FreightCar America, Inc. Reports Second Quarter 2008 Results
Monday, August 4th 2008
FreightCar America, Inc. reported financial results for the three months ended June 30, 2008. For the second quarter of 2008, sales were $141.3 million and net loss was $0.9 million, or a net loss of $0.08 per diluted share. These results include charges related to a loss contingency reserve due to sharp material cost increases on fixed price contracts in the amount of $2.6 million after tax or $0.22 per diluted share. For the second quarter of 2007, the Company generated sales of $195.4 million and net income of $11.5 million, or $0.93 per diluted share.
“The combination of a sharp increase in input costs, specifically steel and aluminum, and pricing pressures has reduced margins. These industry challenges have had a significant impact on our financial results for the quarter,” said Chris Ragot, President and CEO. “We have worked diligently with our customers and suppliers to implement price adjustment and cost reduction initiatives. We have also continued to selectively forward purchase materials to the extent possible to secure prices and, although this decision affected our cash flows for the quarter, we believe that this is more than offset by our improved competitive positioning in the current environment. More importantly, since May 2008 we have quoted variable price contracts.”
“Orders for new railcars totaled 1,436 units in the second quarter of 2008, compared with 2,396 units ordered in the first quarter of 2008 and 2,262 units ordered in the second quarter of 2007. The backlog of unfilled orders was 4,917 units at June 30, 2008, which consists of 4,721 new cars and 196 rebuild/refurbishment cars, compared with 6,785 units at March 31, 2008, which consisted of 6,508 new cars and 277 rebuild/refurbishment cars. The backlog of unfilled orders was 5,589 units at June 30, 2007. The backlog of unfilled orders at June 30, 2008 was affected by cancelled orders for 970 units. We expect order activity to be uneven for the remainder of this year.”
Due to increases in raw material costs on certain fixed price railcar contracts in the backlog, our current estimated cost to complete some contracts is expected to exceed the contractual sales price. As a result of the rapid increase in material costs, a loss contingency reserve of $3.7 million relating to these cost increases was accrued during the three months ended June 30, 2008.
Mr. Ragot further stated, “In addition to our cost savings efforts, we continue to pursue several strategic growth initiatives. We continue to evaluate both domestic and international opportunities to expand the breadth of our business and our geographic presence. Our Indian joint venture is progressing on schedule. We also plan to expand our products and services by introducing new railcar types that we do not offer today and exploring opportunities to enhance the value proposition to our customers by providing aftermarket services. We continue to explore leasing as an additional service for our customer base. In the near term our focus is on cost reductions throughout the company and execution of our diversification initiatives.”
For the six months ended June 30, 2008, sales were $236.4 million and net loss was $11.1 million or a net loss of $0.94 per diluted share. In comparison, for the six months ended June 30, 2007, the Company had sales of $517.8 million and net income of $34.4 million, or $2.75 per diluted share. Results for the first half of 2008 were negatively impacted by a loss contingency of $0.22 per diluted share on an after-tax basis recorded on production of railcars in the backlog.
The Company will host a conference call on Monday, August 4, 2008 at 11:00 a.m. (Eastern Daylight Time) to discuss the Company’s second quarter financial results. To participate in the conference call, please dial (800) 230-1951. Interested parties are asked to dial in approximately 10 to 15 minutes prior to the start time of the call.
An audio replay of the conference call will be available beginning at 1:00 p.m. (Eastern Daylight Time) on August 4, 2008 until 11:59 p.m. (Eastern Daylight Time) on August 11, 2008. To access the replay, please dial (800) 475-6701. The replay pass code is 953921. An audio replay of the call will be available on the Company’s website within two days following the earnings call.
FreightCar America, Inc. manufactures railroad freight cars, with particular expertise in coal-carrying railcars. In addition to coal cars, FreightCar America designs and builds bulk commodity cars, flat cars, mill gondola cars, intermodal cars, coil steel cars and motor vehicle carriers. It is headquartered in Chicago, Illinois and has manufacturing facilities in Danville, Illinois, Roanoke, Virginia and Johnstown, Pennsylvania. More information about FreightCar America is available on its website at www.freightcaramerica.com.
