Greetings and welcome to FreightCar America's First Quarter Fiscal 2022 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lisa Fortuna, Investor Relations. Please go ahead.
Thank you and welcome. Joining me today are Jim Meyer, President and Chief Executive Officer, Mike Riordan, Chief Financial Officer, and Matt Tonn, 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 FreightCar America's 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.
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 earnings release for the 1st quarter 2022 is posted on the company's website at freightcaramerica.com and our 10-Q, which will be filed after the market today. With that, let me now turn the call over to Jim for a few opening remarks.
Thank you, Lisa. Good morning, and thank you all for joining today. As you saw in today's press release, FreightCar America continues to build on the momentum started in 2021. We delivered our strongest quarterly revenue result in nearly five years and 1st double-digit gross margin since the 1st quarter of 2016. As I've said on nearly every call over the last several years, our goals are to be the best manufacturer in the business and to keep getting better from there. To us, to be the best manufacturer means to be the best in safety, quality and efficiency. Our safety performance in Q1 was flawless, quality is good, and if manufacturing operating income is a proxy for efficiency, then we outperformed our much larger competitors by more than 20-1 on a percentage basis.
In short, our efforts to position the company for long-term growth by becoming the best manufacturer in the business are paying off, and we look forward to the challenge of further differentiating our performance as we progress through 2022 and beyond. Matt will provide more detailed industry comments, but at a very high level, we continue to see more positive trends in the industry than we do warning signs, and order inquiries remain relatively strong. We are, however, watching this space carefully as well as trends in the overall economy. As a reminder, and as we said on the last call, however, all of our decisions related to production planning are based on firm orders. Our new manufacturing footprint in Castaños continues to run very well, as evidenced by our financial performance in the 1st quarter of 2022.
Furthermore, we continue to prepare to scale the operation and we will be ready to capitalize on improving demand. Our revenues for the 1st quarter were up 188% year-over-year. Along with strong top line growth, we achieved double-digit gross margin of 10.8%, which was $10.1 million of gross profit on just 783 rail cars. We feel that this is a good barometer reading of a business currently running with just two production lines, but with two more lines and an in-house fabrication shop in the works. I specifically mentioned the latter because our fabrication shop will bring further improvement benefits to our operational efficiency. Despite our improving financial results, supply chain and inflationary headwinds remain very real challenges and continue to put pressure on the company.
with that said, I could not be more proud of our team's ability to continue to navigate through these challenges and mitigate the effects. While we are pleased with the progress and results achieved during the quarter, we are also still building out the facility, hiring, training, and implementing better processes. In many respects, we are still ramping up and learning on where and how we can improve. As you know, in the past we have been reluctant to provide much in the way of forward-looking targets as we were focused on ensuring the successful transition to Castaños.
We are pleased for the 1st time in at least a long time to introduce revenue guidance. For the full year of 2022, we are forecasting revenue to be between $320 million and $340 million, up approximately 63% year-over-year at the midpoint of the range. This projection is based on expected deliveries of between 2,800-3,000 railcars, an increase of approximately 68% from the midpoint of the range and up from our previously stated delivery guidance of between 2,600-2,900 railcars. As we proceed through the year, we will continue to have a very strong focus on gross margin percentages and gross profit dollars.
In summary, our team is performing well, and we expect our performance to only get better as industry conditions improve and we continue to scale our operations with the same levels of focus on cost discipline and manufacturing excellence. With that, I would now like to turn the call over to Mike for a review of our financials. Mike?
Thanks, Jim. Good morning, everyone. We delivered stronger financial results in the 1st quarter, as evidenced by our significant improvements in year-over-year top line and gross margin. Consolidated revenues for the 1st quarter 2022 totaled $93.2 million compared to $32.4 million in the 1st quarter of 2021, an increase of 188% year-over-year. The company's deliveries increased 153% from 309 railcars in the 1st quarter of 2021 to 783 railcars in the 1st quarter of 2022. Further, our product mix shifted between the comparable periods and coupled with an increase in steel pricing year-over-year, generated a 14% increase in the average selling price of delivered cars.
Our gross profit in the 1st quarter of 2022 was $10.1 million, a significant increase compared to $1.3 million in the same period the prior year. Gross margin increased 670 basis points from 4.1% in the 1st quarter of 2021 to 10.8% in the 1st quarter of 2022 and was the sixth consecutive quarter of gross profit for the business. SG&A for the 1st quarter of 2022 totaled $10.7 million, up from $9.2 million in the 1st quarter of 2021. The increase in SG&A during the 1st quarter of 2022 was primarily due to an increase in stock-based compensation that is largely tied to movement in the company's stock price.
Manufacturing operating income for the 1st quarter of 2022 was $8.5 million compared to manufacturing operating loss of $6 million in the 1st quarter of 2021 and was positive for the 4th consecutive quarter. Consolidated operating loss for the 1st quarter of 2022 was $0.7 million compared to an operating loss of $14.5 million in the 1st quarter of 2021. Consolidated operating loss in the 1st quarter of 2022 was primarily driven by the strong manufacturing operating income, offset by stock-based compensation that, as previously discussed, is largely tied to movement in the company's stock price. Interest expense in the 1st quarter of 2022 was $5.7 million, compared to $2.5 million in the 1st quarter of 2021.
This increase was driven by non-cash amortization of deferred financing costs associated with refinancing activities that took place in the prior year after the 1st quarter of 2021. As a reminder, the warrants issued with our financing transactions directly impact our financial statements. The warrant liability is marked to fair value each quarter, with the change in value impacting our net income and earnings per share calculation. For the 1st quarter of 2022, the non-cash charge due to the change in fair value of the warrant liability was $20.7 million. Again, this is a non-cash item primarily reflecting the change in our stock price during the quarter. In the 1st quarter of 2022, we achieved positive Adjusted EBITDA of $3.3 million, compared to an Adjusted EBITDA loss of $1.8 million in the same period last year.
Now, moving to the balance sheet, we finished the quarter with cash and restricted cash equivalents, including availability under the Delayed Draw Loan of $56 million. Capital expenditures for the 1st quarter of 2022 were approximately $1 million compared to $0.5 million for the 1st quarter of 2021. As stated on our last earnings call, we expect CapEx to increase in 2022 as we complete our investments in our previously announced expansion of our internal fabrication and wheel and axle capabilities by mid-year and complete production lines three and four by year-end 2022 and early 2023, respectively. Due to the timing of these projects, we expect the bulk of capital spending to be in the 2nd half of the year. For the full year 2022, we still believe CapEx will range between $7 million and $8 million.
We look forward to more than doubling our capacity to between 4,000 and 6,000 railcars as we bring on the two additional production lines. We now believe that each additional line will bring on approximately 1,500 railcars of capacity per year, up from our original projection of approximately 1,000 railcars. Importantly, we are committed to keeping our manufacturing operating structure aligned with our sales, as well as maintaining our current SG&A structure. Therefore, we expect our Adjusted EBITDA profile to directly benefit from the operational leverage of the expanded footprint. As noted in Jim's opening comments, we are excited to provide a revenue outlook and reiterate our expectation of positive Adjusted EBITDA for the full year 2022. Looking into the 2nd quarter, we will have multiple changeovers on both production lines, which will lower the pace of deliveries in the short term.
However, this is our only period of dual changeovers for the remainder of the year, and we will see a significant pickup in production and deliveries during the 2nd half of the year. With that financial overview, I'd like to now turn the call over to Matt for a few commercial comments related to the 1st quarter and moving forward. Matt?
Thank you, Mike, and good morning, everyone. As Jim alluded to in his comments, the railcar industry continues to see positive activity. Our inquiries during the quarter remain healthy and on par with the activity we witnessed beginning early in the 4th quarter last year. Additionally, the types of inquiries we are receiving are diverse in nature and a broad range of railcar types, another positive industry indicator. Order activity was also strong and comprised a good mix of business for us during the quarter. The actual number of booked orders was 855 railcars. These orders were largely a reflection of the customers' need to upgrade older fleets and to expand their business in select markets.
By the end of this year, we expect that we will have produced 10 different car types and more than 4,500 total railcars in Castaños since commencing operation there about 20 months ago. While we continue to face persistent inflationary headwinds, which directly impact raw material pricing, replacement demand for new railcars remains relatively strong, in large part due to a continued scrapping activity of aging rail assets. With that said, our conversion business provides us with optionality in this environment and reduces our customers' exposure to high raw material and specialty component pricing. With that, I'll now turn the call back over to Jim for a few closing remarks. Jim?
Thanks, Matt. Now, let me briefly remind you of our expectations and strategic priorities for 2022 that we laid out at the beginning of this year. First, we remain on track and expect to be profitable on an Adjusted EBITDA basis for the full fiscal year 2022. Second, we remain on track with and are making good progress on the expansion of our Castaños facility. By mid-2022, we expect to have completed the expansion of our wheel and axle shop and our 162,000 sq ft fabrication shop. These operational additions bring significant efficiencies that will directly impact our bottom line results. We are also on pace to start a 3rd production line during the 4th quarter and expect to have a 4th line ready in 2023.
As Mike alluded to in his remarks, we expect these lines to double our capacity to approximately 4,000-6,000 units per year. In closing, and as was announced in today's press release, I plan to step down from my position as CEO in 2023. We fundamentally restructured the business during the last several years and are now positioning FreightCar America for profitable and significant growth. This will be our singular focus. I'm working closely with the rest of the board on the search for a successor, and we expect to have a comprehensive and smooth transition in due course. Additionally, I intend to remain heavily involved with the business as an active member of the board of directors once the transition does occur. Growth, scale, and improved profitability are the future for our business.
We will continue to focus on differentiating FreightCar America as a best-in-class manufacturer with the ability to flex product specifications and order sizes to meet customer demand. We remain determined to be the leader in the industry for quality and customer satisfaction. That concludes our prepared remarks, and I'll now turn the call over to the operator so that we can address your questions.
Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handsets before pressing the star keys. One moment, please, while we poll for questions. Our 1st question is from George Sellers with Stephens. Please go ahead.
Thanks, and good morning.
Morning.
Good morning.
I guess to start, the updated delivery guidance is the high end of your annual total capacity. Could you just discuss your confidence in reaching that and then, the visibility maybe that your backlog gives you to the remainder of the year? I guess said a little differently, are you entirely sold out for the year, or do you need to get more orders in 2022 to reach that target?
Matt, why don't you address that 1st?
Yeah. Morning, George. I think what it says is, we've got a very strong backlog for 2022. There remains some pockets of opportunity on our line space. A big part of our focus right now is really on addressing inquiries and booking orders for 2023 and beyond.
Yeah, George, this is Jim. As it relates to the rest of your question, we've said pretty consistently that a good rule of thumb is 1,000 units of volume per year per line. Our real experience to date has been somewhat better than that as the factory continues to run better and better, combined with, of course, the orders, the mix, and the number of changeovers executed. That's part of the reason we said today that we're now sort of describing our future capacity as a range of 4,000-6,000 units per year once we get the other two lines on board. Starting about the 4th quarter, we'll have the 3rd line running. We're quite confident in our volume forecast for the year, and we feel good about the corresponding revenue.
Okay, that's helpful. Then I guess on the comments that you made, Matt, it sounds like you're getting orders that are related to sort of replacement demand, but then also some areas of growth. Could you talk about the different industries that you're seeing more replacement demand and some areas where there's more growth demand?
Yeah. I think the majority of what we are seeing is on the replacement demand, given the number of cars scrapped over the course of the next couple of years. Without getting into specific markets, I think you can say that we're seeing demand increase in some select covered hoppers markets. Fertilizers, obviously an area of strength right now. Steel continues to be an area of strength given demand replacement of specialty gondolas, as well as mill gondolas are both areas of strength in the market.
Got it. Okay. In terms of pricing, have you been able to push a little bit more on price as the backlog has filled up a little bit? Or, how has pricing trended recently?
I think, again, without getting into specifics, George, what we're seeing is, we remain in a relatively competitive marketplace. We're starting to see some improvement in talking to our customers on the lease front, which is positive signs that they're starting to be able to capture some improved lease rates, as new cars enter into the market. We anticipate that, a slight improvement in pricing over time. We're all still working through some of the challenges on the supply chain and increases in, you know, raw materials and specialties. Specifics to price increases are really hard to elaborate on at this point.
George, this is Jim. I would just add that, you know, obviously it's still an extremely competitive environment on the one end, and on the other end, we're all dealing with high inflationary pressures and have been with steel for quite some time now. As we've said any number of times, part of our strategy as we executed the move to Mexico was to keep ourselves right-sized with the market. We've been right-sized up to this point. We're forecasting to stay that way, as we bring on the other lines a little bit later on in time. By keeping ourselves right-sized from a capacity standpoint, it also gives us the important opportunity to be a bit more careful, a bit more selective, and pick the business that's out there that best suits our company. I think you see that in part in our gross margin performance versus maybe what you've seen in some of the others.
Okay. That's really helpful. I'll leave it there. Thank you all for the time.
Thanks, George.
Thanks, George.
Thank you. Our next question is from Matt Elkott with TD Cowen. Please go ahead.
Good morning. Jim, congratulations on the planned retirement. Staying on this topic, can you maybe talk about you know, the timing? Is there something strategic about this, or is this just purely personal? If there is something strategic, do you feel like you've gotten the company to a point where you can pass the baton now to someone else? Also maybe talk about you know, the succession process and if you guys have started looking internally and externally for the future CEO.
Yeah. Good morning, Matt. So I don't quite know what you mean by strategic or not strategic. You know, my goal has been, is and always will be to support this company. You know, this has been a very interesting past period of time. The amount of work that's been accomplished and where we sit today, quite frankly, I find thrilling. For that reason, I don't plan to be too far away from the action. I will continue to stay on the board of directors.
I will be an active member of the board of directors, and I will be helping the company every way I can, hopefully without getting in the way to really push it for growth. We've been through this phase of restructuring the company, fixing what wasn't good about it or what wasn't working correctly. That's behind us, and now we've just got this terrific business platform. You know, I'm going to step out of, I'll call it, the 24/7 swivel chair position for personal reasons. I'll leave that to somebody younger, but very much plan to stay involved with the company. I always have, and frankly, more than ever at this point, personally have just very high expectations for this company.
Got it. That's very helpful insight, Jim. Maybe switching back to the market demand and market conditions. You know, barring unexpected turns in the freight environment and the railcar supply demand dynamics, which have been pretty favorable for the last 18 months, you know, I would say, does it look like you guys should see this trajectory of increased deliveries on a quarterly basis, does it look like it will continue into 2023 barring anything, you know, a market downturn?
Yeah, Matt, I think inquiry levels support that. You know, none of us have the crystal ball, but when I look at inquiry levels, order activity, and some of the key indicators on demand and replacement levels, I think, you know, the dynamics in the marketplace still remain very positive as we go into next year.
We should expect gross margins to continue to improve as well with the rise in deliveries.
Well, Matt, we're not going to give sort of further guidance than we've already given. I think for this year now, we've now given volume guidance, revenue guidance, and we certainly laid out a baseline expectation for our Adjusted EBITDA. You obviously have 1st quarter gross margin from which you can work with. As you know, every piece of business we take, every order we deliver has its own particular economics. I will tell you know, we remain very heavily focused on gross margin and the gross profit dollars that come out of it. It is a very key part of, you know, the day-to-day running of the business.
We are no longer in that position that we found ourselves in several years ago where our capacity was such that every piece of business felt like a must-win piece of business. That's just not the world we're working in today with our new company. I think I'll kind of leave it at that.
Okay. Jim and Matt, you know, the cycle, the railcar cycle for the industry historically has been driven by one or two, you know, railcar types. This one, as you guys mentioned earlier, is much more broad-based. You know, just theoretically, as it relates to margins, does this limit, you know, the margin upside relative to previous cycles when you have to do a lot of line changeovers? Is the case that, you know, as you mentioned, Jim, you're being selective in what types of orders you go after because of that reason, partly because you don't wanna do a lot of line changeovers.
Well, it all factors in. You know, as we said in our comments earlier, we've got both our lines going through changeovers in the quarter we're in now, Q2. You know, once we're through those, you know, we're gonna be running pretty hot for the, you know, at least the remainder of the year. That's partly, again, attributed to a factory that's running very well, the orders and backlog, which in part, you know, on the orders we go after harder or less hard, depends on what we're currently building. All this stuff plays into it. We're managing the business for gross margin, for growth and profitability.
Makes sense. Just one last question for you, Jim or for Matt. I think you guys mentioned the you know covered hoppers and a couple of other types of railcars. Historically, you guys are the go-to for open hoppers, and you know demand for aggregate sandstone shipments on rail are you know probably the highest you know traffic group right now. Is that a market you guys are participating in, or are there not cars being built because we have enough already?
Yeah, that's so that's a market we do participate in, and have been known for. You know, with infrastructure spending, that obviously bodes well for those companies that require cars carrying various types of aggregate and stone. We see some positive signs in that area, that would certainly be a benefit to FreightCar's entire portfolio.
It's not currently reflected in the backlog necessarily?
Yeah, without getting into the specifics, I'll just say that that's a market we do participate in. We have delivered some of those cars that serve those markets.
Okay. Then Matt, you did talk about scrapping. It continues to be at elevated levels despite, you know, a year and a half of scrapping. We're still scrapping more cars. You know, industry utilization for the whole fleet is over 80%. We're still, you know, builds are still below replacement levels after two years of being below replacement levels. You know, Matt, would you say that we're at full utilization for the industry fleet right now?
I don't know that I would say that, but I would say maybe anecdotally, the responses we get back from customers we talk to is that they are experiencing high rates of utilization. I think the fact that, and you mentioned it, the scrap rates outpacing replacement rates two solid years in a row, probably almost three, if you factor in last year. I think 2019 was near 50,000 cars scrapped. 2020 and 2021 were both in excess of that, outpacing our deliveries were. I think you're looking at, you know, at least for a period of time, continued demand, a positive demand cycle given that fact.
Got it. Thanks very much, gentlemen. Appreciate it.
Thanks, Matt.
Thank you. Ladies and gentlemen, we have reached the end of the question and answer session, and I would like to turn the call back to Jim Meyer for closing remarks.
Thank you all for joining today's call. We are excited about the future of FreightCar America as we enter our next stage of growth, and we look forward to sharing our successes with you all in the future. Have a good day.
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.