FreightCar America (NASDAQ: RAIL) is looking forward to the opportunities that 2021 has to offer, now that it has moved all of its manufacturing operations from Alabama to Mexico.
That opportunity includes shifting to a positive balance sheet. The company sustained a net loss of $14.4 million in the fourth quarter of 2020 compared with a net loss of $9.5 million in the fourth quarter of 2019 (see below).
“We believe that we are fundamentally transforming FreightCar America’s ability to compete and win and are now preparing the business to pivot from restructuring to growing,” said FreightCar America President and CEO Jim Meyer in a statement.
As planned, the company completed the early termination of its lease of the Shoals manufacturing facility in Cherokee, Alabama, and it exited the facility on Feb. 28 of this year.
With the closing of the Shoals facility, FreightCar America’s manufacturing operations have fully moved to Castaños, Mexico.
“It is fair to say that the heaviest of the heavy lifting of our transformation is complete,” Meyer said in a fourth-quarter earnings call on Wednesday.
The completion of the move has enabled FreightCar America to shift its focus on growth, according to Meyer. The facility in Mexico has the capacity to produce 2,000 railcars per year, and the company has the ability to add additional capacity should market conditions warrant.
The company’s board of directors has also approved the first expansion of the new Castaños facility, which will include a large fabrication shop and additional wheel and axle capability.
FreightCar America described the potential rail traffic growth in 2021 as “promising,” and company leaders are encouraged by the interest in ordering new railcars.
FreightCar America has a delivery guidance of 1,400 to 1,600 railcars in 2021. Although that figure is lower historically than previous years, FreightCar America expects that figure to grow after the industrial economy improves. Furthermore, that figure is also nearly double last year’s total production, according to the company.
The year-end backlog for 2020 was 1,389 railcars with an aggregate value of approximately $146 million.
As FreightCar America looks ahead, one issue will be finding a way to mitigate the cost pressure coming from higher steel prices. The higher steel prices, along with the continued pressure on railcar sales pricing driven by the last year’s downturn, could put company margins under pressure, Meyer said.
However, the company has “the ability to be modestly selective on the business we can pursue” now that it has finished the restructuring of its manufacturing operations, Meyer said.
“Even with the ongoing pandemic, we are seeing encouraging signs of stabilization in the market and possibly even the early stages of recovery. As a result, we believe we can more than double our total deliveries in 2021 and begin to scale the footprint for 2022 assuming conditions warrant,” Meyer said.
Fourth-quarter financial results
FreightCar America sustained a net loss of $14.4 million, or $0.87 per share, in the fourth quarter of 2020 compared with a net loss of $9.5 million, or $0.75 per share, in the fourth quarter of 2019.
The net loss included $19 million in noncash impairment charges related to leased railcars, partially offset by $12.9 million in noncash restructuring gains, much of it related to the terminal of the lease at Shoals, FreightCar America said.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the fourth quarter of 2020 was a loss of $11.6 million. But adjusted EBITDA was a positive $1.7 million. In the fourth quarter of 2019, EBITDA was a loss of $5.9 million and adjusted EBITDA was a loss of $12.6 million.
Consolidated revenues were $60.6 million in the fourth quarter, compared with $25.2 million in the third quarter of 2020 and $44.9 million in the fourth quarter of 2019.
FreightCar America delivered 477 railcars in the fourth quarter, higher than the 163 railcars delivered in the third quarter of 2020 and the 439 railcars delivered in the fourth quarter of 2019.
The company said it achieved its revised 2020 delivery guidance of 750 railcars despite transitioning manufacturing from Shoals to Castaños.
Last year, FreightCar America also faced the lowest freightcar demand cycle since 2009, executives said.
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