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Edited Transcript of RAIL earnings conference call or presentation 1-Aug-19 3:00pm GMT

Q2 2019 FreightCar America Inc Earnings Call

CHICAGO Aug 6, 2019 (Thomson StreetEvents) -- Edited Transcript of FreightCar America Inc earnings conference call or presentation Thursday, August 1, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher J. Eppel

FreightCar America, Inc. - VP of Finance, CFO & Treasurer

* James R. Meyer

FreightCar America, Inc. - President, CEO & Director

* Michael Cieslak

FreightCar America, Inc. - Head of Financial Planning & Analysis and IR

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Conference Call Participants

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* Justin Trennon Long

Stephens Inc., Research Division - MD

* Matthew Stevenson Brooklier

The Buckingham Research Group Incorporated - Analyst

* Matthew Youssef Elkott

Cowen and Company, LLC, Research Division - VP

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Presentation

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Operator [1]

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Welcome to FreightCar America's Second Quarter 2019 Earnings Conference Call and webcast. (Operator Instructions) Please note this conference is being recorded. An audio replay of the conference call will be available from roughly 1:00 p.m. Eastern today until midnight Eastern on September 1, 2019.

To access the replay, please dial (800) 475-6701. The replay passcode is 470143. An audio replay of the call will be available on the company's website within 2 days following this earnings call.

I would now like to turn the conference over to Mike Cieslak, Head of FP&A and Investor Relations at FreightCar America. Please go ahead.

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Michael Cieslak, FreightCar America, Inc. - Head of Financial Planning & Analysis and IR [2]

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Thank you, and welcome. Joining me today are Jim Meyer, President and Chief Executive Officer; and Chris Eppel, Chief Financial Officer.

I'd like to remind everyone that statements made during this conference call relating to the company's expected future performance, future business prospects or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

Participants are directed to FreightCar America's 2018 Form 10-K for a description of certain business risks, some of which may be outside of the control of the company that may cause actual results to materially differ from those expressed in the forward-looking statements. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events or otherwise.

Our 2018 Form 10-K and earnings release for the second quarter of 2019 are posted on the company's website at www.freightcaramerica.com.

With that, let me now turn the call over to Jim for a few opening remarks. Jim?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [3]

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Thank you, Mike. Good morning, everyone, and thank you for joining us today. I am going to spend some time discussing our progress on accomplishments in the quarter and then turn the call over to Chris to speak about our financial performance.

This week marks my second year with the company and approximately 18 months since we announced Back to Basics, our turnaround strategy. Back to Basics was designed to give us the right products, produced on the right footprint and for the right cost. Three areas in which our company was not well positioned 2 years ago. I will use some of this call to discuss how we are doing in each of these areas and then speak to our backlog in the market.

Starting with product. We have previously discussed the need to design or redesign portions of the portfolio and then properly set up the factory for a number of different car types. These car types were either missing from our portfolio or insufficiently tooled and processed for efficient production. The enhancement of our product portfolio is crucial to our ability to compete in this industry and especially important given where our backlog stands today.

Our most recent redesigned product is the 3/53 intermodal railcar. We are now in production with this updated car type, which was redesigned, retooled and completely reprocessed. We can confirm material cost savings of more than 10% and when fully ramped, we expect to realize labor savings of more than 20%. This redesign is transformational, and we believe makes us fully competitive in this car type.

Another new and particularly important product in the pipeline is the large cube plastic pellet car, and we expect that both the car and lining facilities to be ready in early 2020. And again, with every new launch or relaunch, we expect to realize fully competitive product with a fully competitive cost structure.

With respect to overall product cost reduction, we announced the target for this year of $2,000 to $3,000 of savings per railcar on a run rate basis, and we can confirm that we are solidly on pace to achieve this by year-end. Chris will talk further on this in his presentation.

It has also been evident to us for some time now that our approach to product and process design when combined with strategic sourcing works and that we are making progress. This quarter also provides an indicator that is visible, not just to those working inside the company. For the quarter, we produced positive gross margin, our first positive gross margin since the second quarter of 2018.

Although this outcome was aided by more normal production runs and mix than we have been experiencing, our performance was also the result of execution against our strategic priorities and is a solid barometer of where we are ultimately headed. Recall that our goal is to end 2019 sufficiently far along with our turnaround work, so as to be positioned to begin to realize some of the benefits starting in 2020.

Moving to our manufacturing footprint, we announced last week our decision to exit our Roanoke facility.

Before going into details, I would like to extend a heartfelt thank you to all of the employees at our Roanoke facility for their contributions over the years. Roanoke has consistently performed at the highest possible level, and words alone are inadequate to express just how much we appreciate everything they have given the company.

As discussed on our previous earnings call, rightsizing our footprint and matching it to our future product portfolio plans is fundamental to creating a healthy company and a fundamental part of our Back to Basics strategy. We indicated at many points over the prior calls that this is a journey and needs to be carefully planned, timed, and ultimately, executed.

We have made tremendous strides in our footprint and fixed cost over the last 18 months. As a recap, we announced the sale of our Danville facility last August, and of course, the acquisition of Navistar's operating assets at Shoals followed by the new lease arrangement completed in February that further rightsizes our square footage in rent.

In parallel, and over much of the past 24 months, we have worked extremely hard to fix our operational issues at Shoals and are now harvesting some of the world-class potential that this plant possesses. Shoals now has the leadership team, processes and most importantly, a workforce with the skills necessary to also build the car types previously reserved for Roanoke.

With the forthcoming closure of Roanoke and other actions taken, we will take out approximately 1.2 million square feet or roughly 40% of our factory footprint by the end of 2021. And with the improvements achieved at Shoals and more still to come, we have essentially reduced our square footage without an appreciable loss in that capacity.

As noted in our July 22 press release, we expect the annual fixed cost savings of closing the Roanoke facility to come in at around $5 million. Please note that the majority of these savings will be achieved starting in 2020 and are in addition to the $2,000 to $3,000 savings per railcar mentioned a few minutes ago.

Moving to the commercial side, I would like to spend a few minutes discussing our results and what we are currently seeing in the marketplace. In the second quarter, deliveries totaled 729 railcars, which included 478 new railcars and 251 rebuilds.

This compares to 1,185 railcars delivered in the same quarter last year, which included 368 new cars, 514 rebuilds and 303 leased cars. Sequentially, railcar deliveries were up compared to the 641 railcars delivered in the previous quarter, all of which were new railcars.

We received 98 orders for railcars during the second quarter, of which 50 cars were new railcars and 48 cars were rebuilds. While we do not typically speak of post-quarter activity, given our reported backlog figure, we felt it was important to tell you that we received orders for 1,050 additional railcars just after the close of the second quarter.

These orders are predominantly for future year delivery and thus are not included in our 2019 delivery guidance.

Our order backlog as of June 30, 2019, consisted of 1,121 railcars with an estimated total sales value of approximately $96 million, compared sequentially to our backlog at the end of the first quarter, which consisted of 1,752 railcars with an estimated total sales value of approximately $152 million.

Our quarter end backlog figure consists of 824 new railcars and 297 rebuilds and excludes the 1,050 railcars ordered just after the close of the second quarter.

We are pleased with many of the specific highlights we share today. The facts that we are now in production with a key new product, we have the proper cost structure to produce this product and several others in our pipeline on favorable economics. We can indeed generate positive gross margin at this point in our turnaround and with one of our very lightly loaded factories by historical standards. Our continued work to tailor our footprint size and fixed cost, key orders, one just after the quarter close. Our cash management and ability to maintain a clean balance sheet and the list goes on.

At the same time, we've been working for a number of quarters against the backdrop of sales challenges, driven by our prior cost structure, key products missing from the portfolio and the near-term softness in the marketplace.

Looking ahead to the remainder of 2019, we believe it's prudent to adjust our 2019 delivery guidance down to reflect this softer market environment. Thus, we're revising our former outlook of 2,500 to 3,500 railcars delivered to 2,200 to 2,500 railcars. With the visibility that we have, we expect the back half of the year to be challenging from a results perspective, but we remain intact on completing our Back to Basics turnaround and positioning ourselves for a great future.

We are continuing to have much deeper conversations with customers around our evolving portfolio and believe we will be in a substantially better position to compete as we enter 2020.

With that said, Chris, can you please walk us through the financial results for the second quarter?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [4]

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Thanks, Jim. Turning to our financial results. Consolidated revenue for the second quarter 2019 totaled $73.7 million, a 10.4% increase compared to the $66.7 million for the second quarter last year and sequentially $70.7 million for the first quarter 2019. While unit deliveries were lower year-over-year, revenues were higher in the second quarter of 2019 due to business mix as there were more new car deliveries in this quarter. Our gross margin in the second quarter was a positive $6 million compared sequentially to the first quarter 2019 with negative gross margins of $6.9 million. As Jim mentioned, we are pleased with the direction of our margin performance in the quarter. The gross margin did include a positive onetime impact of $3.5 million as a result of settling a historical customer dispute. The remainder of the positive margin was driven by healthier production mix and the results of our Back to Basics initiatives.

In terms of targeted cost savings recognized in the quarter, approximately $1,400 of cost savings per railcar went through the P&L. While our second quarter improved, as Jim alluded to, our margins will be influenced in the back half of the year by lower deliveries.

SG&A for the quarter totaled $15.4 million, up $7.7 million from the first quarter of 2019 and $8.4 million in the second quarter of 2018. The current year's SG&A figure of $15.4 million included a $7.5 million settlement charge as the company resolved a customer dispute related to cars produced several years ago. As a result, a cash outflow related to the settlement accrual will be paid over the course of the next couple of years. Consolidated operating loss in the second quarter totaled $15.8 million. This compares to a consolidated operating loss of $3.5 million a year ago and $14.5 million operating loss in the first quarter of 2019.

Included in our operating loss for the second quarter was a $5.2 million noncash loss on the sale of railcar -- the sale of railcars in our lease fleet as we monetized 195 cars out of our fleet. I will discuss this in more detail shortly.

We also incurred a $1.3 million noncash asset impairment charge related to the Roanoke facility closure. We will accrue severance and other similar expenses in the back half of 2019 related to the closure. When excluding all these items, along with the net impact of the customer settlement I mentioned, consolidated operating loss would have been substantially lower at approximately $3.5 million.

Moving to the balance sheet. We finished the quarter with cash and cash equivalents of $71.5 million, slightly improved from last quarter. As Jim and I have done in our previous work experience together, we kicked off an initiative to identify less productive assets on the balance sheet and turn them into productive, flexible assets to support our strategic initiatives moving forward. The company will continue its effort to reallocate our balance sheet towards more productive uses in the coming quarters.

Specifically, there were a couple of transactions we undertook in the quarter that speaks to this approach: First, as I mentioned, we sold 195 cars out of our long-term railcar fleet in the quarter. The decision is in line with the company's long-term capital allocation investment strategy. This brought in cash proceeds of overall $11 million. This action created a noncash loss of $5.2 million predominantly related to railcars that were not utilized on lease. As of today, our fleet stands at 645 railcars, and it's 100% utilized on lease.

Second, we also took advantage of our new lease fleet facility to generate $10 million against our lease loan portfolio to provide us with additional cash and flexibility. As a reminder, this facility secured directly against leased assets and no other part of our balance sheet. Cash will be used for strategic purposes as we allocate resources to more productive strategies in the future.

Capital expenditures for the second quarter totaled $1.3 million. For 2019, we still anticipate our CapEx figures for the year to be roughly $5 million. These expenditures will go forward or go towards advancing the design of our new products, bringing those products online and enhancing our Shoals facility with a number of modifications that will be made throughout the year.

We remain confident in the strength of our balance sheet with little debt and additional available liquidity. As a reminder, this April, we announced 2 new credit facilities. The first is a $15 million asset base corporate revolver, which replaced our earnings-based revolver and is currently unused. The second was the $40 million dedicated facility backed by our lease portfolio in our newly incorporated leasing entity. Our balance sheet provides us with the flexibility to achieve our goal in an orderly and systemic fashion.

We will continue to manage our cash with conservatism and address product cost to help improve our operating cash flow.

I'll conclude by reiterating what Jim said on the outset of the call. There are a number of positive examples in today's results that demonstrate our Back to Basics strategy is working. We are confident that the work we are doing now will position FreightCar for a higher level of success as the market begins to return to growth.

We look forward to updating you on this continued progress in the second half of the year as we continue to position the business for a stronger performance in 2020.

With that, I'd like to conclude our prepared remarks and turn the call back over to the operator for some Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from Matt Elkott from Cowen.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [2]

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Can you guys talk about the types of cars in the order you received after the second quarter?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [3]

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Matt, this is Jim. We do not call out car types on future orders. So...

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [4]

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Can you tell us if it's -- Jim, can you tell us if it's -- how many different types of cars there were in the...

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [5]

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I'd say, it's a couple of different car types.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [6]

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Okay. Got it. And then -- types of cars that are your kind of traditional, historically -- your core types or is it new designs?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [7]

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Again, Matt, we don't comment on the mix or the specific car types on these future orders.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [8]

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Got it. And did you guys -- sorry, if I missed it. Did you say, what the value of the order was?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [9]

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Not at this time. We are not, again, giving that forward number. But we will obviously update the value of the backlog at the end of Q3.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [10]

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Okay. Fair enough. And then on the $4 million net settlement charge that you guys reported. Can you tell us what types of cars that related to?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [11]

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Matt, what I would tell you is, it relates to a -- an order and a build of cars that goes back sometime in history. I'll leave it at that.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [12]

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Okay. Got it. And just maybe one last kind of bigger picture question, Jim. Obviously, you've made some progress and it's good to see the positive gross margin in the quarter. If we take a longer-term view, 3 to 5 years from now, how do you see -- how do you envision the company from a competitive standpoint? Just trying to look beyond this transitory phase with all the efforts that you guys are implementing to regain profitability and look past that and see what the company would look like in 3 to 5 years.

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [13]

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Yes, so -- I mean it's important to kind of take stock on where we've been. We've been a company with a variety of railcars and trying to diversify ourselves in any number of directions. And doing so, against the backdrop of a very large operating footprint. And as we go forward, we're sort of flipping that around. We're going to a smaller, tighter, much more efficient footprint. And we're going to a more focused set of product categories that we plan to focus on. And -- so where we see ourselves several years down the road is clearly a much stronger, healthy full competitor in the marketplace and a very good #3 out there. The industry deserves and our customers, as we said before, continue to a lot more choice, and we intend to be that alternative choice.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [14]

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That's helpful, Jim. And then I think we've talked about this on previous calls, maybe a couple of quarters ago. But on the lease fleet, is there any possibility that we can move to a more traditional or conventional lease fleet further down the line? Or you are happy with the current approach?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [15]

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This is Chris, that's a great question. As you know, the purpose of the revolver that we've put in place was to allow us to position ourselves in a more traditional way in terms of building specifically to lease and holding to a certain extent of time. So we've expanded that flexibility. That's not -- I think it's safe to say, that's kind of going to be the majority of how we are looking, but we did take our first step towards that. And as time goes on and the balance sheet supports it, we'll probably be more aggressive in that area.

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Matthew Youssef Elkott, Cowen and Company, LLC, Research Division - VP [16]

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Got it. And just one last quick one, if I may. Back in 2015, I think you guys produced close to 9,000 cars. So that probably was flirting with your maximum capacity. With how the company is now and all the capacity rationalization that you've done so far, what is your maximum production capacity?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [17]

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Well, that's a question that seems like it should have a singular answer, but of course, it doesn't because it depends on the type of car you are building and the number of changeovers, and so forth. But we've said before when we are done consolidating Shoals and realizing the operational improvement work that is very well underway, of course. We talked in terms of roughly an 8,000 unit a year capacity type of number. We think that's still a funny good number. And as it relates a little more clarity on the significant reduction that we'll be putting in place on the Shoals footprint. The number of lines currently is for production lines, after the consolidation it will stay for production lines. Where we're shrinking the footprint is in an area of the building that is heavily underutilized. And essentially, we're -- as we renegotiated our future rental agreements, we basically consolidate ourselves out of being responsible for what will, what are and would remain underutilized or fully unutilized pieces of the building.

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Operator [18]

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(Operator Instructions) And our next question is from Justin Long.

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Justin Trennon Long, Stephens Inc., Research Division - MD [19]

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So I wanted to start with the question on SG&A. I know there were a few onetime items in the quarter. So could you just clarify what you view as kind of the adjusted SG&A number in the second quarter? And then any thoughts about the progression of SG&A going forward?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [20]

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As I mentioned in my remarks, we had $7.5 million related to the customer settlement that ran through the SG&A line. If you make that adjustment out, that gets you just under $8 million in the SG&A, and that's somewhat in line with what you saw in '19. So I think that if you're modeling or you're looking for that $7 million, $8 million as a normalized SG&A at this point in time, it's probably the right way to think about it.

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Justin Trennon Long, Stephens Inc., Research Division - MD [21]

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Okay. So that should be pretty flat sequentially. And then, just to make sure I heard correctly, you said $3.5 million was the impact to gross margin in the quarter?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [22]

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Yes. I wanted to do -- yes, that's correct. There was a positive $3.5 million and, again, the negative $7.5 million, so you net to $4 million. I do want to also mention, I made a comment that adjusted for all these items, the operating loss, I should have said $5.3 million, I might have transposed the numbers. I just wanted to clarify that as well. But the $3.5 million is the positive impact. So to adjust the gross margin, you take out $3.5 million.

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Justin Trennon Long, Stephens Inc., Research Division - MD [23]

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Got you, okay, that helps to clarify. I think I was -- just wanted to make sure my $5.3 million adjusted number was right. And then on the delivery guidance, so second half of the year, should we be thinking about the kind of quarterly cadence of deliveries being pretty consistent, 3Q and 4Q? Or how should we be thinking about that cadence?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [24]

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I can't give a lot of guidance on this. But in general, I think it's safe to say that this will be a little bit more weighted to the third quarter at this point than the fourth quarter.

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Justin Trennon Long, Stephens Inc., Research Division - MD [25]

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Okay. And then there was another large manufacturer that kind of hinted at the fact that there's been a bit more price competition when it comes to the new railcar market here recently. So could you just comment kind of more broadly on the pricing trends that you are seeing out there? And where are you seeing pressure of it, more of kind of broad-based pricing pressure? Or if you are seeing certain car types where things are more competitive?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [26]

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This is Jim, Justin. We'll subscribe to the competitor that starts that you alluded to as a very competitive market for pricing. It's a tough pricing environment.

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Justin Trennon Long, Stephens Inc., Research Division - MD [27]

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And would you say, it's gotten materially worse over the last quarter? Or it's stayed kind of about the same and it remained competitive?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [28]

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Yes. I would say, it feels about the same as it has felt. I'm not going to suggest it's gotten worse. But I'm not going to suggest it's improved any either.

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Justin Trennon Long, Stephens Inc., Research Division - MD [29]

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Okay. And then last question kind of following up on the order that you received subsequent to quarter end. Can you give some color on the customer and whether or not this is a customer that you've worked with previously that maybe took delivery of some cars from Shoals and was happy with those cars and is ordering more now? Or this just a new customer to FreightCar for the first time?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [30]

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Justin, we don't elaborate on that type of thing. And we'll speak consistently about it as part of our third quarter earnings call.

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Operator [31]

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Our next question is from Matt Brooklier from Buckingham Research.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [32]

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Jim, you talked about a softer environment being part of the revision down in terms of your expected deliveries for this year. But just curious, if you could just provide maybe a little bit more color in terms of how that transpired those conversations with customers, transpired during 2Q? And kind of your thoughts on -- initial thoughts on 2020? But just trying to get maybe a little bit of more -- better sense of some of the drivers aside from just the broader weakness in the market that drove delivery guidance down for the year?

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [33]

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Well, Matt, we're -- let me answer another couple of thoughts here. We remain very, very confident that -- as part of our Back to Basics work that we have portfolio work to do, and which parts of the portfolio to address, and how to address it. That portfolio work is, to a very great degree influenced by discussions we have all the time with customers, current, past and future hopefully customers. And so -- and we're very confident in what we're working on and where we're headed. And we now see light at the end of the tunnel in terms of being ready and moving into the launch phases, which is where we all want to get to with new products or redesign products on a better cost structure.

And what I'm going to simply say is until we get to the point where we're actually in launch mode with these new products, it's pretty tough to participate in the marketplace, of course. But the customers that are out there that buy certain car types do know what we are working on and many of them know the timing in which we'll be ready. So that's all positive.

And many of the car types that we have and have been in production with that have been important to us, the work that we've done around product development and reprocessing there purely makes us much more competitive in a margin standpoint. So we need all the pieces to come together ultimately. We need good cost structure on the current portfolio. We need the additions to the new portfolio. And then there isn't a builder out there that wouldn't like a little bit of pressure release in the marketplace.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [34]

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And then could you talk to -- you did give some color earlier in the call. But -- what's left in the lease fleet from a car composition perspective, I can't remember if you gave that detail. Trying to get a sense of what types of cars are in the lease really currently?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [35]

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Right. We don't give the details of lease fleet. But as we mentioned in the remarks that the fleet, the 645 cars in the fleet are 100% on lease at this point in time. So I'll just kind of reiterate that information for you as you're looking out.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [36]

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Trying to get a sense if utilization did potentially slip, if there is the potential for the need to sell additional cars and therefore maybe take additional losses on those sales?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [37]

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In general, I mean not specific to lease fleet, but I think it's safe to say we're going to continue to look at underutilized assets. And if it makes sense to be able to take those underutilized assets and turn them into more flexible assets, that's worth a strategy, we would consider doing that. But -- and again, as of right now, we are focused on maintaining our lease fleet until we see a better use for the assets.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [38]

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Okay. And then just to clarify one thing, the debt that you took on in the quarter, that debt is backstopped by lease assets?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [39]

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That's correct. It's actually on the lease facility, the M&T lease facility, which the details will be released today with the earnings on that facility. And it is 100% backed by the lease portfolio and not anything else on the balance sheet.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [40]

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Okay. And then just my last question. Do you have a targeted leverage ratio for the lease fleet? How should we think about balance sheet leverage into the end of this year?

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [41]

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Well, the lease fleet itself has about 40 -- it's a $40 million revolver as we've disclosed previously. So when you think about how that gets utilized, there is an evaluation that gets done by the facility in terms of the car and based on their value, you get a percentage of that. But again, that will be disclosed when we release the details. So that particularly -- there is really no other debt in the company at this point in time.

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Matthew Stevenson Brooklier, The Buckingham Research Group Incorporated - Analyst [42]

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All right. I guess my question is, is there a possibility that your balance sheet leverage (technical difficulty)

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Christopher J. Eppel, FreightCar America, Inc. - VP of Finance, CFO & Treasurer [43]

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We have the flexibility right now and the availability to do that. That's not part of our plans as of right now.

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Operator [44]

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And at this time, there are no further questions in queue. Please continue.

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James R. Meyer, FreightCar America, Inc. - President, CEO & Director [45]

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Thank you, again, for your time today and your continued support, and look forward to continuing to update all of you on our progress. Have a great day. Thank you.

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Operator [46]

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Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.