Johnstown America Reports Record Revenues and Earnings
29 July 1998
Johnstown America Reports Record Revenues and Earnings in Second Quarter and First Half
CHICAGO--July 29, 1998--Johnstown America Industries, Inc. reported second quarter records for revenues and net income, with revenues in the quarter ended June 30, 1998 increasing to $238.2 million from $158.2 million a year earlier and net income rising to $6.2 million, or 61 cents per share, compared to a loss of $0.5 million, or 5 cents per share, in the second quarter of 1997.Through six months, revenues and earnings were the best in the company's history, with revenues increasing to $469.4 million from $274.0 million in the 1997 period and net income increasing to $20.2 million, or $2.00 per share, up from a loss of $2.4 million, or 25 cents per share, a year ago.
Earnings for the second quarter of 1998 include an extraordinary charge of $1.0 million ($0.6 million after-tax), or 5 cents per share, from the write off of non-cash deferred financing costs in connection with $15 million of senior debt prepayments and a one time increase in operating income of $1.7 million ($1.0 million after-tax), or 10 cents per share, from the settlement of a former pension plan at Gunite Corporation. The pension gain was generally offset by the impact of the three week strike in May at Gunite. Earnings for the first half of 1998 also include an increase in operating income of $16.8 million ($10.0 million after-tax), or $1.00 per share, from the previously announced settlement of patent infringement litigation against Trinity Industries, Inc.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $25.7 million in the current quarter including the $1.7 million pension termination gain and $65.2 million through six months including $18.5 million from the patent litigation settlement and pension termination gains, compared to $15.8 million and $28.4 million, respectively, in the comparable periods last year. Non-cash amortization, after tax, was $1.8 million, or 18 cents per share, in the second quarter of both 1998 and 1997 and $3.6 million, or 36 cents per share, for the first six months of both 1998 and 1997.
"The accelerating momentum of our freight car operations and the continuing strong performance of our truck components and iron castings businesses produced our best first half results ever," said Thomas M. Begel, chairman, president and chief executive officer. "Revenues and earnings have improved sharply from year-earlier levels resulting in our fifth consecutive quarter of improved operating performance."
Truck components operations, which include Gunite Corporation, Bostrom Seating and Fabco Automotive, recorded sales of $73.8 million in the current quarter compared to $75.1 million a year ago. Through six months, revenues were $148.7 million, up from $141.5 million in the first half of 1997.
"Second-quarter revenues were negatively affected by a three-week strike at Gunite that ended in mid-May, resulting in a one time reduction in margins and operating income for the group. First half margins and operating income however, were ahead of last year's performance," Mr. Begel said. "Gunite now is back in full production and the truck components operations are operating near capacity to meet customer demand resulting from the continuing strength of the heavy-duty truck market."
Iron castings operations produced sales of $35.2 million in the second quarter and $74.1 million through six months, up from $34.0 million and $69.0 million, respectively, a year ago. Margins and operating income increased as well in both the quarter and first half. "This business continues to benefit from strong demand for castings from a broad customer base and a high degree of customer loyalty driven by a reputation for superior quality and customer service," Mr. Begel said.
Revenues from freight car operations were $129.2 million in the quarter and $246.6 million in the first half, both marking dramatic improvement from the $49.1 million and $63.5 million reported in the comparable periods last year.
Second quarter 1998 shipments of 2,163 new and rebuilt freight cars more than doubled the year-earlier total of 1,043. The order backlog increased for the sixth successive quarter and on June 30, 1998 stood at 5,194 cars, compared to 1,949 cars a year earlier and 4,625 cars on March 31, 1998.
"The steps taken in recent years to improve efficiency and reduce costs are being reflected in sharply improved margins and operating income for our freight car operations," Begel said. "Future prospects are enhanced by the strong customer demand for our aluminum Auto Flood II and BethGon Coalporter designs, which comprise a substantial part of the order backlog."
At June 30, 1998, the company had $27.9 million in cash on hand, compared with $17.3 million a year earlier and $19.7 million at March 31, 1998. There were no outstanding borrowings under the company's $75 million revolving credit facility at quarter end. During the second quarter the proceeds from the Trinity settlement and cash provided by operating activities were used to prepay long-term senior bank debt by $15.0 million.
Prospects for the remainder of 1998 are very bright, Mr. Begel said. "Our diversified operations all are benefitting from strong demand in the market sectors they serve and from their positions of market leadership. As a result, we expect that revenues and earnings will continue to be strong throughout the year."
Johnstown America Industries, Inc., headquartered in Chicago, IL, has three operating groups: truck components and assemblies operations, a leading supplier of wheel-end components, seating, steerable drive axles and gear boxes for the heavy-duty truck industry; iron castings operations, a major producer of complex iron castings for a wide range of industries; and freight car operations, a leading manufacturer and lessor of new and rebuilt freight cars used for hauling coal, intermodal containers, highway trailers, agricultural and mining products.
The statements herein, which are not historical facts, including statements about future expectations, are "forward-looking statements" that involve certain risks and uncertainties that could cause actual future results to differ materially from those stated. These risks are spelled out more fully in the company's SEC filings. The company assumes no obligation to update its forward-looking statements. In addition, industry data included herein has been compiled by independent industry sources and accordingly the company assumes no responsibility for such data.
JOHNSTOWN AMERICA INDUSTRIES, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1998 1997 1998 1997
------ ------ ------ ------
Net manufacturing sales $ 236,442 $ 156,516 $ 465,256 $ 270,860
Leasing revenue 1,772 1,724 4,151 3,102
--------- --------- --------- ---------
Total revenue 238,214 158,240 469,407 273,962
Cost of sales -
manufacturing 203,849 135,153 403,010 231,031
Cost of leasing 1,332 661 2,820 1,489
--------- --------- --------- ---------
Gross profit 33,033 22,426 63,577 41,442
Operating expenses (income):
Selling, general and
administrative 12,958 11,310 26,120 22,062
Amortization 2,138 2,146 4,276 4,248
Gain on sale of leased
freight cars -- (325) (1,223) (587)
Pension termination gain (1,688) -- (1,688) --
Patent lawsuit settlement -- -- (16,750) --
--------- --------- --------- ---------
Operating income 19,625 9,295 52,842 15,719
Interest expense, net 7,452 8,066 15,505 16,335
Interest expense-leasing 213 667 782 1,046
--------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary item 11,960 562 36,555 (1,662)
Income taxes 5,225 1,076 15,777 743
--------- --------- --------- ---------
Net income (loss) before
extraordinary item 6,735 (514) 20,778 (2,405)
Extraordinary item, net
of taxes (585) -- (585) --
--------- --------- --------- ---------
Net income (loss) $ 6,150 $ (514) $ 20,193 $ (2,405)
========= ========= ========= =========
Diluted weighted average
equivalent shares outstanding 10,165 9,837 10,114 9,805
========= ========= ========= =========
Diluted earnings (loss) per
share before extraordinary
item $ 0.66 $ (0.05) $ 2.06 $ (0.25)
========= ========= ========= =========
Diluted earnings (loss)
per share $ 0.61 $ (0.05) $ 2.00 $ (0.25)
========= ========= ========= =========
JOHNSTOWN AMERICA INDUSTRIES, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
----------------
1998 1997
---- ----
Cash Flows from Operating Activities:
Net income (loss) $ 20,193 $ (2,405)
Depreciation 7,632 7,807
Amortization-deferred financing costs 2,057 1,079
Amortization-other 4,836 4,874
Accrued postretirement benefits 1,393 1,080
Pension termination gain (1,688) --
Gain on sale of leased freight cars (1,223) (587)
Deferred income taxes (585) (623)
----------- -----------
32,615 11,225
Change in operating assets and liabilities (15,846) (5,356)
----------- -----------
Net cash provided by operating activities 16,769 5,869
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures (5,414) (2,405)
Leased assets additions (2,265) (25,682)
Sales of leased freight cars 24,320 7,487
Other 42 13
----------- -----------
Net cash provided (used) by investing
activities 16,683 (20,587)
----------- -----------
Cash Flows from Financing Activities:
Revolving credit facility, net -- --
Payments of term loans and capital lease (16,760) (8,415)
Leased assets loan facility, net (19,755) 16,168
Deferred financing costs (8) (259)
Other 106 --
----------- -----------
Net cash provided (used) by financing
activities (36,417) 7,494
----------- -----------
Net (decrease) in cash and cash equivalents (2,965) (7,224)
Cash and cash equivalents, beginning of period 30,875 24,535
----------- -----------
Cash and cash equivalents, end of period $ 27,910 $ 17,311
=========== ===========
JOHNSTOWN AMERICA INDUSTRIES, INC.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
1998 1997 (audited)
----------- -----------
Assets:
Cash and cash equivalents $ 27,910 $ 30,875
Accounts receivable, net 94,126 60,484
Inventories 59,938 58,674
Prepaid expenses and other 20,790 17,568
----------- -----------
202,764 167,601
Property, plant and equipment, net 116,185 118,063
Leasing business assets, net 17,264 38,430
Excess costs over assets acquired
and other intangible assets, net
and other 248,248 254,744
----------- -----------
$ 584,461 $ 578,838
=========== ===========
Liabilities and Shareholders Equity:
Accounts payable $ 70,323 $ 55,246
Accrued expenses and other payables 67,982 58,633
Current maturities of long-term debt
and capital lease 824 4,783
----------- -----------
139,129 118,662
Long term debt and capital lease 83,291 96,903
Leasing business loan facility 8,952 27,896
Senior subordinated notes 182,515 182,691
Deferred income tax liabilities 35,788 36,373
Other long-term liabilities 43,466 45,293
----------- -----------
354,012 389,156
Shareholders equity 91,320 71,020
----------- -----------
$ 584,461 $ 578,838
=========== ===========
JOHNSTOWN AMERICA INDUSTRIES, INC.
Supplemental Company and Industry Information
(Dollars in thousands, except per share information)
Three Months Ended Six Months Ended
June 30, June 30,
Company Information: 1998 1997 1998 1997
-------------------- ---------- --------- --------- --------
EBITDA:
Manufacturing Business(1) $ 25,122 $ 14,327 $ 62,372 $ 26,383
Leasing Business(2) 533 1,428 2,822 2,017
---------- --------- --------- --------
Total $ 25,655 $ 15,755 $ 65,194 $ 28,400
========== ========= ========= ========
Non-cash amortization:
Amortization, after tax $ 1,792 $ 1,791 $ 3,579 $ 3,556
Per share, after tax 0.18 0.18 0.36 0.36
Freight Car Operation Data(3):
Freight car backlog(4) 5,194 1,949 5,194 1,949
Freight car shipments(5) 2,163 1,043 4,250 1,575
Industry Information:
--------------------
Backlog:(4)
Freight cars(6) 63,120 20,869 63,120 20,869
N.A. Class 8 trucks(7) 236,300 99,500 236,300 99,500
Production:
Freight cars(6) 19,290 11,414 37,063 22,908
N.A. Class 8 trucks(7) 63,600 54,800 126,100 102,700
Orders:
Freight cars(6) 19,011 14,534 44,874 26,022
N.A. Class 8 trucks(7) 93,000 71,100 198,600 130,600
(1)Includes pension termination gain in 2Q '98, as well as patent
litigation settlement in the first half of 1998
(2)Includes gains on the sale of leased freight cars
(3)Includes new and substantially rebuilt freight cars
(4)As of end of period
(5)Includes freight cars sold to the lease fleet; 35 in 2Q '97 and 325
in the first half of 1997
(6)Includes only new freight cars
(7)Company estimate based on industry sources, actual number not
available for 1998