the mean, going But If to be of assume I able in on not. then what's we we the there's one an what the -- no, far, fell many wouldn't utilization depend would to option. there's sell secondary sell on No, if that of assets opportunities going we was -- of market. market. the that

of it's that kind worked stress against situation. So

rail you the again fifth straight then And still fleet, your the And didn't quickly orders exposure for turning cancellations I currently. year-over-year crude quarter mention remove level. through fleet backlog, from the have aspect that new oil albeit noticed on now to you utilized fell your

that can help of areas there any is see your wave orders? see going say cancellations any there of is don't is that other offsetting is I you other or you maybe strong mentioned Now, that you agriculture that cancellation? expect basically an any forward, additional kind but shaky to might sectors that we expect to know where you potential growth

and again. it don't the still become opportunity new so at to this I'd single drive demand a does to year, happen. I driver seen and even cycles, I biggest new bit of a for demand. buying buy other driver zero replacement that say Eric with a that go to to is as of longer-term customers don't going orders for to to that's in largest new part we've assets Replacement the this James, this going orders. is expect expect cycle, longer-term view deliveries railcar is the Sure, be railcar really

some we've even And orders we to in the orders. received continue past hundred several get week;

need some So even these still of midst challenges, customers railcars. the of the in

finally, And you. helpful. very hand Thank it one off. I'll then and is that question more Okay, then

cut "inefficiencies". could That or utilization, you like -- historically, mention the given what your to move rather for a the your is related any margins give costs Group And for the as quarter? that for lag. in operate you expect in maybe kind second said, one did for market look us costs potential of contraction does how margins of decrease to So, it far expectations your the the reasons as Group to in there Rail for in your the Rail looking the back on --

forward any in guidance. margin next doing should things not call we're quarter give hope stabilize. that James, to We our

helpful. if many and Actually first quarter, orders railcar how that's many real of how could, Leasing then Group? quick, for the the were you the Okay, in

little Roughly about leasing. of half about half, more than little the were orders for

Little time. Thank Appreciate more than all very much. you right. that, the

for the you Thank interest.

next Matt Please our go from take ahead. We'll Cowen. Elkott with question

open. line is Your

Good an morning. first. I Thank you. industry question have

dated this that number sense to maybe the you. think know for idle a I no but much big cars railcars just back, come going idle not now if not of population? demand, of and are in is XX Do how waiting price able supply to anything scrap never of to out subtypes. to demand and even some idle is they a be comes Eric you what be used types right the the information have back the we are There's roughly about taken of going for right be just percentage tank cars that DOT may of meaning matter be how

number bit trend previous in XX,XXX fleet looked this think that the other a done the as that. of as line a or kind that if things put giving on bucket. on the storage or our at it research data on is important. deceiving. we would then I'd surplus a I I not be some on we've to Matt, been Eric. put as longer railcar what's define within is number Put destine If numbers right. and the great that of and and I that to long-term can me I've calls and year to spot storage had mentioned deem we've in more There's XX,XXX opinion, little hasn't used would But scrap. long-term storage kind But for railcars

types make that be and hoppers some I hope of the and that mount But some think coal then helps. cars. to of that's up covered boxcars principal the old older going the higher car opinion. some are that my I

case is that is knowing the self-explanatory, presenting mean, Yes, to think likely scenario, you numbers. then may -- base scenario you want think now well you sure Thanks the is you scenario happen. those this just guys are more base be what opinion. make that what I which but know for can you it's And with work because the case it called to I

run stabilizes, to the of industry any I is we this we going you or those that have guardrails; you we've want effect guidance at Matt, of on there. is, levers not based give Jean. looked what what to know scenarios. occur, environment. what's the we confidence in But to just wanted changing to off We can't some until to say pull and we think So, happen going many many, we've is give

for delivery year? then backlog is And which guys did cars percentage it. current of what your I this is Got you think XX,XXX say

scheduled not. did will our it's about Q delivery this in But XX,XXX it railcars for and are We be year.

-- And based risk the base under number scenario, no there's to think? you that case

our said, scenario, case as Under in we delivers that our base base case.

on lease it. some think gave think got is you utilization X% and of lease and fleet Eric, crude Okay, And fleet? numbers is crude -- your I lease in also I the frac, X% on the of frac

that's fleet, our serve was that last That of a utilization was -- service. the last not number,

Okay.

the fleet? utilized So X% of it's not

It our that's X% fleet. good is because a is of actually not, question -- total it And

your amortization those on What's cars?

fleet. of last -- the It at looked is the on it's we XXX% content. our So

it And idle, so and if it's individual our of car. utilization crude and frac load But currently and there sand crude breaking -- last sand in fleet it's not X% car in We're crude. the last it's a idle car. frac load It was a has out of a frac has a the types. by was was currently then X% sand the of

Okay.

percentages utilized meaningfully actual lower the X%? fleet are the and X% So of than

I I that. understood think

sure the math think I I'm that. the follow on I answer, not

Yes, think fleet is realization mean, I your yes, XX%? I

right. XX%

the population Of gave? percentage crude X% lower and utilized, frac the X% that's than if is you that's and that

number yes, right. the That's right. number that's yes yes, the -- of car, Right,

makes Got question. case it, any sense. just got us assumptions? stress And the scenario Can That it. macro underlying for assumptions you're one last using that give you

loading were not at of start really back the into looking We come XXXX. to half second the railcar

it So recovery overall was the industry. a later of

go Please ahead. next from with our take We'll Majors Susquehanna. question Bascome

open. line Your is

On anything. or I mean, or down could what single the it close with unwillingness around us you understand XX% quarter, in you a production, any quarter, or took guiding rates you. I production But, share of we to Thank on actually before can runway biweekly or basis a adjustments? of now a further moving how get a weekly in right a are so what's kind things sense monthly caution the

from last took that of end the to XX%, the of sure the reduction through just in quarter, had make quarter on so want the headcount. year manufacturing, first a So we in we clear so was

Headcount, production headcount.

Yes, I was rates? asking about the production rate and delivery

Okay.

not those for Many production the throughout we weren't reasons, get sorry. into going those guidance and related. quarter. decrease. expected did the -- those COVID-XX that in to the Yes, our We've We're take -- call were Bascome, we of quarter our February but we reasons actions give actions for I'm talked run about to first in we that going competitive rates did necessarily to

declines in that that then So from then that further COVID, the number. would out extent of come there's

that your weaker are to opportunity there production And some three is primary all Or in you running below of capacity? consolidate a market? locations of an

manufacturing lot anything If production We new the over want we depends where facilities assets. of on back it terms facilities. the side. facilities or We've of you we've or operating look to look one, three to optimize two it continue three and a years, our in are will to consolidated operate goes Jean, you -- major that --? on we currently

No.

on. rates a the And the coupon you. open market in leasing, see? of we of Should advanced I'll kind you might today? collateral access couple then sense want Thank pass Rail that any have it to ABS do And on rates you that? Is

time is access comes the us it. in successful will to this be the for believe I Eric and Bascome, market, again. when access that ABS we

But higher bit we on the the little last it low, do they'll be access likely kind when higher a we be I what depends but But than will previously. think year achieved than did. will I overall spreads we open. believe be with of think coupon the I markets, benchmarks to

mean you any deals as I historically in rates, on you've XXs. been think that well? your high last in I advance there's think give you Do few the Do

transaction, rate a to And in want all to you a advance you possible. different trade-off. tranched, It assets times the flexibility push of of lot how markets, always the It's single of do expect depends, a little it's a securitizations. lower. in bit do single of it that may be transaction, similar would be advanced bit little to the But or past. terms that's it's years whether But tranche be rate much natural -- you have inside I you would a if baseball

disclosing And fleet. we and a count me, to you Would last XX% the in if crude could size be to different sand of meaningfully that I get as your it of book number car end current from exposures. deferrals, it hearing committed up the or we conversations customer that, were that, percent that if the one payment appreciate financial or of or where value coming maybe a maybe or you're more these they're requesting broad? are is that relief And Thank in those revenue? are from percent to markets you. up book

Okay, great. This I'll that. is Eric, take

on the terms, add sand close in look of you tell been that the that have in revenue value, revenue that book book -- So you be at that at pretty in I you value as you will when look X% the if the you count, come perspective out would them and at going about a at book if one our on about number. XX%, a frac it X%, you first it’s to it'll what will quarter in revenue, a cars average, quarter. value -- When the unit when look the it disclosed total, we be from look the up, to from

discussions. And lessee your The we're so a number affected many included would and seeing of industries. be from many question around frac part than in has customers impact then and just broader that the energy. requests but market Those and sand second

customers. are other many So we’re seeing of -- we our talking to

Markets. ahead. with go KeyBanc our take We'll next question from Please Capital Barger Steve

Your open. is line

just into in you I look first to now? we conditions next what or the directionally about for everybody good want just basically versus margin consolidated morning operating if get think how or terms current guidance. see like you will XQ should a half are of while, half, the know Good But can quarters and what second on few don't the deliveries afternoon. get we based

off that the would will more of quarter challenged I the we we're expect quarter first second in operating based currently. the were that in environment be than

back Okay. or And any half is think just as about there? you the color

we remember looking again, the I have to the recover rail said case, the to for stress do XXXX. to of case we loadings case. And start stress half in So the and were base second

would I refer might stress back on to that case we So what expect.

a single-digit, stress that base any margins stress case. providing or play range, Yes, guess that expectations? as it you just terms case, that just I broad we mid-single-digit, just high out, does about fall were does the kind operating and if to of of stay really you in appreciate think to

We the July. not not we're to give more getting I you -- would on guidance. Yes, so right going in into to I'm in that guidance now. comment second hope quarter information

rough Rail what just in railcar to more minimum Group? it. runs you mix to in stay just production one Got And level then, is matter but that break-even, the the stay break-even need get math, to I production

Steve, this is Eric.

Let lower. volatility, it's can production it's me cycle. cycle, there's if going your a production just smoother say break-even on a be be it it's a will higher. that depends If to smooth the breakeven of points If depend. And analysis lot

XXXX difference And facilities. in and in earlier, those more XXXX our fewer one I a, we I versus have today As platform structure a facilities. operating think of variable we're mentioned is cost

that -- not where And But run so be. -- so -- an into get I lower all would should itself would things a be low been break-even hard point. been being a we're to there's by not a break-even actual -- equal, -- life's it's

at Greiner. no line are I'll Jessica turn this questions time. back the there program the on further And to

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