President and CEO Ed Whalen said, "2012 was a good year for FreightCar despite the fact that fourth quarter results were impacted by a decrease in coal car demand and product line change-over costs at both our manufacturing plants.
"As we look forward, 2013 will be a challenging year for our traditional coal car business, but the long-term need to replace the Eastern coal car fleet remains," Whalen said. "In the near term, we will focus closely on the factors within our control, including improving production efficiency, improving the results of our services business and controlling costs throughout the Company. I am encouraged by the prospects for our non-coal railcar products and the value that our new Shoals facility will bring to our bottom line when operational."
KeyBanc Capital Markets Markets Inc. analyst Steve Barger, in a note to investors late Monday, observed the results "missed our estimate of $0.18 and [Wall Street] consensus of $0.27. We note that Rail paid taxes of $0.8 million on an EBIT of ($0.1) million, which we estimate accounts for $0.07 of the reported loss. Reported revenue of $117 million was down 38% from last year and missed consensus estimate of $133 million, but beat our model of $114 million.
"Additionally, we point out that Rail revenue includes a benefit related to the sale of leased cars as evidenced by the decline in the dollar value of leased cars ($43 million at end of 4Q12 vs. $51 million last quarter). Gross and operating margins came in at 7.0% and (0.1%), respectively, vs. our estimate of 9.6% and 3.0%, which we think is reflective of our belief that pricing is likely getting more aggressive," Barger said.
KeyBanc Capital Markets also noted, "In addition to the earning, Rail announced yesterday [Feb. 19] that it has sub-leased about 25% of Navistar, Inc.'s Cherokee, Ala., manufacturing facility. The facility was initially designed to build a wide variety of railcar types (although we do not think this includes tank cars). Rail guided that it expects to invest $23 million to equip and operationalize the facility, which could see its first deliveries in 2H13 and a total capacity of up to 7,000 railcars per year. Over the longer term, we think this is a positive as it allow the company to diversify from its current heavy exposure to the coal car."