Railcar manufacturer and lessor FreightCar America (NASDAQ: RAIL) reported a $1.09 per share loss for the third quarter of 2019. This excludes a $21.5 million non-cash goodwill impairment charge and more than doubles the $0.50 per share loss the company reported in the same period of 2018.
FreightCar America reported a 49% year-over-year decline in revenue to $40.7 million as railcar deliveries declined by a similar amount to 467 units (255 new cars, 212 rebuilds). The cost to make those railcars exceeded the revenue generated from their delivery as gross profit was negative by more than $5 million.
The downside of the railcar manufacturing cycle has been well-documented. Significant year-over-year declines in carloads and precision scheduled railroading (PSR) initiatives aimed at improving network fluidity and asset returns have resulted in a significant amounts of railcars moving into storage.
FreightCar America reiterated its 2019 delivery guidance range of 2,200 to 2,500 railcars. The company’s backlog at the end of the third quarter 2019 totaled 1,704 railcars with a value of approximately $188 million, up from the second quarter backlog of 1,121 railcars valued at $96 million.
The company remains focused on improving operating efficiency by lowering production costs and consolidating its manufacturing footprint. On September 20, FreightCar America announced a manufacturing joint venture in Mexico and the closure of its Roanoke, Virginia manufacturing facility to accomplish these goals. These moves, along with reducing the square footage leased at its “Shoals” facility in Cherokee, Alabama are expected to provide $12 million in annual cash savings.
The company also announced that it was on track with its two-year production cost initiative aimed at lowering unit production costs by $5,000 per car in 2019.
“We are pleased with the foundational improvements achieved over the prior 24 months and our ability to more successfully compete than in the recent past. At the same time, continued industry headwinds have delayed the impact of our improvements and our potential to demonstrate results, as indicated by our third quarter performance. Nevertheless, we remain committed to completing our new product plans and to the recently announced new footprint in Mexico,” said FreightCar America’s president and CEO Jim Meyer.
FreightCar America is a Chicago, Illinois-based company that manufactures and leases railcars and supplies railcar parts. The company designs and builds hopper, gondola, intermodal and flat railcars.