The bad news kept on coming in the third quarter for companies that manufacture railroad cars.
FreightCar America, Inc. reported net income of $1.1 million for the three months ended Sept. 30, 2009 on revenues of $55.1 million. That's down dramatically from the previous quarter when the company generated sales of $104.3 million and net income of $7.0 million. The picture is bleaker on a year-over-year basis. In the third quarter of 2008, FCA generated sales of $238 million and net income of $10.0 million.
There were no net orders for new railcars in the third quarter of 2009, compared to 694 units ordered in the second quarter of 2009, and 2,329 units ordered in the third quarter of 2008. Railcar deliveries totaled 695 units in the third quarter, compared to 1,207 units delivered in the second quarter of 2009 and 3,082 units delivered in the third quarter of 2008. The total backlog of unfilled orders was 777 units at the end of the third quarter, compared with 1,472 units at the end of the second quarter of 2009 and 4,401 units at the end of the third quarter of 2008.
On a conference call with analysts, company executives said they had not received any orders so far in the fourth quarter and expected demand to be down well into 2010.
"The decline in order activity in the quarter illustrates that the market for new railcars remains very challenging. However, I believe we are performing well in a difficult environment," said Chris Ragot, president and CEO.
"With little visibility to a recovery in the new car market, the preservation of cash and our strong balance sheet continues to be a high priority for us," he said. Cash and investments on-hand at the end of the quarter were approximately $134 million. Given the difficult outlook for 2010, the railcar builder is taking more cost-cutting steps, including additional headcount and salary reductions and limits on outside services spending.
FCA said it was pursuing other revenue opportunities, including refurbishment, after-market parts and services and international sales.
FCA, based in Chicago, is known as a builder of coal-carrying railcars. It also designs and builds bulk commodity cars, flat cars, mill gondola cars, intermodal cars, coil steel cars and motor vehicle carriers. It has manufacturing facilities in Danville, Ill. and Roanoke, Va.
American Railcar Industries, Inc. had a similar story to tell with its third-quarter earnings.
For the quarter ended Sept. 30, 2009, revenues were $78.1 million and net earnings were $1.1 million. In comparison, for the three months ended Sept. 30, 2008, revenues were $217.2 million and net earnings were $7.4 million.
ARI, based in St. Charles, Mo., shipped about 610 railcars in the third quarter of 2009, compared to approximately 2,120 railcars in the same period of 2008.
"As the weak economy is driving low demand for railcars, we shipped 71 percent fewer railcars in the third quarter of 2009 as compared to the same quarter of 2008," noted James Cowan, ARI's president and CEO. "The weak railcar market has and will continue to require us to evaluate our production levels at all manufacturing locations and we plan to continue to adjust our workforce and production levels as needed."
He noted that the company's railcar services segment continues to experience strong results with revenues increasing 32 percent in the third quarter of 2009 compared to the same quarter of 2008. Losses from joint ventures were $2.7 million higher in the third quarter of 2009 than in the third quarter of 2008, primarily due to temporarily idling the company's castings joint venture and losses from its axle joint venture.
For the nine months ended Sept. 30, 2009, revenues were $345.0 million and net earnings were $5.0 million, compared with revenues of $605.8 million and net earnings of $23.8 million in the same 2008 period.
During the nine months ended Sept. 30, 2009, the company shipped approximately 3,080 railcars compared to approximately 6,100 railcars in the same period of 2008.
The company, as of Sept. 30, 2009, had a railcar order backlog of approximately 1,160 railcars. The CIT Group/Equipment Financing, Inc., a subsidiary of CIT Group Inc. (CIT), is the company's largest customer and accounted for approximately 39 percent of ARI's total consolidated revenues for the third quarter and about 55 percent of its order backlog.
CIT and its subsidiary, CIT Group Funding Company of Delaware LLC, filed for bankruptcy protection on Nov. 1 with a prepackaged plan of reorganization. In connection with that announcement, CIT said that none of its operating subsidiaries, including CIT Equipment Financing, will be included in the bankruptcy filings. ARI said it understands that all of CIT's operating entities are expected to continue normal operations while the bankruptcy cases are pending. ARI said its business with CIT Equipment Financing is subject to a number of risks, including the ability to convert the backlog into revenue as well as the risks that CIT's prepackaged plan of reorganization may not be successful, or that CIT Equipment Financing may not continue normal operations or may seek to renegotiate its existing obligations through bankruptcy protection.
ARI is a leading North American designer and manufacturer of hopper and tank railcars. It also repairs and refurbishes railcars, provides fleet management services and designs and manufactures certain railcar and industrial components.