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FOR IMMEDIATE RELEASE |
July 27, 2005 |
FreightCar America, Inc. Reports Quarterly Pro Forma Earnings Per Share of $0.90 and Net Earnings Per Share of $0.76 as Backlog Reaches 15,867 Units.
FreightCar America, Inc. (Nasdaq:RAIL) today reported financial results for the three months ended June 30, 2005. For the second quarter of 2005, sales were $230.7 million and net income attributable to common stockholders was $9.1 million, or $0.76 per diluted share. In comparison, for the second quarter of 2004, the Company had sales of $94.9 million and a net loss attributable to common stockholders of $4.3 million, or $0.63 per diluted share.
After giving effect to the Company's initial public offering and the related transactions, including the repayment in full of the Company's outstanding debt obligations, and the issuance of shares of common stock in the first quarter of 2005 upon the exercise of stock options, pro forma earnings per share was $0.90 on a fully diluted basis for the three months ended June 30, 2005, compared to a pro forma loss per share of $0.11 on a fully diluted basis for the same period in 2004. Pro forma earnings per share is a non-GAAP financial measure. A reconciliation of the Company's net income (loss) per common share attributable to common stockholders to pro forma earnings (loss) per share is set forth in the supplemental disclosure attached to this press release.
EBITDA was $18.4 million in the second quarter of 2005 compared with EBITDA loss of $0.1 million in the second quarter of 2004. Adjusted EBITDA was $18.4 million in the second quarter of 2005 compared with Adjusted EBITDA of $3.7 million in the second quarter of 2004. The improvement in EBITDA reflects increased sales volume, an improved market pricing environment, operating leverage attributed to higher volume and the impact of the pass-through of increases in raw material costs to our customers with respect to a majority of our railcar deliveries. EBITDA and Adjusted EBITDA are non-GAAP financial measures. A reconciliation of the Company's net income (loss) to EBITDA and Adjusted EBITDA is set forth in the supplemental disclosure attached to this press release.
"We are extremely pleased with the performance of our company in the second quarter, both in executing the orders on hand and replenishing our backlog of unfilled orders," said John E. Carroll, Jr., President and CEO. "We successfully increased our deliveries of new railcars during the quarter by raising the output rates in our existing and subcontract facilities and beginning production in our facility in Roanoke, Virginia. The Roanoke start-up has gone much better than planned; the facility achieved its production goals several weeks ahead of schedule, and our customers are very satisfied with our production quality.
"We believe business conditions in the North American coal railcar sector remained strong in the second quarter, and the Company retained its market share of new orders. The Company's orders for all types of new railcars totaled 5,104 units in the second quarter, a 60% increase over the order activity in the second quarter of 2004. In addition, the total backlog of unfilled orders reached 15,867 units at June 30, 2005, nearly double the backlog on June 30, 2004. We will continue to ramp up production output to deliver the increased backlog as scheduled and committed to our customers."
FreightCar America, Inc. manufactures railroad freight cars, with particular expertise in coal-carrying railcars. In addition to coal cars, FreightCar America designs and builds 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.
This press release may contain statements relating to our expected financial performance and/or future business prospects, events and plans that are "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. These potential risks and uncertainties include, among other things: the cyclical nature of our business; adverse economic and market conditions; fluctuating costs of raw materials, including steel and aluminum, and delays in the delivery of raw materials; our ability to maintain relationships with our suppliers of railcar components; our reliance upon a small number of customers that represent a large percentage of our sales; the variable purchase patterns of our customers and the timing of completion, delivery and acceptance of customer orders; the highly competitive nature of our industry; the risk of lack of acceptance of our new railcar offerings by our customers; and the additional risk factors described in our filings with the Securities and Exchange Commission. We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.
FreightCar America, Inc. Condensed Consolidated Balance Sheets June 30, December 31, 2005 2004 -------- ------------- (Unaudited) (In thousands, except share and per share data) Assets Current assets Cash and cash equivalents $ 20,467 $ 11,213 Restricted cash -- 1,200 Accounts receivable, net 5,191 4,136 Inventories 72,625 73,218 Prepaid expenses and other current assets 1,279 983 Deferred income taxes 5,406 10,519 -------- ------------- Total current assets 104,968 101,269 Property, plant and equipment, net 26,136 24,199 Restricted cash -- 11,755 Deferred financing costs, net 841 915 Deferred offering costs -- 2,013 Intangible assets, net 13,342 13,637 Goodwill 21,521 21,521 Deferred income taxes 19,709 15,834 -------- ------------- Total assets $186,517 $ 191,143 ======== ============= Liabilities and Stockholders' Equity (Deficit) Current liabilities Accounts payable $ 58,625 $ 69,631 Current portion of long-term debt 8 2,000 Accrued payroll and employee benefits 15,361 9,904 Accrued warranty 6,462 5,964 Other current liabilities 4,317 5,274 Industrial revenue bonds -- 5,200 -------- ------------- Total current liabilities 84,773 97,973 Long-term debt, less current portion 28 48,858 Deferred revenue 5,058 4,883 Accrued pension costs, less current portion 17,548 16,767 Accrued postretirement benefits 20,580 18,988 Rights to additional acquisition consideration, including accumulated accretion of $0 and $20,408, respectively -- 28,581 -------- ------------- Total liabilities 127,987 216,050 -------- ------------- Commitments and contingencies Redeemable preferred stock -- 12,182 Stockholders' equity (deficit) Common stock 57 -- Additional paid in capital 93,714 8,900 Accumulated other comprehensive loss (5,055) (5,055) Accumulated deficit (30,186) (40,934) ----------- ------------- Total stockholders' equity (deficit) 58,530 (37,089) ----------- ------------- Total liabilities and stockholders' equity (deficit) $186,517 $191,143 =========== ============= FreightCar America, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ---------------------- 2005 2004 2005 2004 ----------- ---------- ---------- ---------- (In thousands, except share and per share data) Sales $ 230,714 $ 94,867 $ 396,519 $ 183,813 Cost of sales 206,539 92,982 358,976 181,294 ----------- ---------- ---------- ---------- Gross profit 24,175 1,885 37,543 2,519 Selling, general and administrative expense 7,664 3,802 13,740 6,993 Compensation expense under stock option agreements (selling, general and administrative expense) 69 -- 69 -- Provision for settlement of labor disputes (selling, general and administrative expense) -- -- 370 -- ----------- ---------- ---------- ---------- Operating income (loss) 16,442 (1,917) 23,364 (4,474) Interest income (239) (24) (342) (52) Related-party interest expense 1,346 1,726 3,253 3,397 Third-party interest expense 690 396 964 531 Interest expense and related accretion on rights to additional acquisition consideration 4,823 1,351 6,382 2,598 Write-off of deferred financing costs 439 -- 439 -- Amortization of deferred financing costs 89 135 184 270 ----------- ---------- ---------- ---------- Income (loss) before income taxes 9,294 (5,501) 12,484 (11,218) Income tax provision (benefit) 149 (1,455) 1,425 (3,197) ----------- ---------- ---------- ---------- Net income (loss) 9,145 (4,046) 11,059 (8,021) Redeemable preferred stock dividends accumulated 31 266 311 532 ----------- ---------- ---------- ---------- Net income (loss) attributable to common stockholders $ 9,114 $ (4,312) $ 10,748 $ (8,553) =========== ========== ========== ========== Net income (loss) per common share attributable to common stockholders - basic and diluted $ 0.76 $ (0.63) $ 1.11 $ (1.24) =========== ========== ========== ========== Weighted average common shares outstanding - basic 11,972,260 6,875,000 9,715,020 6,875,000 =========== ========== ========== ========== Weighted average common shares outstanding - diluted 11,988,740 6,875,000 9,723,306 6,875,000 =========== ========== ========== ========== FreightCar America, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, ------------------ 2005 2004 -------- -------- (In thousands)Cash flows from operating activitiesNet income (loss) $ 11,059 $ (8,021)Adjustments to reconcile net income (loss) to net cash flows provided by operating activities: Depreciation 3,432 3,366 Amortization of intangible assets 295 295 Amortization of deferred financing costs 184 270 Write-off of deferred financing costs 439 -- Accretion of Senior Notes 1,012 357 Accretion of deferred revenue 513 190 PIK Notes issued for interest 2,241 3,041 Interest expense and related accretion on rights to additional acquisition consideration 6,382 2,598 Deferred income taxes 1,238 (3,198) Compensation expense under stock option agreements 69 -- Changes in operating assets and liabilities: Restricted cash (45) (25) Accounts receivable (1,055) (1,016) Inventories 593 (20,722) Prepaid expenses and other current assets (296) (1,647) Income taxes receivable -- 815 Accounts payable (11,906) 23,147 Accrued payroll and employee benefits 5,457 1,309 Accrued warranty 498 403 Other current liabilities (957) (622) Deferred revenue (337) (114) Accrued pension costs and accrued postretirement benefits 2,373 (150) -------- --------Net cash flows provided by operating activities 21,189 276 -------- --------Cash flows from investing activitiesRestricted cash withdrawals 13,000 --Purchases of property, plant and equipment (5,330) (728) -------- --------Net cash provided by (used in) investing activities 7,670 (728) -------- --------Cash flows from financing activitiesIssuance of common stock 85,309 --Payments on long-term debt (58,963) (1,750)Redemption of preferred stock (13,000) --Payment of rights to additional acquisition consideration (34,964) --Deferred offering costs 2,013 -- -------- --------Net cash flows used in financing activities (19,605) (1,750) -------- -------- -------- --------Net increase (decrease) in cash and cash equivalents 9,254 (2,202)Cash and cash equivalents at beginning of period 11,213 20,008 -------- --------Cash and cash equivalents at end of period $ 20,467 $ 17,806 ======== ========Supplemental cash flow informationCash paid for: Interest $ 474 $ 366 ======== ======== Capital lease obligations incurred for equipment $ 39 $ -- ======== ======== FreightCar America, Inc. Supplemental Disclosure I Reconciliation of net income (loss) per common share attributable to common stockholders to pro forma earnings (loss) per share(1) (Unaudited) Three Months Six Months Ended Ended June 30, June 30, ---------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- ------- (In thousands, except share and per share data) Net income (loss) per common share attributable to common stockholders - basic and diluted $ 0.76 $ (0.63) $ 1.11 $ (1.24) ======= ======= ======= ======= Net income (loss) attributable to common stockholders $ 9,114 $(4,312) $10,748 $(8,553) Related-party interest expense 1,346 1,726 3,253 3,397 Third-party interest expense 690 396 964 531 Write-off of deferred financing costs 439 -- 439 -- Fees for termination of management services agreements (selling, general and administrative expense) 900 -- 900 -- Tax effects of related-party interest expense, third-party interest expense, write-off of deferred financing costs and fees for termination of management services agreements (1,229) (772) (2,022) (1,430) Interest expense and related accretion on rights to additional acquisition consideration 4,823 1,351 6,382 2,598 Tax effect of interest expense and related accretion on rights to additional acquisition consideration (4,820) -- (5,326) -- Redeemable preferred stock dividends accumulated 31 266 311 532 ------- ------- ------- ------- Adjusted net income (loss) attributable to common stockholders $11,294 $(1,345) $15,649 $(2,925) ======= ======= ======= ======= Pro forma earnings (loss) per share - basic and diluted $ 0.90 $ (0.11) $ 1.25 $ (0.23) ======= ======= ======= ======= Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2005 2004 2005 2004 ---------------------- ---------------------- (In thousands, except share and per share data) Weighted average common shares outstanding - basic (prior to adjustments) 11,972,260 6,875,000 9,715,020 6,875,000 ====================== ====================== Common shares issued upon full exercise of the options granted in 2004 under the Company's stock option plan -- 557,700 -- 557,700 Effect of common shares issued in the initial public offering, as if the transaction occurred on the first day of the respective period 560,440 5,100,000 2,817,680 5,100,000 ---------------------- ---------------------- Weighted average common shares outstanding - basic (following adjustments) 12,532,700 12,532,700 12,532,700 12,532,700 ====================== ====================== Dilutive effect of options granted under the 2005 Long-Term Incentive Plan, as if the options were granted on the first day of the respective period 18,514 18,514 18,514 18,514 ---------------------- ---------------------- Weighted average common shares outstanding - diluted (following adjustments) 12,551,214 12,551,214 12,551,214 12,551,214 ====================== ====================== (1) Pro forma earnings per share represents the Company's net income (loss) per common share attributable to common shareholders as adjusted to give effect to: (1) with respect to the three months and six months ended June 30, 2004, the shares of common stock (the "2004 Option Shares") issued in the first quarter of 2005 as a result of the full exercise of the options granted in 2004 (the "2004 Options") under the Company's stock option plan; (2) the issuance of stock options under the 2005 Long-Term Incentive Plan; (3) the completion of the Company's initial public offering on April 11, 2005; and (4) the related transactions involving uses of the offering proceeds. The adjustments relating to the Company's initial public offering and the related transactions reflect: (i) the increase in the number of weighted average shares as a result of the issuance of the new shares sold in the offering; (ii) the removal from the calculation of net income (loss) of interest expense relating to the Company's term loan, senior notes and PIK notes, rights to additional acquisition consideration and industrial revenue bonds that the Company is no longer obligated to pay as a result of the repayment in full of such obligations with the proceeds from the offering; (iii) the removal from the calculation of net income (loss) of the write-off of deferred financing costs and fees for termination of management services agreements in connection with the offering; (iv) the redemption of the Company's preferred stock with the proceeds from the offering; (v) the tax effects of the removal of related-party interest expense third-party interest expense, write-off of deferred financing costs and fees for termination of management services agreements from the calculation of net income (loss); and (vi) the tax effect of interest expense and related accretion on rights to additional acquisition consideration, which expense became deductible for tax purposes upon payment of the additional acquisition consideration with the proceeds from the offering. The Company believes that pro forma earnings per share information is useful to investors because it illustrates the effect on the Company's financial results of the completion of the Company's initial public offering and the related transactions. Since the offering and the related transactions involved changes to the Company's capital structure and the repayment of all of the Company's outstanding debt obligations (eliminating for future periods certain expenses that the Company historically has been obligated to pay), the Company believes that pro forma earnings per share will allow investors to more effectively compare the Company's financial results prior to and after the offering. In addition, the Company believes that giving effect to the 2004 Option Shares with respect to the results for the three months and six months ended June 30, 2004 provides a more consistent basis for comparison of the financial results between the periods. Pro forma earnings per share is not a financial measure presented in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Accordingly, when analyzing our operating performance, investors should not consider pro forma earnings per share in isolation or as a substitute for earnings per share calculated in accordance with U.S. GAAP. Our calculation of pro forma earnings per share is not necessarily comparable to that of other similarly titled measures reported by other companies. FreightCar America, Inc. Supplemental Disclosure II Reconciliation of net income (loss) to EBITDA(1) and Adjusted EBITDA(2) (Unaudited) Three Months Six Months Ended Ended June 30, June 30, ---------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- ------- (In thousands) Net income (loss) $ 9,145 $(4,046) $11,059 $(8,021) Income tax provision (benefit) 149 (1,455) 1,425 (3,197) Related-party interest expense 1,346 1,726 3,253 3,397 Third-party interest expense 690 396 964 531 Interest expense and related accretion on rights to additional acquisition consideration 4,823 1,351 6,382 2,598 Interest income (239) (24) (342) (52) Amortization of deferred financing costs 89 135 184 270 Write-off of deferred financing costs 439 -- 439 -- Amortization of intangible assets 148 148 295 295 Depreciation 1,767 1,628 3,432 3,366 ------- ------- ------- ------- EBITDA 18,357 (141) 27,091 (813) Provision for settlement of labor disputes -- -- 370 -- Loss on customer contract for box railcars -- 3,813 1,500 6,492 Non-cash expense relating to stock options 69 -- 69 -- ------- ------- ------- ------- Adjusted EBITDA $18,426 $ 3,672 $29,030 $ 5,679 ======= ======= ======= ======= (1) EBITDA represents net income (loss) before income tax expense, interest expense, net, amortization and depreciation of property and equipment. We believe EBITDA is useful to investors in evaluating our operating performance compared to that of other companies in our industry. In addition, our management uses EBITDA to evaluate our operating performance. The calculation of EBITDA eliminates the effects of financing, income taxes and the accounting effects of capital spending. These items may vary for different companies for reasons unrelated to the overall operating performance of a company's business. EBITDA is not a financial measure presented in accordance with U.S. GAAP. Accordingly, when analyzing our operating performance, investors should not consider EBITDA in isolation or as a substitute for net income, cash flows from operating activities or other statements of operations orstatements of cash flow data prepared in accordance with U.S.
GAAP. Our calculation of EBITDA is not necessarily comparable to that of other similarly titled measures reported by other companies. (2) Adjusted EBITDA represents EBITDA before the following charges: (a) charges in connection with our settlement with the unionrepresenting the unionized employees in our Johnstown,
Pennsylvania manufacturing facility, also referred to as
the Johnstown settlement. On November 15, 2004, we entered
into the Johnstown settlement and recorded a $9.2 million
charge with respect to the year ended December 31, 2004.
For the three months ended March 31, 2005, we recorded an additional charge of $370,000 relating to the Johnstown settlement consisting of a retroactive payment to unionized Johnstown employees for certain previously unpaid work hours. We recorded no charges relating to the Johnstown settlement for the three months ended June 30, 2005; (b) charges of $3.8 million for the three months ended June 30, 2004 and charges of $6.5 million and $1.5 million for the six months ended June 30, 2004 and 2005, respectively, in connection with losses on a customer contract for box railcars, which reflects increased raw material, labor and other costs that exceeded the fixed purchase price under this contract. We recorded no charges relating to the customer contract for box railcars for the three months ended June 30, 2005. This customer contract was our first contract for the manufacture of box railcars. We delivered all of the box railcars under this contract, and we do not plan to produce any box railcars in the future; and (c) non-cash charges reflecting the grant of the 2004 Options that were recorded in the fourth quarter of 2004 and the issuance of stock options under the 2005 Long-Term Incentive Plan.
We believe that Adjusted EBITDA is useful to investors evaluating our operating performance compared to that of other companies in our industry because it eliminates the effects of the Johnstown settlement, the losses on a customer contract for box railcars and non-cash expenses relating to the grant of the 2004 Options and stock options under the 2005 Long-Term Incentive Plan. We also believe that Adjusted EBITDA is useful to investors in assessing our ability to comply as of the relevant balance sheet dates with the financial covenants under our former revolving credit facility and the senior notes. In addition, Adjusted EBITDA is equivalent to the measure that was used to determine our eligibility to enter into our new revolving credit agreement upon the closing of our initial public offering. Adjusted EBITDA is not a financial measure presented in accordance with U.S. GAAP. Accordingly, when analyzing our operating performance, investors should not consider Adjusted EBITDA in isolation or as a substitute for net income, cash flows from operating activities or other statements of operations or statements of cash flow data prepared in accordance with U.S. GAAP. Our calculation of Adjusted EBITDA is not necessarily comparable to that of other similarly titled measures reported by other companies.