East End Car Shops to reopen
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Fri Jan 14 22:50:41 EST 2005
Friday, January 14, 2005
Getting back on track
FreightCar America wants to capitalize on the exploding market for coal
after losing money in the past four years.
By <mailto:lois.caliri at roanoke.com>Lois Caliri
The Roanoke Times
A company that plans to build aluminum railroad cars at Norfolk Southern's
East End Shops has a huge backlog of orders, and it wants to cash in on the
nation's growing demand for coal.
Positioning itself to satisfy that demand, FreightCar America plans to hire
400 people in the next 30 months to build rail cars at the shops, which
have been for the most part idle since NS laid off hundreds of union
workers in 2000.
Rail car orders have been on the upswing because of economic recovery, the
replacement of aging rail cars and an improved outlook for U.S. steel
manufacturers and an increasing demand for electricity.
FreightCar has shops in Johnstown, Pa., and Danville, Ill., which are union
shops. But the company recently got embroiled in a class-action lawsuit and
a proposed settlement with the workers in Johnstown, according to company
documents filed with the Securities and Exchange Commission.
Chicago-based FreightCar has a backlog of almost 11,500 rail car orders, up
from 4,400 a year earlier. The current backlog represents estimated net
sales of $750.3 million, according to the SEC papers.
Company officials did not return phone calls Thursday, so it's unknown
whether the Roanoke jobs will be union jobs, when production will begin in
Roanoke and how many cars will be manufactured.
On Tuesday, the company announced it wants to raise $115 million through a
public offering of its stock. FreightCar executives are prohibited from
discussing the offering by the SEC's mandatory pre-IPO "quiet period."
The company, which has lost money in each of the past four years, will use
the proceeds to repay its debt. FreightCar said in the IPO prospectus that
it wants to capitalize on the exploding market for coal.
And it wants to expand its aluminum rail fleet to include rail cars that
carry other materials. The last time the company posted a profit was in
2000, when it cleared $1.8 million.
For the nine-month period ended Sept. 30, FreightCar reported a loss of
$15.5 million, compared with a loss of $5.9 million in the same period a
year earlier. Part of the larger reported loss was because of a $9.2
million expense tied to a legal dispute and proposed settlement between the
company and the United Steelworkers of America in Johnstown.
Net sales increased $136.4 million during the nine-month period, according
to the company's SEC filing. The delivery of an additional 1,866 rail cars
contributed to the increase.
The company's prospectus projects the compound annual growth rate for rail
car deliveries over the next four years will be about 14.2 percent,
resulting in an estimated 53,550 rail car deliveries a year by 2007.
"We believe that over the last 25 years we have built and introduced more
types of coal-carrying railcars than all other manufacturers in North
America combined," the company said in its filing.
The company warns investors, however, of the industry's ups and downs.
U.S. and international economic conditions, changes in interest rates,
federal and state regulations and the purchasing habits of rail car buyers
contribute to the upswings and downturns within the market. Also, the
demand for coal-carrying cars fluctuates in response to changes in
During the most recent industry cycle, industrywide rail car deliveries
plunged from a peak of 75,704 in 1998 to a low of 17,736 rail cars in 2002.
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