RAIL - Earnings call transcript Q1 2019 | FreightCar America, Inc.

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Operator

Welcome to FreightCar America's First Quarter 2019 Earnings Conference Call and Webcast. At this time all participant lines are in a listen-only mode.

For those of you participating on the conference call, there will be an opportunity for your questions at the end of today's prepared comments. Please note this conference is being recorded. An audio replay of the conference call will be available from roughly 1:00 p.m. XX:XX until today time p.m. Eastern June Eastern XXXX. time on X, dial access the please replay, To XXX-XXX-XXXX. is replay XXXXXX. The passcode replay the this audio website An of within the available two company's on days following earnings call call. will be of to turn FreightCar over Cieslak, Relations I'd now FP&A the Investor like and to call Mike Head America. at

Michael Cieslak

and Thank you, Amy, welcome.

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

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

James Meyer

and to going financials. and restructuring speak I'm our the briefly and market progress to present Thank our ask to on speak Chris you, Ted results on then Mike.

thanking forward on for so have appreciate to Chris reasons during Matt everything did to share role Kohnke the though, hard he and by last his want new transition. the why and years. over him we our help me us pleased work are three the First as start look I the We CFO. and for to let you to his board introduce

team. look a ongoing Given someone cost skilled CFO the our have will is nature that search be deep brought very with of that someone luck credentials, to and experience, a worked business And business very the someone it, also however, as manufacturing is has turnarounds, led and and proven I past. the the with we not us know for would have to multiplier and but cutter only someone within a that decided transformation, successfully force well these operational

to So Chris, team. welcome the

to a expectations Turning in year-over-year on results the with with quarter, our deliveries line basis. lower were

near order strong meaningfully our to which, to in that we our have them you and XXXX running heavy cash top track aren't our our Most While COGS place importantly, drive to balance level, be will results the as with sheet anywhere product of is our confident are hard us and and transformation us well understand to that development now focus fully for allowing reposition the know, full also from remained work implementation basics, prior the in fiscal line. with lowering on our year. quarter. the about unchanged where Back at plans we remain essentially we on want P&L is

the believe in are easiest facilities and that and highly improvements to appreciate. had the continue that government safety of incidents are and We to quality the are in for linked safety us we quarter. productivity by no safety, first to make which our recordable report metrics, I'm the strongly defined pleased We

strides. to operating We facilities are levels world-class at our near now work continues make for safety. The quality or at the of tremendous also

culture internal standards the started. This by audit the KPIs, factory Shoals quality levels or rework are with results our from around lowest meeting is industry. mindset, since exceeding though And will rest products our the supported now by continuous apart that the of data. that's tracking stand far Our we quality us other on-site improvement being was of independent industry levels the aspire remade and

range for to now to much - as and produce car hours productivity, unit previously Our reduces to where is referred produced we squarely on quality, issues, models have per and rework. also in a hours worker closer needs it This is months. see the are end-system our that consumed we be that of we to past which result our realizing during fixing XX the opportunities improving didn't

people in bringing of right in leadership build is investment on entire training. now off. in this to our the And are paying investing Our through team we idea,

last from focus more of As shifted call, the introduced have much finding to and training, fixing training. operations we in and our plant training

also complete workforce will during workforce program. complete each Our in remanufacturing are will of salaried hourly our time additional operation entire workforce then welding in-house which complete six program, remanufacturing entire Shoals' training brand-new will a day hourly our intensive a these Shoals weld When our school. done, Shoals'

an additional leading and this on All to improvement floor. important is factory extremely the transformation of delivering cultural

rest to doing of floorlet to more unit first Kaizen factory productivity as we these this of seven many the and are to complete dozens two Our the each we deploy [ph] and continue per five hours throughout delivering of training projects floor gains will year. the be

call. that year, $X,XXX savings the target for our to the feel good in material the cost-reduction communicated As $X,XXX about we per last to car we plan

With in that for car process. we four time our formalized is quarter, product our In first development. car operations, our on confident additional within focus model feel types our ability the builds launch completed the increase momentum building under to new we

XXXX. XXXX last the of in being If car types expectation competitive are of the entered still with competitive is car we we XX the This by in expectation. end you from types XX remember believing commercially the quarter, that

sheet. shape, to the In let forget balance us addition operational the transformation taking not

a which our the It earnings-based million and cash worth also replace credit equivalents is $XX noting revolver. year-end. cash corporate of in announced versus first relatively was revolver, million we unchanged new position current April, Our two that asset-based $XX is facilities, will

$XX we units. two our the continue is our confident making the support they dedicated will sheet. remain quality to to entity new strategic through are for The of provide, and finish by the credits take leasing newly that our ability million the facilities will with in flexibility To conclude, transformation Ted, we you a and backed and to progress be strong balance us Along will commercial facility those the maintain a results we ensure please second against additional future delivery first quarter? job. incorporated can leased

Ted Baun

Thanks, Jim.

were XXX new and which cars XXX railcars and of quarter of railcars received quarter the included XX XXX down delivered and down which quarter to the orders railcar XXX quarter the We XXX orders compares the This were comprised XXX XXXX. deliveries rebuilds fourth our for leased year, new we to compared rebuilds. of of received first XXX Moving of the during cars. received quarter, railcars in new commercial orders new X,XXX first railcars last XXXX to railcars. and which totaled to of in cars, the were the is were X,XXX This deliveries railcars, XXX in for previous same all during figures rebuilds. XXX compared deliveries Sequentially, same quarter railcar railcars XXX in

consisted the order $XXX $XXX with sales quarter, total an of sequentially backlog, of of value X,XXX railcars which X,XXX as estimated total XX, an sales consisted end backlog with approximately the compared million. to Our estimated XXXX, fourth of value of at railcars million of March our approximately

Industry-wide comprise rebuilds. end car these from of covered cube down a figure to received the of of last non-tank where Similar orders consider quarter level overall a quarter, Our we, represent the large XXX of but high industry share segments the X,XXX for within portion and XXXX, the Box the of quarter non-tank the XXXX, orders. to flat of railcars non-tank saw industry we cars, hoppers, new orders. first rebuild of activity. fourth backlog a consists ourselves and X,XXX reasonable of be smaller Similar quarter segments for comprised bulk railcars the these strong, product railcars quarter XX,XXX gondolas orders to XXXX. we cars again, first

get us ability better inherently volumes give categories. the markets in the will these to initiatives to we well in development and product track ourselves compete current higher on remain Our with positioned

see increased and traffic at cars, Rail expect would traffic month levels like to rail cars which progressed grow levels financial will scheduled railroading and precision at with the detail we respect and issues and Chris continuing QX modest of forward, by to within in were railcar U.S. dealing showed to we categories future call the to first fewest also as pace going results. anticipate flooding continued of within inquiry over the to With since flat the the implementation softened Midwest quarter the of We recover railcar X hopper Railcars Our average as quarter believe customers first for the effects will roughly cars. With the and XXXX of covered traffic to storage attribute he the ongoing March, near the levels, practices. in quarter demand QX will industry slightly in XX term gains, below rail July gondolas. the our levels. that, remain an XXXX. certain from inquiry quarter to the year-over-year XX,XXX turn I in assess outlook only

Chris Eppel

tremendous work look FreightCar America before with value employees I'm and going potential I for my working want opportunity to point energized again. join an such the team we FreightCar and has And join and to forward. Ted. as begin, at I express Thanks, forward a to customers turnaround. America company's I in to FreightCar shareholders, with pivotal Jim create to excitement have

of the financials. the sequential million to the of driven quarter Consolidated first for revenue $XX to totaled quarter lower revenues in in million deliveries the year is Moving in quarter The by $XX.X last fourth and million quarter. $XX.X the for decline compared first XXXX. XXXX

the consolidated sequential million XXXX, of SG&A totaled million, $X $X.X $X.X a up negative margin first a the Our This years million million quarter The in increase for a margin XXXX XXXX reserve quarter onetime our quarter well was quarter of expenses down loss for $X.X and first on the of to with due operating to product million. as by accrual sequentially compensation the volumes the decrease lower consolidated from fourth loss fourth quarter XXXX. in to negative XXXX XXXX. operating $X.X gross of fourth million. recorded our The efforts. product to from was was $X driven $XX.X quarter produced new the incentive development primarily associated in million $XX.X cars the of quarter loss of in related in and compared operating margin as warranty million several QX in but R&D ago. gross basis compares This the

incentive reminder, for expenditures a had compensation the our Capital team first XXXX. As in totaled quarter no paid $XXX,XXX.

figures for will design between $X enhancing year. CapEx our million. Shoals throughout go new advancing $X anticipate towards and the year These that be We of expenditures with online those and our to products, to bringing continue the facility modifications a be number million our our made products will of

Finally, a to the The our assets statement. that Please that, like With change. lease to the materially in company the net a the call in my created X not conclude footnote balance this I for on XX-Q the remarks Q&A. for to on adopted liability standard income operator do our refer change and would turn sheet lease prepared quarter. additional over impact information accounting new both our and lease

Operator

with question Instructions] Thank ahead. our [Operator Elkott go from comes Matt you. Cowen. And first Please

Matthew Elkott

base my question. bit for elaborate taking Good you you that? Ted, for average mean increase going by what morning. you a forward, mentioned you on can Thank

Ted Baun

Matt, Yes, several we've what to reported last the we're typical what seeing quarters. is hey in

world they're that the comparatively not we've here So fire and same increase recently on that pace sort of are the car reported in the types and at it's seen I've the past. lighting

are it's covered tank gondolas, to obviously, flat very now. right us, pertinent cars are which well cars, us doing hopper For and not certain cars,

Matthew Elkott

Okay.

quarter reason is, base to first the average moderate did note means first trends in I forward. tick orders but the wanted that the more inquiries So make the quarter, know, of of continuation in ask sure going the I you which and down already we

Ted Baun

just it that gross challenge comment inquiries - Yes, receive orders. is turning from we the inquiries into The it's obviously those was really on a quarter-to-quarter.

Matthew Elkott

in frac cars? hoppers percentage Okay. the you sand tell us is your quarter. what industry of frac backlog Can And saw cancellations covered sand X,XXX of current the

Ted Baun

exposure relating into get We that we at can to the don't typically any markets, not we you tell to current do specifics time. respect energy with backlog, have our but the the

Matthew Elkott

quarter? the in the in good the that deliveries That's orders to can know. us how made the attributable you And to taken you or ASP last from decline you've much tell the quarter, new was of

Ted Baun

function 'XX. a mix and QX we It's were obviously, of present that QX had Yes. in not the in rebuilds

Matthew Elkott

behind and And And The for meaningfully Got accounts question role. quarter. final Anything in drivers the on What noteworthy? declined new Chris. one the receivable just are that? Chris, congratulation it. inventory the

Chris Eppel

Really the nothing of this quarter noteworthy. shipments It's quarter. just last the quarter end at going the function in into of

Matthew Elkott

you very Thank much.

Operator

our Long And Please go with from Stephens. next ahead. question Justin is

Justin Long

Thanks and good morning.

So ask any the thoughts deliveries maybe to if updated to wanted remainder the around of of over the you I start, had cadence year.

Just also if can that guidance? into the quarters you versus mix provide there cars And any curious, baked the on rebuilt what's new getting the helpful. ahead, in is of would be color

Ted Baun

also rebuilds, QX Ted. spread it's would the specific will of equally over we again, not the as classify purposes. a and X similar guidance, that to and of we're XXXX, rest to cadence but flat. into going the to respect out for the rebuilds all we at throughout next Justin, follow the QX pattern. When those look get intents With Sure, QX, essentially delivery balance

Justin Long

high-level then the would that return the the don't of give commentary, Okay. next That's could when love to to gross going Jim, know of get by being on positive? year, into repositioning into profit margin just Is think your do I year, business going achievable the gross to this really any but XXXX, business guidance is helpful. the thoughts? initiatives thoughts And on and that your something end of back this, the have high-level you about line, you you strategic some on

James Meyer

Justin. Hi,

at transformation. be the cost first and pleased what couldn't have to for a will we're we accumulate of and There's And the are lot very folks future structure, with transformation the will us. our and operations me actually where done start us more pleased to was we opportunity around of phase in manufacturing reiterating, by more Let where with a continue more do. and be all still lot for There's foreseeable to-date. build for that any

got is to to and have need the we've have what build. to portfolio of in to right get to right course, need then marketplace. have piece done, products many many, of business platform product to the to said, we I've second The the And we the the got sell as right we structure cost and times, it

So gross talked by both meaningful of start small most and to manufacturing this of so also margin feeling can it get backlog because now, margins that which high point right about for we're gross retool again, products challenged by an got a opportunity. couple but the the number all where us good challenged several drive right things. from. we're need at is and They at but line. an about there plant What to We changeovers in we this quarters of increasingly the at, building out at the hurts is our a the we runs, business those we It the are number opportunity way. relatively are impediment, for products, of reprocess production to

at right and it's take point the And It's don't right, backlog. right to how anything. the we things products forward-looking building we're to what with line get quite more that's about gross so see cost comfortable than margin that this right drive guidance, we now. structure And on going but you're

Justin Long

out to Okay, initial just been role. great. in of on love that's context board, I laid would then And lastly, new get you priorities here. And know Chris. but helpful. of the I Congrats financial gate on thoughts strategic for That's just the out around came maybe plan the your the

Chris Eppel

at companies things. and first to path to timing laid for seen if the sheet exciting that out path work provides the on we'll I'm very, to turnarounds record achieve that things I for to achievable more and our balance going about us on a say and the in were kind on and want flexibility I plan, track look about and me then team and that joining second them the continually the the finally, fashion and to things again his in you To was but efforts, obviously, fact and company. laid product to me sheet operational orderly the FreightCar has how me the our out based those very why really and me, And as thing And laid the of balance that our excited out and the value-creation resources about that opportunity very thing details think other was was and transformation also again, me got coming about that the with couple attractive very joining in support was previously. previously. aligned and Jim systemic and I've Justin. what clear excited achieve behind board we're into the be Thanks, were of

the background. So but around no of and financial prior comments provides in that hopefully, change conservatism, cash little terms a

Justin Long

does. always. as time the It Thank you and appreciate

Operator

of And the our from with go Brooklier next Research. Buckingham question ahead. Please is Matthew line

Unidentified Analyst

during XQ you Hi, have for of much incremental are the And type warranty just cost was products you expense questions. expectations maybe couple color a how warranty what what driving expense warranty about might of I bit guys asking XXXX? know on to if for little forward? I mind moving you any Kyle do a be the expense but the and spoke these Matt. it's have

Chris Eppel

overly indicative To to years around looking by in obviously trend change question, products surprising. it's that forward. going and several produced related Really, address so is the your any warranty way accruals million anything any our it's you not in at of was and $X.X that can see not ago

look should So at is $X.X - warranty exceed going view you as normalized that forward. our million how without

Unidentified Analyst

I or a down, demand up Have quarter would Okay. talking or increase just you you change going any closed? about ramp And guess, is since also, like, on? what mind looking then seen

Ted Baun

Kyle, Ted. feels post Hey really that comment say don't activities, quarter and would looked. March February but like it's much We I on how April of just

Unidentified Analyst

commentary. appreciate Okay, I you, great. the Thank

Ted Baun

Sure.

Operator

And no questions there further are queue. in the

James Meyer

joining Thank you progress you participating our today with for our us of of company. the and See keeping and we next apprised forward all you to look transformation quarter.

FreightCar America (RAIL) 5 May 192019 Q1 Earnings call transcript