Freightcar America, Inc.

Greetings. Welcome to the Freight Car America third quarter 2021 conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal 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 Fortuna. 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 of 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 on 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 GAAP measures are included in the press release issued this morning. Our earnings release for the third quarter of 2021 is posted on the company's website at freightcaramerica.com, and our 10-Q will be posted later today after the market close. With that, let me now turn the call over to Jim for some opening remarks.

Thank you, Lisa. Good morning and thank you all for joining us today. As you saw in our third quarter earnings press release today, we reported a fourth consecutive quarter of positive gross margin, as well as positive operating income at the manufacturing level for the second quarter in a row. During the third quarter, our revenue was up 131% year over year and 56% sequentially. We delivered 505 rail cars versus 163 in the same period last year. These results come in while our team continues to build out the new facility in Castanos, Mexico, refine all aspects of our manufacturing operations, heavily focus on material cost reduction, and deal with the ongoing challenges of the pandemic and global supply chains. We delivered the fourth consecutive quarter a positive gross margin at $1.5 million, despite incurring significant expense related to the launch of a new car model. Without this extra expense and the associated challenges, we estimate that our gross margin would have been approximately two and a half times higher during the quarter. In a company like ours that is currently running two production lines, the impact of a messy launch has the potential for an outsized impact. With that said, this is now well behind us, and we are determined not to incur something like this again. Additionally, and similar to many other manufacturing companies, we continue to face challenges related to the supply chain and raw material inflation. Specifically, higher steel prices have persisted and appear to be having a temporary impact on order closings. Over the last 12 months, we have seen steel prices appreciate by roughly 225%, and steel is, of course, the largest input to our manufacturing cost. In response to this, our team is doing everything they can to protect margins, mainly through a renewed focus on material cost reduction across the board, passing through cost increases where possible, and being more selective on the business we accept. As we mentioned last quarter, given our now smaller size and lower fixed cost structure, not every piece of business needs to be treated as must win business. Additionally, and most importantly, Our business remains operationally profitable at the manufacturing level despite these significant headwinds. Given the transformation of our manufacturing footprint that we have successfully completed, once the environment normalizes, coupled with added manufacturing lines and capabilities in Costanos, we should be positioned for a great future. The demand environment across our end markets is strengthening and is congruent with the return to growth strategy we laid out at the beginning of this year. That said, we believe some customers are delaying orders temporarily with the hope that the inflationary environment cools. But pent-up demand is evident to us, and we believe that a market recovery is forthcoming. For the fourth quarter, we will continue at a production rate that supports our prior guidance, which was raised last quarter to 1750 to 1850 rail cars for fiscal 2021. As noted on the last call, this is up 20% at the midpoints compared to our original outlook of 1400 to 1600 rail cars at the beginning of this year. During the quarter, we continued to make progress on the planning and construction of our own fabrication shop and an expansion to our wheel and axle shop. Each of these work streams will bring additional and meaningful efficiencies to our production process when brought online in 2022. Further, we have also broken ground on the two additional production lines at Castanos and continue to expect to have both online starting late next year. As we emphasized during last quarter's call, we remain excited about our workforce in Castano's and believe it to be a real differentiator for the company. Today, the Castano's team is approximately 950 individuals. and is approaching nearly a 100% rate of voluntary full vaccination against COVID-19. Our workforce is readily scaled as we continue to grow and is well trained, healthy, and committed to our future just as much as the rest of us are. Shifting gears, subsequent to the quarter end, we received our first Mexican VAT refund. At the end of the quarter, the VAT receivable totaled $30.1 million, and the first refund was for $10.2 million of the outstanding balance. We anticipate that the remainder of this balance plus additional money paid in since the quarter end will be made in 2022. Furthermore, we believe that we are on track to receive the remainder of our certifications within the next three months which will both greatly reduce the amount paid in each month and further speed up the refund cycle. As it relates to our capital structure and future cash needs, we are focused on all of the following. Improving our cash cushion, improving on our various loan terms and conditions, ensuring ample funding to complete the expansion of our Castano facility, and eventually funding an entrance into the tank car market. Furthermore, we feel there are multiple means in which to support all of these. In summary, we are pleased by the progress we have made and the results we produced in the third quarter, despite the challenges mentioned. We are confident that our plans to return to growth and profitability are taking hold. With that said, I'd now like to turn the call over to Terry for a review of our financials.