FreightCar Net Rises as Sales Plummet

Sometimes even a good financial report can show how bad the economy is. Equipment maker FreightCar America’s path to a $2.6 million first quarter profit, up from a $10.2 million loss a year earlier, was one of those.

The company’s revenue in the 2009 period was $39.6 million, less than half the $95.1 million in the first three months of 2008.

It racked up just 339 new railcar orders, down 80 percent from last year’s result. Deliveries of 974 units in the quarter were down from 1,287, and nearly two-thirds of the new shipments were leased cars instead of sales. The order backlog eroded to 1,985 cars to build at the end of the quarter, from 2,620 at the end of December.

Those figures reflect a freight market in which major railroads are handling about 18 percent fewer loads, prompting carriers, shippers and leasing middleman firms to idle equipment all over North America. FCA specializes in making coal cars, but builds intermodal and other bulk-hauling cars as well.

With all that, FCA boosted its gross margin to 26.6 percent from only 9.8 percent at the same point last year. Part of that was from a $3.9 million termination fee that one customer paid to cancel cars the company planned to sell this quarter. Some was also a revenue gain from leasing, parts sales and refurbishing older cars.

Last year’s quarterly loss reflected costs from shutting down its Johnstown, Pa., plant, but even with those removed it would have earned only $1.2 million. So, Chris Ragot, president and CEO, said “despite the challenging market conditions we are pleased with our financial results.”

FCA is still shifting more toward secondary services like shop work for its sales rather than primary railcar construction. For car building it hopes a budding venture in India will help ship a first prototype this year and diversify beyond North American demand.

At home, Ragot said, “customers continue to be interested in leasing railcars in this environment” rather than buying, but that FCA is “selective” in making those deals. And it keeps an eye out for sudden opportunities to convert leases into equipment sales. It added $48 million worth of cars under operating leases, but also sold $26 million in cars that had been leased.

Contact John D. Boyd at jboyd@joc.com .