Freightcar America, Inc.

Greetings. Welcome to the Freight Car America fourth quarter and four-year earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the phone presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Lisa Fortino of Investor Relations. You may begin.

Thank you and welcome. Joining me today are Jim Meyer, President and Chief Executive Officer, Terry Rogers, Chief Financial Officer, and Matt Ton, Chief Commercial 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 Freight Car America's 2020 Form 10-K for a description of certain business risks, some of which may be outside the control of the company that may cause actual results to materially differ from those expressed in the forward-looking statement. We expressly disclaim any duty to provide updates to our forward-looking statements, whether as a result of new information, future events, or otherwise. During today's call, there will also be a discussion of some items that do not conform to U.S. generally accepted accounting principles, or GAAP. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the press release issued this morning. Our 2020 Form 10-K and earnings release for the fourth quarter of 2020 are posted on the company's website at www.freightcaramerica.com. With that, let me now turn the call over to Jim for his opening remarks.

Thank you, Lisa. Good morning, and thank you all for joining us today. 2020 was a truly unique year. It was highly challenging on so many different levels, but it was also a great year in terms of what was accomplished. 2020 set the table for our future. In the midst of both the deep industry downturn and the once-in-a-century pandemic, the Frank Carr America team finished the most challenging aspects of the business transformation in and essentially finished remaking the company. We are excited to share our progress today and to share some of the reasons why we believe in the potential of the new company. I will also introduce you to our new Chief Financial Officer, Terry Rogers, so let's get started. I am happy to report that we successfully completed our exit from Shoals. Everything went according to plan. And given the operational challenges associated with closing down a two-plus-million-square-foot facility as it continued to produce, that is saying quite a lot. We had no appreciable cost overruns. We completed our last car build with quality, and we returned the facility back over to the Retirement Systems of Alabama, the facility owner, on the last day of February as originally planned. One final time, I want to thank our Shoals employee for their dedication to the last day, and we wish all of them the very best for the future. Our new team at Castano's started building cars in July and started shipping to customers in November. To date, Castano has produced three different car types on time, all while meeting or exceeding customer expectations for quality. If we take a step back and consider where we were just three and a half years ago, we were a company with two legacy cost-disadvantaged facilities plus the extremely large facility in Muscle Shoals. Our fixed costs and our variable costs were uncompetitive, and we needed to produce 6,000 to 7,000 units per year to be profitable. We were not in a position to survive, much less win. In fact, we could only win under the condition of a resurgence in the need for coal cars. Fast forward to today. and we are now a streamlined manufacturing organization that controls the newest purpose-built facility in North America. That facility is appropriately sized for the moment and has the flexibility to scale when we need it to. We have removed in excess of $25 million per year in fixed costs as compared to 2019, and we have improved our variable costs, and we believe we are ready to lead the industry in terms of quality. In fact, we will have reduced our break-even production levels by two-thirds compared to the old freight car America, and that is after we finish scaling the Castanos plant. It is fair to say that the heaviest of the heavy lifting of our transformation is now complete, and we are ready to fulfill our vision to become the most cost-effective, highest-quality producer in the industry, and that we can now start to shift some of our focus towards growth. At this very moment, we are a two-production line company with capacity to produce approximately 2,000 rail cars per year, depending on the mix and number of changeovers. we will scale this new business with the upcycle that we believe is going to come. As a reminder, the Castano's footprint currently consists of two assembly lines, a much larger paint shop, one designed to accommodate future expansion, and a wheel and axle shop. We currently receive the majority of our fabrications from Fasamex, which was our JV partner prior to acquiring their stake. We have hired a very experienced team at the facility that is more than qualified to run a future larger operation. The performance of this workforce is, in our opinion, amongst the best in the industry, and the results already attest to that fact. Related to all of this, our board just approved the construction of our own fabrication shop. This will allow us to make the large majority of our fabrications in-house starting within 12 months, which will bring additional capability and efficiencies. We will gauge the market and sales inquiry levels to time the construction of additional assembly lines and capacity. On a more onerous topic, we must find ways to mitigate the very substantial cost pressure associated with steel prices, which have doubled over the past 12 months and are currently at near all-time highs. Between these increases and continued pressure on pricing, driven by the industry downturn and overcapacity that still remains, margins will be under pressure for the short term. The improving news, as Matt will discuss, is that order activity is starting to increase, and now that we are wholly in Mexico with a smaller size, we have the ability to be modestly selective on the business we pursue. As we continue to build the company around the new footprint in Castanos and start to focus on growth, we are highly encouraged by the feedback we have received from customers who have toured the new facility. They are impressed with the efficient and scalable size of the facility, the highly trained and experienced workforce we have assembled, and the absolutely positive morale and culture of the people. We are increasingly encouraged by the number of new sales increases since the start of the year as well. Our delivery guidance for the year is a range of 1,400 to 1,600 rail cars, which is approximately two times our deliveries for 2020. While this delivery guidance is below the roughly 2,000 rail cars we have noted as our new break-even level, it is aligned with where the industry is right now. To conclude, we closed the door on Shoals and completed the physical part of the transformation of Freight Car America. 2021 is about building momentum in support of expansion and profitable growth as we move forward. We believe the new flexibility of our business will allow us to ride out the last stage of our industry's downturn and significantly capitalize on its next phase of expansion. With that brief overview, it is my pleasure to introduce you to Terry Rogers, our new CFO. Terry is a true finance professional with nearly 40 years of experience. That includes having held the CFO positions at Roadrunner Transportation Systems, Heiko, and Ryerson. We are very fortunate to have him on the team. Terry?