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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
Accelerated filer |
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Emerging growth company |
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES NO
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2021 was $
As of March 11, 2022, there were
DOCUMENTS INCORPORATED BY REFERENCE
Documents |
Part of Form 10-K |
Portions of the registrant’s definitive Proxy Statement for the 2022 annual meeting of stockholders to be filed pursuant to Regulation 14A within 120 days of the end of the registrant’s fiscal year ended December 31 |
Part III |
FREIGHTCAR AMERICA, INC.
TABLE OF CONTENTS
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PART I
Item 1. Business.
OVERVIEW
We are a diversified manufacturer of railcars and railcar components. We design and manufacture a broad variety of railcar types for transportation of bulk commodities and containerized freight products primarily in North America, including open top hoppers, covered hoppers, and gondolas along with intermodal and non-intermodal flat cars. We and our predecessors have been manufacturing railcars since 1901. Over the last several years, we have introduced a number of new or redesigned railcar types as we continue to diversify our product portfolio.
During 2019, we entered into a joint venture arrangement with Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex”), a Mexican company with operations in both Mexico and the United States, to manufacture railcars in Castaños, Coahuila, Mexico (“Castaños”), in exchange for a 50% interest in the operation. Production of railcars at the facility began during the third quarter of 2020. On October 16, 2020, we acquired Fasemex’s 50% ownership in the joint venture. As of March 2021, we moved all of our production to the Castaños facility.
We ceased operations at our Roanoke, Virginia manufacturing facility ("the Roanoke Facility") and vacated the facility as of March 31, 2020. On September 10, 2020, we announced our plan to permanently close our manufacturing facility in Cherokee, Alabama (the "Shoals Facility") in light of the cyclical industry downturn, which was magnified by the COVID-19 pandemic. The closure will reduce costs and align our manufacturing capacity with the current rail car market. We ceased production at the Shoals Facility in February 2021.
We lease freight cars through our JAIX Leasing Company and FCA Leasing subsidiaries. Although we continually look for opportunities to package our leased assets for sale to our leasing company partners, these leased assets may not be converted to sales, and may remain revenue producing assets into the foreseeable future. We also rebuild and convert railcars and sell forged, cast and fabricated parts for all of the railcars we produce, as well as those manufactured by others.
Our primary customers are financial institutions, railroads, and shippers, which represented 66%, 22% and 6%, respectively, of our total sales attributable to each type of customer for the year ended December 31, 2021. In the year ended December 31, 2021, we delivered 1,731 railcars, including 1,354 new railcars and 377 rebuilt railcars, compared to 751 railcars, including 600 new railcars and 151 rebuilt railcars delivered in the year ended December 31, 2020. Our total backlog of firm orders for railcars increased from 1,389 railcars as of December 31, 2020 to 2,323 railcars as of December 31, 2021. Our backlog as of December 31, 2021 includes a variety of railcar types and the estimated sales value of our backlog is $240 million.
Our Internet website is www.freightcaramerica.com. We make available, free of charge, on or through our website items related to Corporate governance, including, among other things, our Corporate governance guidelines, charters of various committees of the Board of Directors and our code of business conduct and ethics. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments thereto, are available on our website and on the SEC’s website at www.sec.gov. Any stockholder of our company may also obtain copies of these documents, free of charge, by sending a request in writing to Investor Relations at FreightCar America, Inc., 125 S. Wacker Drive, Suite 1500, Chicago, Illinois 60606.
OUR PRODUCTS AND SERVICES
We design and manufacture a broad variety of freight cars including covered hoppers, open top hoppers, gondolas, intermodal and non-intermodal flat cars that transport numerous types of dry bulk and containerized freight products.
In the last six years, we have added 20 new or redesigned products to our portfolio, including various covered hopper car products with cubic capacities from 3,282 cubic foot to 6,250 cubic foot; 52’ and 66’ mill gondolas; coil gondolas; triple hoppers and hybrid aluminum/stainless steel railcars; ore hopper and gondola railcars; ballast hopper cars; aggregate hopper cars (with manual, independent or fully automatic transverse or longitudinal door systems); intermodal flats (including the 3-unit, 53-foot well cars) and non-intermodal flat cars (including slab, hot slab and bulkhead flats). Focused product development activity continues in areas where we can leverage our technical knowledge base and capabilities to realize market opportunities.
The types of railcars listed below include the major types of railcars that we are capable of manufacturing; however, some of the types of railcars listed below have not been ordered by any of our customers or manufactured by us in a number of years. We rebuild and convert railcars and sell forged, cast and fabricated parts for all of the railcars we produce, as well as those manufactured by others. Many of our railcars are produced using a patented one-piece center sill, the main longitudinal structural component of the railcar. In addition to railcars designed for use in North America, we have manufactured railcars for export to Latin America and the Middle
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East. Railroads outside of North America are constructed with a variety of track gauges that are sized differently than in North America, which requires us, in some cases, to alter our manufacturing specifications accordingly.
Any of the railcar types listed below may be further developed to meet the characteristics of the materials being transported and customer specifications.
Our aluminum bodied open-top hopper railcar, the AutoFlood™, is a five-pocket coal car equipped with a bottom discharge gate mechanism. We began manufacturing AutoFlood railcars in 1984, and introduced the AutoFlood II and AutoFlood III designs in 1996 and 2002, respectively. Both the AutoFlood II and AutoFlood III designs incorporate the automatic rapid discharge system, the MegaFlo™ door system, a patented mechanism that uses an over-center locking design, enabling the cargo door to close with tension rather than by compression. Further, AutoFlood railcars can be equipped with rotary couplers to permit rotary unloading.
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MANUFACTURING
Our railcar production facility in Castaños is certified by the Association of American Railroads (the “AAR”), which sets railcar manufacturing industry standards for quality control. Our Castaños manufacturing facility began production during the third quarter of 2020 and provides a solid platform from which to pursue a broad range of commodity carrying railcar business including intermodal well cars, non-intermodal flat cars and various open-top hopper, covered hopper and gondola cars.
Our manufacturing process involves four basic steps: fabrication, assembly, finishing and inspection. Our facility has numerous checkpoints at which we inspect products to maintain quality control, a process that our operations management continuously monitors. In our fabrication processes, we employ standard metal working tools, many of which are computer controlled. Each assembly line typically involves 15 to 20 manufacturing positions, depending on the complexity of the particular railcar design. We use mechanical fastening in the fitting and assembly of our aluminum-bodied railcar parts, while we typically use welding for the assembly of our steel-bodied railcars. For aluminum-bodied railcars, we begin the finishing process by cleaning the railcar’s surface and then applying the decals. In the case of steel-bodied railcars, we begin the finishing process by blasting the surface area of the railcar, painting it and then applying decals. Once we have completed the finishing process, our employees, along with representatives of the customer purchasing the particular railcars, inspect all railcars for adherence to specifications.
CUSTOMERS
We have strong long-term relationships with many large purchasers of railcars. Long-term customer relationships are particularly important in the railcar industry, given the limited number of buyers of railcars.
Our customer base consists mostly of North American financial institutions, railroads and shippers. We believe that our customers’ preference for reliable, high-quality products, our engineering design expertise, technological leadership in developing and enhancing innovative products and the competitive pricing of our railcars have helped us maintain our long-standing relationships with our customers.
In 2021, revenue from three customers, TTX Company, CIT Rail and Union Pacific Railroad, accounted for approximately 46%,12% and 8%, respectively, of total revenue. In 2021, sales to our top five customers accounted for approximately 78% of total revenue. In 2020, revenue from three customers, Amtrak, TTX Company and The Boeing Company, accounted for approximately 44%, 21% and 12%, respectively, of total revenue. In 2020, sales to our top five customers accounted for approximately 94% of total revenue. Our railcar sales to customers outside the United States were $1.4 million in 2020. We did not have any railcar sales to customers outside the United States in 2021. Many of our customers do not purchase railcars every year since railcar fleets are not necessarily replenished or augmented every year. The size and frequency of railcar orders often results in a small number of customers representing a significant portion of our sales in a given year. Although we have long-standing relationships with many of our major customers, the loss of any significant portion of our sales to any major customer, the loss of a single major customer or a material adverse change in the financial condition of any one of our major customers could have a material adverse effect on our business, financial condition and results of operations.
SALES AND MARKETING
Our direct sales group is organized by customer and geography and consists of vice presidents of sales, (“VP’s”) contract administrators, a manager of customer service, a director of field support, and support staff. The VP’s are responsible for developing and closing new business and managing customer relationships. Our contract administrators are responsible for preparing proposals and other inside sales activities. Our director of field support is responsible for after-sale follow-up, technical support, training, and in-field product performance reviews.
RESEARCH AND DEVELOPMENT
We utilize the latest engineering methods, tools and processes to ensure that new products and processes meet our customers’ requirements and are delivered in a timely manner. We develop and introduce new railcar designs as a result of a combination of customer feedback and close observation of developing market trends. We work closely with our customers to understand their expectations and design railcars that meet their needs. New product designs are tested and validated for compliance with AAR standards prior to introduction. This comprehensive approach provides the criteria and direction that ensure we are developing
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products that our customers desire and perform as expected. Costs associated with research and development are expensed as incurred.
BACKLOG
We define backlog as the value of those products or services which our customers have committed in writing to purchase from us or lease from us when built, but which have not yet been recognized as sales. Our contracts may include cancellation clauses under which customers are required, upon cancellation of the contract, to reimburse us for costs incurred in reliance on an order and in some cases, to compensate us for lost profits. However, customer orders may be subject to customer requests for delays in railcar deliveries, inspection rights and other customary industry terms and conditions, which could prevent or delay backlog from being converted into sales.
The following table depicts our reported railcar backlog in number of railcars and estimated future sales value attributable to such backlog, for the periods shown.
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Year Ended December 31, |
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2021 |
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2020 |
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Railcar backlog at start of period |
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1,389 |
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1,650 |
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Railcars delivered |
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(1,731 |
) |
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(751 |
) |
Net railcar orders received |
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2,665 |
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490 |
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Railcar backlog at end of period (1) |
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2,323 |
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1,389 |
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Estimated revenue from backlog at end of period (in thousands) (2) |
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$ |
240,160 |
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$ |
146,006 |
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Although our reported backlog is typically converted to sales within two years, our reported backlog may not be converted to sales in any particular period, if at all, and the actual sales from these contracts may not equal our reported backlog estimates. In addition, due to the large size of railcar orders and variations in the mix of railcars, the size of our reported backlog at the end of any given period may fluctuate significantly.
SUPPLIERS AND MATERIALS
The cost of raw materials and components represents a substantial majority of the manufacturing costs of most of our railcar product lines. As a result, the management of raw materials and components purchasing is critical to our profitability. We enjoy generally strong relationships with our suppliers, which helps to ensure access to supplies when railcar demand is high.
Our primary aluminum suppliers are Mandel Metals and Hydro Extrusions. Aluminum prices generally are not fixed at the time a railcar order is accepted due to our infrequent usage and subsequent low volume purchases of aluminum. In 2021 we primarily bought fabrications from local suppliers, with Fasemex being the largest of the local suppliers. In 2022, we have returned to buying steel directly. Currently our steel is converted to fabrications by Fasemex or by other local suppliers. With the anticipated opening of our Fabrication Shop in Q2 2022, we will again be producing our own fabricated parts.
Our primary component suppliers include Wabtec, Standard Steel, SKF, Amsted, and Metalex, who supply us with truck components, brake components, couplers, wheels & axles, bearings, and running boards, respectively. Roll Form Group is the sole supplier of our roll-formed center sills, which were used in 20% and 44% of our new railcars produced in 2021 and 2020, respectively. A center sill is the primary longitudinal structural component of a railcar, which helps the railcar withstand the weight of the cargo and the force of being pulled during transport. Our center sill is formed into its final shape without heating by passing steel plate through a series of rollers.
Other suppliers provide brake systems, castings, bearings, fabrications and various other components. The railcar industry is periodically subject to supply constraints for some of the key railcar components.
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Except as described above, there are usually at least two suppliers for each of our raw materials and specialty components. Our top ten suppliers accounted for 80% and 69% of our total purchases in 2021 and 2020, respectively.
COMPETITION
We operate in a highly competitive marketplace especially in periods of low market demand resulting in excess manufacturing capacity and face substantial competition from established competitors in the railcar industry in North America. In addition to price, competition is based on delivery timing, product performance and technological innovation, reputation for product quality and customer service and support.
We have three principal competitors in the North American railcar market that primarily manufacture railcars for third-party customers, which are Trinity Industries, Inc., The Greenbrier Companies, Inc. and National Steel Car Limited.
Competition in the North American market from railcar manufacturers located outside of North America is limited by, among other factors, high shipping costs and familiarity with the North American market.
INTELLECTUAL PROPERTY
We have several U.S. and international patents and pending applications, registered trademarks, copyrights and trade names. Key patents include our one-piece center sill, our hopper railcar with automatic individual door system and our railroad car tub. The protection of our intellectual property is important to our business.
HUMAN CAPITAL
Employees
As of December 31, 2021, we had 997 employees, of whom 223 were salaried and 774 were hourly wage earners. As of December 31, 2021, 941 of our employees were based in Mexico while 54 were based in the US and 2 were based in China. As of December 31, 2020, we had 669 employees, of whom 170 were salaried and 499 were hourly wage earners. As of December 31, 2020, 316 of our employees were based in Mexico while 351 were based in the US and 2 were based in China.
Workforce Talent and Diversity
The success and growth of our business depend in large part on our ability to attract, develop, and retain a diverse population of talented, qualified, and highly skilled employees at all levels of our organization, including the individuals who comprise our global workforce, our executive officers and other key personnel.
Our compensation programs are designed to ensure that we attract and retain the right talent. We generally review and consider median market pay levels when assessing total compensation, but pay decisions are based on a more comprehensive set of considerations such as company performance, individual performance, experience, and internal equity. We continually monitor key talent metrics including employee engagement and employee turnover. Our employee benefits programs strive to deliver competitive benefits that are effective in attracting and retaining talent, that create a culture of well-being and inclusiveness, and that meet the diverse needs of our employees. Our total package of benefits is designed to support the physical, mental, and financial health of our employees, and we currently provide access to medical, dental, vision, life insurance and retirement benefits, as well as disability benefits.
Safety
We are committed to providing a safe and healthy work environment for all employees. We seek to protect the well-being of our employees through comprehensive health and safety policies and procedures that include the identification and mitigation of health and safety risks, operations management, health and safety training, emergency preparedness, performance auditing, program certification, and improvement targets.
Human Rights
We are committed to respecting human rights throughout all our operations, and seek to provide respect, dignity, and all basic needs to employees and contractors. We are committed to promoting human rights and strive to ensure that the products and services provided by the Company and our third-party business partners are ethically sourced and do not breach human rights laws in countries in which they originate.
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COMMITMENT TO SUSTAINABILITY
Consistent with our vision, we are committed to growing our business in a sustainable and socially responsible manner. In March 2021, our Nominating and Corporate Governance Committee made a determination to undertake a comprehensive review of our governance policies in light of recent trends relating to environmental, social and governance (“ESG”) topics and disclosure. Throughout 2021, the Nominating and Corporate Governance Committee met periodically to develop, assess and prioritize ESG topics that are important to our business and all of our stockholders and to improve both the measurement and transparency of our ESG disclosures and practices. The Nominating and Corporate Governance Committee has primary oversight responsibility for our developing ESG efforts.
Environmental Stewardship
We are committed to contributing to a more resource-efficient economy and embedding climate change mitigation into our business strategy to help confront challenges such as energy management, fuel economy and efficiency, and materials sourcing. We aim to operate our business in a manner that minimizes the impact on natural resources and the environment. For decades, FCA has been a leader in introducing lighter weight freight car designs that require less energy to manufacture and offer higher capacity than the freight cars they replace. Our offering of “conversion” railcars, eliminates underutilized and older inefficient railcar assets by scraping the car body and reusing key steel and cast components. The scrap materials are used to support a more environmentally friendly steel manufacturing process and the reuse of key components including wheels and castings results in reduced energy consumption and greenhouse gas emissions. We believe railcars are a more environmentally-friendly way to fuel the North American supply chain. U.S. freight railroads are among the most fuel efficient modes to transport goods, moving 1 ton of freight 435 miles on a single gallon of fuel. Railroads produce far fewer greenhouse gas emissions than certain other modes of commercial transportation, such as trucks. We strive to responsibly support customers' products at each stage of the product lifecycle, including recycling the railcar through scrap and salvage at the end of its useful life.
Social Responsibility
We actively engage stakeholders across our environmental, health and safety initiatives to continually improve processes and performance as we operate our businesses with a goal of zero injuries and incidents. We strive to attract and retain a diverse and empowered workforce. Our priorities include fostering an inclusive and collaborative workplace, promoting opportunities for professional development, improving the well-being of our employees and other stakeholders, and contributing to the communities in which we operate.
Governance
Our goal is to promote the long-term interests of stakeholders, strengthen accountability, and inspire trust. We have focused our governance practices to promote best-in-class leadership, diversity, independence and stockholder-aligned incentive practices at the most senior levels. Our Board of Directors includes an independent Chairman and diverse and independent Board members who help ensure that our business strategies and programs, including our compensation program, are aligned with stakeholder interests. Our Board of Directors and senior management teams are also committed to the Company’s continued respect for human rights throughout all our operations.
GOVERNMENTAL REGULATION
Railcar Industry
The Federal Railroad Administration, or FRA, administers and enforces U.S. federal laws and regulations relating to railroad safety. These regulations govern equipment and safety compliance standards for freight railcars and other rail equipment used in interstate commerce. The AAR promulgates a wide variety of rules and regulations governing safety and design of equipment, relationships among railroads with respect to freight railcars in interchange and other matters. The AAR also certifies freight railcar manufacturers and component manufacturers that provide equipment for use on railroads in the United States as well as providers of railcar repair and maintenance services. New products must generally undergo AAR testing and approval processes. As a result of these regulations, we must maintain certifications with the AAR as a freight railcar manufacturer and products that we sell must meet AAR and FRA standards.
We are also subject to oversight in other jurisdictions by foreign regulatory agencies and to the extent that we expand our business internationally, we will increasingly be subject to the regulations of other non-U.S. jurisdictions.
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Environmental Matters
We are subject to comprehensive federal, state, local and international environmental laws and regulations relating to the release or discharge of materials into the environment, the management, use, processing, handling, storage, transport or disposal of hazardous materials, or otherwise relating to the protection of human health and the environment. These laws and regulations not only expose us to liability for our own negligent acts, but also may expose us to liability for the conduct of others or for our actions that were in compliance with all applicable laws at the time these actions were taken. In addition, these laws may require significant expenditures to achieve compliance, and are frequently modified or revised to impose new obligations. Civil and criminal fines and penalties may be imposed for non-compliance with these environmental laws and regulations. Our operations that involve hazardous materials also raise potential risks of liability under the common law.
Environmental operating permits are, or may be, required for our operations under these laws and regulations. These operating permits are subject to modification, renewal and revocation. We regularly monitor and review our operations, procedures and policies for compliance with these laws and regulations. Despite these compliance efforts, risk of environmental liability is inherent in the operation of our businesses, as it is with other companies engaged in similar businesses. We believe that our operations and facilities are in substantial compliance with applicable laws and regulations and that any noncompliance is not likely to have a material adverse effect on our operations or financial condition.
Future events, such as changes in or modified interpretations of existing laws and regulations or enforcement policies, or further investigation or evaluation of the potential health hazards of products or business activities, may give rise to additional compliance and other costs that could have a material adverse effect on our financial condition and operations. In addition, we have in the past conducted investigation and remediation activities at properties that we own to address historic contamination. To date, such costs have not been material. Although we believe we have satisfactorily addressed all known material contamination through our remediation activities, there can be no assurance that these activities have addressed all historic contamination. The discovery of historic contamination or the release of hazardous substances into the environment could require us in the future to incur investigative or remedial costs or other liabilities that could be material or that could interfere with the operation of our business.
In addition to environmental laws, the transportation of commodities by railcar raises potential risks in the event of a derailment or other accident. Generally, liability under existing law in the United States for a derailment or other accident depends on the negligence of the party, such as the railroad, the shipper or the manufacturer of the railcar or its components. However, for the shipment of certain hazardous commodities, strict liability concepts may apply.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
The following table presents information on our primary leased and owned operating properties as of December 31, 2021:
Use |
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Location |
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Size |
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Leased or Owned |
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Lease Expiration Date |
Corporate headquarters |
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Chicago, Illinois |
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8,800 square feet |
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Leased |
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November 30, 2031 |
Railcar assembly and component manufacturing |
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Castaños, Mexico |
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302,037 square feet on 40.7 acres of land |
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Leased |
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September 30, 2040 |
Administrative and parts warehouse |
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Johnstown, Pennsylvania |
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86,000 square feet |
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Leased |
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December 31, 2023 |
Sourcing office |
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Qingdao, China |
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1,485 square feet |
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Leased |
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October 31, 2023 |
Item 3. Legal Proceedings.
The information in response to this item is included in Note 17, Risks and Contingencies, to our Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
Item 4. Mine Safety Disclosures.
Not applicable
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Our common stock has been quoted on the Nasdaq Global Market under the symbol “RAIL” since April 6, 2005. As of March 22, 2022, there were approximately 63 holders of record of our common stock, which does not include persons whose shares of common stock are held by a bank, brokerage house or clearing agency.
Dividend Policy
The declaration and payment of future dividends will be at the discretion of our board of directors and will depend on, among other things, general economic and business conditions, our strategic plans, our financial results, contractual and legal restrictions on the payment of dividends by us and our subsidiaries and such other factors as our board of directors considers to be relevant. The ability of our board of directors to declare a dividend on our common stock is limited by Delaware law.
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
You should read the following discussion in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements. See “Forward-Looking Statements.”
We are a diversified manufacturer of railcars and railcar components. We design and manufacture a broad variety of railcar types for transportation of bulk commodities and containerized freight products primarily in North America, including open top hoppers, covered hoppers, and gondolas along with intermodal and non-intermodal flat cars. We and our predecessors have been manufacturing railcars since 1901. Over the last several years, we have introduced a number of new or redesigned railcar types as we continue to diversify our product portfolio.
During 2019, we entered into a joint venture arrangement with Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex”), a Mexican company with operations in both Mexico and the United States, to manufacture railcars in Castaños, Coahuila, Mexico (“Castaños”), in exchange for a 50% interest in the operation. Production of railcars at the facility began during the third quarter of 2020. On October 16, 2020, we acquired Fasemex’s 50% ownership in the joint venture in exchange for $0.2 million in cash and 2,257,234 shares of the Company's common stock. As of March 2021, we moved all of our production to the Castaños facility.
We ceased operations at the Roanoke Facility and vacated the facility as of March 31, 2020. On September 10, 2020, we announced our plan to permanently close the Shoals Facility in light of the cyclical industry downturn, which was magnified by the COVID-19 pandemic. The closure will reduce costs and align our manufacturing capacity with the current rail car market. We ceased production at the Shoals Facility in February 2021.
Restructuring and impairment charges of $6.5 million related to these actions were incurred during the year ended December 31, 2021. Restructuring and impairment charges for the year ended December 31, 2020 of $18.3 million primarily included a $17.5 million non-cash impairment charge recorded to reduce the right of use asset for the Shoals Facility lease to its fair value, non-cash impairment charges for property, plant and equipment of $9.5 million and employee severance and retention charges of $3.3 million which were offset by a $15.2 million lease termination gain for the Shoals Facility.
Railcar deliveries totaled 1,731 units, consisting of 1,354 new railcars and 377 rebuilt railcars, for the year ended December 31, 2021, compared to 751 railcars delivered in the year ended December 31, 2020, including 600 new railcars and 151 rebuilt railcars. Our total backlog of firm orders for railcars increased from 1,389 railcars as of December 31, 2020 to 2,323 railcars as of December 31, 2021.
Since first being reported in December 2019, the COVID-19 pandemic continues to present risks to our business. We are closely monitoring and managing the impacts of the COVID-19 pandemic on our business, as well as the impact on the global economy, and governmental reactions to the pandemic. The United States government and the Mexico Federal Ministry of Health and Federal Ministry of Communications and Transportation cited the railcar industry as critical to the United States and Mexico’s response efforts to the pandemic. The railcar industry is susceptible to a reduction in demand associated with the overall economic slowdown caused by the virus. In addition, public health organizations and national, state and local governments have implemented measures to combat the spread of COVID-19, including restrictions on movement such as quarantines, “stay-at-home” orders and social distancing ordinances and restricting or prohibiting some forms of business activity. Accordingly, our ability to predict industry demand and establish forecasts for sales, operating results and cash flows may be impacted. Furthermore, our plant operations and supply chain are potentially susceptible to large-scale outbreaks of the virus within our workforce or that of any of our suppliers.
Our management is focused on mitigating the impact of COVID-19 on our business and the risk to our employees. We have taken a number of precautionary measures including implementing detailed cleaning and disinfecting processes at our facilities, adhering to social distancing protocols, encouraging employees to work remotely, when possible, and scheduling vaccination clinics for our employees.
The Company recognized an increase in revenue compared to the corresponding prior year which we attribute primarily to improvement in the railcar market in the latter half of 2021.
FINANCIAL STATEMENT PRESENTATION
Revenues
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Our Manufacturing segment revenues are generated primarily from sales of the railcars that we manufacture. Our Manufacturing segment sales depend on industry demand for new railcars, which is driven by overall economic conditions and the demand for railcar transportation of various products, such as coal, steel products, minerals, cement, motor vehicles, forest products and agricultural commodities. Our Manufacturing segment sales are also affected by competitive market pressures that impact our market share, the prices for our railcars and by the types of railcars sold. Our Manufacturing segment revenues also include revenues from major railcar rebuilds and lease rental payments received with respect to railcars under operating leases. Our Corporate and other revenue sources include parts sales.
We generally recognize revenue at a point in time as we satisfy a performance obligation by transferring control over a product or service to a customer. Revenue is measured at the transaction price, which is based on the amount of consideration that we expect to receive in exchange for transferring the promised goods or services to the customer. Performance obligations are typically completed and revenue is recognized for the sale of new and rebuilt railcars when the finished railcar is transferred to a specified railroad connection point. In certain sales contracts, revenue is recognized when a certificate of acceptance has been issued by the customer and control has been transferred to the customer. At that time, the customer directs the use of, and obtains substantially all of the remaining benefits from the asset. When a railcar sales contract contains multiple performance obligations, we allocate the transaction price to the performance obligations based on the relative stand-alone selling price of the performance obligation determined at the inception of the contract based on an observable market price, expected cost plus margin or market price of similar items. The variable purchase patterns of our customers and the timing of completion, delivery and customer acceptance of railcars may cause our revenues and income from operations to vary substantially each quarter, which will result in significant fluctuations in our quarterly results.
Cost of sales
Our cost of sales includes the cost of raw materials such as aluminum and steel, as well as the cost of finished railcar components, such as castings, wheels, truck components and couplers, and other specialty components. Our cost of sales also includes labor, utilities, freight, manufacturing depreciation and other operating costs. A portion of the contracts covering our backlog at December 31, 2021 are fixed-rate contracts. Therefore, if material costs were to increase, we will likely not be able to pass on these increased costs to those customers. We manage material price increases by locking in prices where possible.
Operating loss
Operating loss represents revenues less cost of sales, loss on sale of railcars available for lease, impairment on leased railcars, gain on termination of postretirement benefit plan, selling, general and administrative expenses, and restructuring and impairment charges.
RESULTS OF OPERATIONS
Year Ended December 31, 2021 compared to Year Ended December 31, 2020
Revenues
Our consolidated revenues for the year ended December 31, 2021 were $203.1 million compared to $108.4 million for the year ended December 31, 2020. Manufacturing segment revenues for the year ended December 31, 2021 were $192.8 million compared to $98.7 million for the year ended December 31, 2020. The increase in Manufacturing segment revenues for 2021 compared to 2020 reflects an increase in the number of railcars delivered from 751 railcars in 2020 to 1,731 railcars in 2021, which was partially offset by a lower average selling price for new railcars. Corporate and Other revenues for the year ended December 31, 2021 were $10.2 million compared to $9.7 million for the year ended December 31, 2020 reflecting higher parts sales.
Gross Profit (Loss)
Our consolidated gross profit for the year ended December 31, 2021 was $11.5 million compared to a gross loss of $13.5 million for the year ended December 31, 2020. Our consolidated gross margin was 5.6% for the year ended December 31, 2021 compared to (12.5)% for the year ended December 31, 2020. Manufacturing segment gross profit for the year ended December 31, 2021 was $8.5 million compared to a gross loss of $15.2 million for the year ended December 31, 2020. The $25.0 million increase in consolidated gross profit and $23.8 million increase in Manufacturing segment gross profit reflect a favorable volume variance of $8.7 million a favorable price/mix variance of $15.1 million which primarily consisted of a reduction in overhead costs due to the restructuring of our manufacturing footprint.
Selling, General and Administrative Expenses
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Consolidated selling, general and administrative expenses for the year ended December 31, 2021 were $27.5 million compared to $29.8 million for the year ended December 31, 2020. Consolidated selling, general and administrative expenses for the year ended December 31, 2021 included decreases in bad debt expense of $1.8 million, salaries and wages of $1.3 million and executive retention bonuses of $1.1 million which were partially offset by increases in stock-based compensation of $1.9 million. Consolidated selling, general and administrative expenses for the year ended December 31, 2021 were 13.6% of revenue, compared to 27.5% of revenue for the year ended December 31, 2020. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2021 were $2.6 million compared to $7.1 million for the year ended December 31, 2020 and the decrease was primarily due to decreases in allocated costs of $3.6 million and bad debt expense of $1.7 million which were partially offset by increases in consulting costs. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2021 were 1.3% of revenue compared to 7.2% of revenue for the year ended December 31, 2020. Corporate and Other selling, general and administrative expenses were $24.9 million for the year ended December 31, 2021 compared to $22.8 million for the year ended December 31, 2020. Corporate and Other selling, general and administrative expenses for the year ended December 31, 2021 included increases in stock-based compensation expenses of $1.9 million and allocated costs of $4.0 million, which were partially offset by decreases in consulting costs of $1.2 million and executive retention bonuses of $1.1 million. Corporate and Other selling, general and administrative expenses for the year ended December 31, 2021 also included decreases in salaries and wages of $0.9 million and medical insurance costs of $0.7 million due to lower headcount.
Impairment on Leased Railcars
During the year ended December 31, 2021, we recorded a pre-tax non-cash impairment charge of $0.2 million related to our small cube covered hopper railcars due to renegotiation of certain leases and our settlement agreement with the lender for our leasing companies. During the year ended December 31, 2020, we recorded a pre-tax non-cash impairment charge of $19.0 million related to our small cube covered hopper railcars of which $17.0 million related to the railcars which we own and $2.0 million related to the right-of-use asset associated with our leased railcar portfolio See Note 7 – Leased Railcars to our consolidated financial statements.
Restructuring and Impairment Charges
Restructuring and impairment charges for the year ended December 31, 2021 were $6.5 million compared to $18.3 million for the year ended December 31, 2020. On September 10, 2020, we announced our plan to permanently close our Shoals facility in light of the cyclical industry downturn, which had been magnified by the COVID-19 pandemic. On October 8, 2020, we reached an agreement with the Shoals facility owner and landlord to shorten the Shoals lease term by amending the expiration date to the end of February 2021. In addition, the landlord agreed to waive the base rent payable under the original lease for the months of October 2020 through February 2021. Property, plant and equipment with an estimated fair value of $10.1 million was sold or transferred to the Shoals landlord during 2021 as consideration for the landlord’s entry into the lease amendment and the aforementioned rent waiver. Restructuring and impairment charges of $6.5 million for the year ended December 31, 2021 related to relocating some of the facility’s equipment to Castaños as well as shutting down the Shoals facility.
Restructuring and impairment charges of $18.3 million for the year ended December 31, 2020 primarily included a $17.5 million non-cash impairment charge recorded to reduce the right of use asset for the Shoals Facility lease to its fair value, non-cash impairment charges for property, plant and equipment of $9.5 million and employee severance and retention charges of $3.3 million which were offset by a $15.2 million lease termination gain for the Shoals Facility.
Operating Loss
Our consolidated operating loss for the year ended December 31, 2021 was $22.8 million compared to $80.6 million for the year ended December 31, 2020. Operating loss for the Manufacturing segment was $0.8 million for the year ended December 31, 2021 compared to $59.0 million for the year ended December 31, 2020. Corporate and Other operating loss was $22.0 million for the year ended December 31, 2021 compared to $21.6 million for the year ended December 31, 2020.
Interest Expense
Interest expense was $13.3 million for the year ended December 31, 2021 compared to $2.2 million for the year ended December 31, 2020 reflecting increased borrowings on our revolving line of credit, increased costs related to eligible collateral, an additional term loan advance during 2021 and an increase in amortization of deferred financing costs.
Loss on Change in Fair Market Value of Warrant Liability
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Loss on change in fair market value of warrant liability was $14.9 million for the year ended December 31, 2021 compared to $3.7 million for the year ended December 31, 2020. The increase in the loss is primarily driven by appreciation in the Company’s stock price during the year ended December 31, 2021 which is the primary driver in the valuation of the warrants.
Gain on Extinguishment of Debt
Gain on extinguishment of debt of $10.1 million for the year ended December 31, 2021 primarily represents PPP Loan forgiveness of all outstanding PPP loan principal and accrued interest.
Income Taxes
Our income tax provision was $1.4 million for the year ended December 31, 2021 compared to $0.2 million for the year ended December 31, 2020. Our income tax provision for the year ended December 31, 2021 reflects pre-tax income for our Mexico subsidiary. Our effective tax rate for the year ended December 31, 2021was (3.5)% compared to (0.4)% for the year ended December 31, 2020.
Net Loss
As a result of the foregoing, our net loss was $41.4 million for the year ended December 31, 2021, compared to a net loss of $84.4 million for the year ended December 31, 2020. For the year ended December 31, 2021 our net loss per share was $2.00 compared to net loss per share of $6.29 for the year ended December 31, 2020.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are our cash and cash equivalent balances on hand and our credit and debt facilities outlined below.
The Company manufactures and provides essential products and services to a variety of critical infrastructure customers, and it intends to continue providing its products and services to these customers. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. and Mexico governments, state and local government officials, and other international governments to prevent disease spread, all of which are uncertain and cannot be predicted. Accordingly, our ability to predict industry demand and establish forecasts for sales, operating results and cash flows may be impacted.
Term Loan Credit Agreement
On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender committed to the extension of a term loan credit facility in the principal amount of $40.0 million, consisting of a single term loan to be funded upon the satisfaction of certain conditions precedent set forth in the Term Loan Credit Agreement, including stockholder approval of the issuance of the common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). FreightCar America, Inc. stockholders approved the issuance of the common stock underlying the Warrant at a special stockholders’ meeting on November 24, 2020. The $40.0 million term loan closed and was funded on November 24, 2020. The Company incurred $2.9 million in deferred financing costs related to the Term Loan Agreement. The deferred financing costs are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Term Loan Agreement.
The Term Loan Credit Agreement has a term ending five years following the Closing Date. The term loan outstanding under the Term Loan Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of December 31, 2021, the interest rate on the original advance of $40.0 million under the Term Loan Credit Agreement was 14.0%.
The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, minimum liquidity, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement.
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On May 14, 2021, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”) entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Second Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with CO Finance LVS VI LLC, as lender (the “Lender”), an affiliate of a corporate credit fund, and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”), pursuant to which the principal amount of the term loan credit facility was increased by $16.0 million to a total of $56.0 million, with such additional $16.0 million (the “Additional Loan”) to be funded upon the satisfaction of certain conditions precedent set forth in the Second Amendment. The Additional Loan closed and was funded on May 17, 2021. The Company incurred $0.5 million in deferred financing costs related to the Second Amendment which are presented as a reduction of the long-term debt balance and amortized on a straight-line basis to interest expense over the term of the Second Amendment.
The Additional Loan bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of December 31, 2021, the interest rate on the Additional Loan was 14.0%.
Pursuant to the Second Amendment, in the event that the Additional Loan is not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender a warrant (the “March 2022 Warrant”) to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). The March 2022 Warrant, if issued, will have an exercise price of $0.01 and a term of ten years.
Pursuant to the Second Amendment, the Company was required to among other things, i) obtain a term sheet for additional financing of no less than $15.0 million by July 31, 2021 and ii) file a registration statement on Form S-3 registering Company securities, including the shares of Company common stock issuable upon exercise of the March 2022 Warrant, by no later than August 31, 2021. The Company has met each of the aforementioned obligations. The Form S-3 registering Company securities, including the shares of Company stock issuable upon exercise of the March 2022 Warrant was filed with the Securities and Exchange Commission on August 27, 2021 and became effective on September 9, 2021.
On July 30, 2021, the Loan Parties entered into an Amendment No. 3 to Credit Agreement (the “Third Amendment” and together with the Credit Agreement, as amended, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which, among other things, Lender obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of $25,000 for the account of the Company and for the benefit of Siena Lending Group LLC (the “Revolving Loan Lender”).
Pursuant to the Third Amendment, on July 30, 2021, the Company, the Lender, Alter Domus (US) LLC, as calculation agent, and the Agent entered into a reimbursement agreement (the “Reimbursement Agreement”), pursuant to which, among other things, the Company agreed to reimburse the Agent, for the account of the Lender, in the event of any drawings under the Third Amendment Letter of Credit by the Revolving Loan Lender.
On December 30, 2021, the Loan Parties entered into an Amendment No. 4 to Credit Agreement (the “Fourth Amendment” and together with the Credit Agreement, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $15.0 million to a total of $71.0 million, with such additional $15.0 million (the “Delayed Draw Loan”) to be funded, at the Borrower’s option, upon the satisfaction of certain conditions precedent set forth in the Fourth Amendment. The Borrower has the option to draw on the Delayed Draw Loan through January 31, 2023 and may choose not to do so.
The Delayed Draw Loan, if funded, will bear interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement.
Pursuant to the Reimbursement Agreement, the Company shall make certain other payments as set forth below, so long as the Third Amendment Letter of Credit remains outstanding:
Letter of Credit Fee
The Company shall pay to Agent, for the account of Lender, an annual fee of $0.5 million, which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter.
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Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender (or, so long as Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if Lender has timely notified the Company in writing of such designation) a fee (the “Equity Fee”) payable in shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”). The Equity Fee shall be calculated by dividing $1.0 million by the volume weighted average price of the Company’s Common Stock on the Nasdaq Capital Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company can opt to pay the Equity Fee in cash, in the amount of $1.0 million, if, and only if, (x) the Company has already issued as Equity Fees a number of shares of its Common Stock equal to (I) 5.0% multiplied by (II) the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock, and (y) the Company has at least $15.0 million of Repayment Liquidity after giving effect to such payment. The term Repayment Liquidity, as defined in the Term Loan Credit Agreement, means (a) all unrestricted and unencumbered cash and cash equivalents of the Loan Parties, plus (b) the undrawn and available portion of the commitments under that certain Amended and Restated Loan and Security Agreement by and among the Loan Parties and the Revolving Loan Lender (as described below), minus (c) all accounts payable of the Loan Parties that are more than 30 days past due.
The Equity Fee shall no longer be paid once the Company has issued to Lender and/or OC III LVS XII LP Equity Fees in an amount of Common Stock equal to 9.99% multiplied by the total number of shares of Common Stock outstanding as of July 30, 2021, rounded down to the nearest whole share of Common Stock (the “Maximum Equity”).
The issuance of each Equity Fee under the Reimbursement Agreement will be made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act for offers and sales of securities that do not involve a “public offering.”
Cash Fee
The Company shall pay to the Agent, for the account of the Lender (or, so long as the Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if the Lender has timely notified the Company in writing of such designation) a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $1.0 million, provided that, in the quarter in which the Maximum Equity is issued, such fee shall be equitably reduced by the value of any Equity Fee issued by the Company that quarter.
Warrant
In connection with the entry into the Term Loan Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020 (the “Warrant Acquisition Agreement”), by and between the Company and the Lender to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 23% of the outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance). The Warrant is exercisable for a term of ten years from the date of the issuance of the Warrant. The Warrant was issued on November 24, 2020 after the Company received stockholder approval of the issuance of the common stock issuable upon exercise of the Warrant by the Warrantholder. In connection with the issuance of the Warrant, the Company and the Lender entered into a registration rights agreement (the “Registration Rights Agreement”) as of the Closing Date of November 24, 2020. As of December 31, 2021 and December 31, 2020, the Warrant was exercisable for an aggregate of 6,098,217 and 5,307,539 shares, respectively, of common stock of the Company with a per share exercise price of $0.01. The Company determined that the Warrant should be accounted for as a derivative instrument and classified as a liability on its Consolidated Balance Sheets primarily due to the instrument obligating the Company to settle the Warrant in a variable number of shares of common stock. The Warrant was recorded at fair value and is treated as a discount on the term loan. The discount on the associated debt is amortized over the life of the Term Loan Credit Agreement and included in interest expense.
Pursuant to the Second Amendment, in the event that the Additional Loan is not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender the March 2022 Warrant to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the March 2022 Warrant is exercised (after giving effect to such issuance). The March 2022 Warrant, if issued, will have an exercise price of $0.01 and a term of ten years. The Company believes that it is probable that the March 2022 Warrant will be issued and as such has recorded an additional warrant liability of $7.4 million during the third quarter of 2021.
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021 (the “Warrant Acquisition Agreement”), the Company issued to the Lender a warrant (the “December 2021 Warrant”) to purchase a number of shares of the
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Company’s common stock, par value $0.01 per share, equal to 5% of the Company’s outstanding common stock on a fully-diluted basis at the time the December 2021 Warrant is exercised (after giving effect to such issuance). The December 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of December 31, 2021, the December 2021 Warrant was exercisable for an aggregate of 1,325,699 shares of common stock of the Company with a per share exercise price of $0.01
In addition, to the extent the Delayed Draw Loan is funded, the Company has agreed to issue to the Lender a warrant (the “3% Additional Warrant”) to purchase up to a number of shares of the Company’s common stock, par value $0.01 per share, equal to 3% of the Company’s outstanding common stock on a fully-diluted basis at the time the 3% Additional Warrant is exercised (after giving effect to such issuance). The 3% Additional Warrant, if issued, will have an exercise price of $0.01 and a term of ten years.
Siena Loan and Security Agreement
On October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20.0 million, (the "Maximum Revolving Facility Amount") consisting of revolving loans (the Revolving Loans").
The Siena Loan Agreement replaced the Company’s prior revolving credit facility under the Credit and Security Agreement (the “BMO Credit Agreement”) dated as of April 12, 2019, among the Company and certain of its subsidiaries, as borrowers and guarantors, and BMO Harris Bank N.A., as lender, as amended from time to time, which was terminated effective October 8, 2020 and otherwise would have matured on April 12, 2024.
The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $20.0 million, subject to borrowing base requirements set forth in the Siena Loan Agreement, which generally limited availability under the revolving credit facility to (a) 85% of the value of eligible accounts and (b) up to the lesser of (i) 50% of the lower of cost or market value of eligible inventory and (ii) 85% of the net orderly liquidation value of eligible inventory, and as reduced by reserves established by Siena from time to time in accordance with the Siena Loan Agreement.
On July 30, 2021, the Loan Parties and Siena entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement in its entirety.
Pursuant to the Amended and Restated Loan and Security Agreement, the Maximum Revolving Facility Amount was increased to $25.0 million, provided, however, that the outstanding balance of all Revolving Loans may not exceed the lesser of (A) the Maximum Revolving Facility Amount minus the Availability Block and (B) an amount equal to the issued and undrawn portion of the Third Amendment Letter of Credit (as defined above) minus the Availability Block. The term “Availability Block”, as defined in the Amended and Restated Loan and Security Agreement, means 3.0% of the issued and undrawn amount under the Third Amendment Letter of Credit.
The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of 2% per annum in excess of the Base Rate (as defined in the Siena Loan Agreement). As of December 31, 2021, the interest rate on outstanding debt under the Amended and Restated Loan and Security Agreement was 5.26%.
The Amended and Restated Loan and Security Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Amended and Restated Loan and Security Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Amended and Restated Loan and Security Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Amended and Restated Loan and Security Agreement.
As of December 31, 2021, the Company had $24.0 million in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $0.1 million. As of December 31, 2020, the Company had $6.9 million in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $9.7 million. The Company incurred $1.1 million in deferred financing costs related to the Siena Loan Agreement and incurred $1.0 million in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement. The deferred financing costs are presented as an asset and amortized to interest expense on a straight-line basis over the term of the Siena Loan Agreement.
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On February 23, 2022 we entered into an amendment to the Siena Loan Agreement which, among other things, increased the Maximum Revolving Facility Amount to $35.0 million. See Note 23 Subsequent Events.
SBA Paycheck Protection Program Loan
In March 2020, Congress passed the Paycheck Protection Program (“PPP”), authorizing loans to small businesses for use in paying employees that they continue to employ throughout the COVID=19 pandemic and for rent, utilities and interest on mortgages. In June 2020, Congress enacted the Paycheck Protection Program Flexibility Act (“PPPFA”), amending the PPP.
Loans obtained through the PPP, as amended, are eligible to be forgiven as long as the proceeds are used for qualifying purposes and certain other conditions are met. On April 16, 2020, the Company received a loan from BMO Harris Bank N.A. in the amount of $10.0 million (the “PPP Loan”). Since the entire PPP Loan was used for payroll, utilities and interest, management anticipated that the majority of the PPP Loan would be forgiven. The Company filed an application for PPP Loan forgiveness on October 28, 2020 along with a request for extension of the term of the PPP Loan to five years. On July 14, 2021, the Company received a notification from BMO Harris Bank N.A. that the Small Business Administration approved the Company’s PPP Loan forgiveness application for the entire $10.0 million balance, together with interest accrued thereon, of the PPP Loan and that the remaining balance of the PPP Loan was zero. The Company recognized a gain on extinguishment of debt of $10.1 million related to PPP Loan forgiveness during 2021.
M&T Credit Agreement
On April 16, 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of the Company (“Freightcar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”). Pursuant to the M&T Credit Agreement, M&T extended a revolving credit facility to Freightcar Leasing Borrower in an aggregate amount of up to $40.0 million for the purpose of financing railcars which will be leased to third parties.
On April 16, 2019, Freightcar Leasing Borrower also entered into a Security Agreement with M&T (the “M&T Security Agreement”) pursuant to which it granted a security interest in all of its assets to M&T to secure its obligations under the M&T Credit Agreement.
On April 16, 2019, FreightCar America Leasing, LLC, a wholly-owned subsidiary of the Company and parent of Freightcar Leasing Borrower (“Freightcar Leasing Guarantor”), entered into (i) a Guaranty Agreement with M&T (the “M&T Guaranty Agreement”) pursuant to which Freightcar Leasing Guarantor guarantees the repayment and performance of certain obligations of Freightcar Leasing Borrower and (ii) a Pledge Agreement with M&T (the “M&T Pledge Agreement”) pursuant to which Freightcar Leasing Guarantor pledged all of the equity of Freightcar Leasing Borrower held by Freightcar Leasing Guarantor.
The loans under the M&T Credit Agreement are non-recourse to the assets of the Company or its subsidiaries other than the assets of Freightcar Leasing Borrower and Freightcar Leasing Guarantor.
The M&T Credit Agreement had a term ending on April 16, 2021 (the “Term End”). Loans outstanding thereunder will bear interest, accrued daily, at the Adjusted LIBOR Rate (as defined in the M&T Credit Agreement) or the Adjusted Base Rate (as defined in the M&T Credit Agreement). The M&T Credit Agreement has both affirmative and negative covenants, including, without limitation, maintaining an Interest Coverage Ratio (as defined in the M&T Credit Agreement) of not less than 1.25:1.00, measured quarterly, and limitations on indebtedness, loans, liens and investments. The M&T Credit Agreement also provides for customary events of default.
On August 7, 2020, FreightCar Leasing Borrower received notice (the “First Notice”) from M&T that, based on an appraisal (the “Appraisal”) conducted by a third party at the request of M&T with respect to the railcars in FreightCar Leasing Borrower’s Borrowing Base (as defined in the M&T Credit Agreement) under the M&T Credit Agreement, the unpaid principal balance under the M&T Credit Agreement exceeded the availability under the M&T Credit Agreement as of the date of the Appraisal by $5.1 million (the “Payment Demand Amount”). In the First Notice, M&T Bank: (a) asserted that an Event of Default under the M&T Credit Agreement has occurred because FreightCar Leasing Borrower did not pay the Payment Demand Amount to M&T within five days of the asserted change in availability; (b) demanded payment of the amount within five days of the date of the First Notice; and (c) terminated the commitment to advance additional loans under the M&T Credit Agreement.
On December 18, 2020, FreightCar Leasing Borrower received a revised notice (the “Second Notice,” and together with the First Notice, the “Notices”) from M&T asserting that: (a) as a result of the continuing Event of Default that M&T alleged to have occurred under the M&T Credit Agreement, M&T has declared a default and accelerated and demands immediate payment by FreightCar Leasing Borrower of $10.1 million (the “Outstanding Amount”); (b) FreightCar Leasing Borrower is liable for all interest that continues to accrue on the Outstanding Amount; and (c) FreightCar Leasing Borrower is liable for all attorneys’ fees, costs and expenses as set forth in the M&T Credit Agreement.
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On April 20, 2021, FreightCar Leasing Borrower received a notice from M&T that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not be paid by the Term End.
On December 28, 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with the FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC, a Delaware limited liability company (“FCA Management”), and M&T, entered into a Forbearance and Settlement Agreement (the “Forbearance Agreement”) with respect to the M&T Credit Agreement and its related Credit Documents (as defined in the M&T Credit Agreement), as well as certain intercompany services agreements related thereto.
Pursuant to the Forbearance Agreement, the Obligors will continue to perform and comply with all of their performance obligations (as opposed to payment obligations) under certain provisions of the M&T Credit Agreement (primarily related to information obligations and the preservation of the collateral pledged by the Borrower to M&T pursuant to the M&T Security Agreement, between the Borrower and M&T (the “Collateral”)) and all the provisions of the M&T Security Agreement. During the period from Execution Date until the termination of the Forbearance Agreement, M&T may not take any action against the Obligors or exercise or enforce any rights or remedies provided for in the Credit Documents or otherwise available to it. The M&T Credit Agreement is not being amended.
On December 1, 2023, or sooner if requested by M&T (the “Turnover Date”), the Borrower shall execute and deliver to M&T documents required to deliver and assign to M&T all the leased railcars and related leases serving as Collateral for the M&T Credit Agreement.
Upon the Turnover Date and the Obligors’ performance of their respective obligations under the Forbearance Agreement, including the delivery of certain Collateral to M&T upon the Turnover Date, all Obligations (as defined in the M&T Credit Agreement) shall be deemed satisfied in full, M&T shall no longer have any further claims against the Obligors under the M&T Credit Documents and the Credit Documents shall automatically terminate and be of no further force or effect except for the provisions thereof that expressly survive termination.
The Forbearance Agreement contains customary releases at execution for all affiliates of the Company (other than the Obligors) and agreements to deliver final releases with respect to the Obligors upon their performance under the Forbearance Agreement. The Company also agreed to turn over to M&T on the Effective Date certain rents in the amount of $0.7 million that it had previously collected as servicing agent for the Borrower, and to continue to provide such services through the Turnover Date without a service fee, and after the Turnover Date through the return of the railcars serving as Collateral, for a service fee.
As of December 31, 2021 and December 31, 2020, FreightCar Leasing Borrower had $7.9 million and $10.1 million, respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $6.6 million and $7.0 million, respectively. As of December 31, 2021, the interest rate on outstanding debt under the M&T Credit Agreement was 4.25%.
Additional Liquidity Factors
Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $5.0 million and $10.6 million as of December 31, 2021 and 2020, respectively. Restricted deposits of $0.3 million and $3.2 million as of December 31, 2021 and 2020, respectively, relate to a customer deposit for purchase of railcars. Restricted deposits of $4.7 million and $7.4 million as of December 31, 2021 and 2020, respectively, are used to collateralize standby letters of credit with respect to performance guarantees. The standby letters of credit outstanding as of December 31, 2021 are scheduled to expire at various dates through December 10, 2022.
Based on our current level of operations and known changes in planned volume based on our backlog, we believe that our cash balances will be sufficient to meet our expected liquidity needs for at least the next twelve months. Our long-term liquidity is contingent upon future operating performance and our ability to continue to meet financial covenants under our revolving credit facilities, our Term Loan Credit Agreement and any other indebtedness and the availability of additional financing if needed. We may also require additional capital in the future to fund working capital as demand for railcars increases, payments for contractual obligations, organic growth opportunities, including new plant and equipment and development of railcars, joint ventures, international expansion and acquisitions, and these capital requirements could be substantial. Additionally, our Value Added Tax ("VAT") receivable has grown over the past year and has become a significant part of the Company’s working capital structure. We continue to work through the return process and have made progress during 2021 in recovering VAT refunds.
Based upon our operating performance and capital requirements, we may, from time to time, be required to raise additional funds through additional offerings of our common stock and through long-term borrowings such as the $40.0 million term loan under the Term Loan Credit Agreement. There can be no assurance that long-term debt, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve
19
restrictive covenants. Our failure to raise capital if and when needed could have a material adverse effect on our results of operations and financial condition.
Benefits under our pension plan are now frozen and will not be impacted by increases due to future service and compensation increases. The most significant assumptions used in determining our net periodic benefit costs are the discount rate used on our pension obligations and expected return on pension plan assets. As of December 31, 2021, our benefit obligation under our defined benefit pension plan was $50.9 million, which exceeded the fair value of plan assets by $0.04 million. We made no contributions to our defined benefit pension plan during 2021 and are not required to make any contributions to our defined benefit pension plan in 2022. Funding levels will be affected by future contributions, investment returns on plan assets, growth in plan liabilities and interest rates.
Cash Flows
The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the years ended December 31, 2021 and 2020:
|
|
2021 |
|
|
2020 |
|
||
|
|
(In thousands) |
|
|||||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(55,397 |
) |
|
$ |
(58,905 |
) |
Investing activities |
|
|
(1,675 |
) |
|
|
(6,092 |
) |
Financing activities |
|
|
29,265 |
|
|
|
52,787 |
|
Total |
|
$ |
(27,807 |
) |
|
$ |
(12,210 |
) |
Operating Activities. Our net cash provided by or used in operating activities reflects net loss adjusted for non-cash charges and changes in operating assets and liabilities. Cash flows from operating activities are affected by several factors, including fluctuations in business volume, contract terms for billings and collections, the timing of collections on our contract receivables, processing of bi-weekly payroll and associated taxes, payments to our suppliers and other operating activities. As some of our customers accept delivery of new railcars in train-set quantities, variations in our sales lead to significant fluctuations in our operating profits and cash from operating activities. We do not usually experience business credit issues, although a payment may be delayed pending completion of closing documentation.
Our net cash used in operating activities for the year ended December 31, 2021 was $55.4 million compared to $58.9 million for the year ended December 31, 2020. Our net cash used in operating activities for the year ended December 31, 2021 reflects changes in working capital, including increases in VAT receivable of $24.7 million due to production increases and delays in receiving VAT refunds and inventory of $12.4 million to meet current production needs for the start-up of several new railcar orders. Our net cash used in operating activities for the year ended December 31, 2020 reflects changes in working capital, including increases in inventory of $17.9 million and increases in accounts receivable of $6.9 million. Our net cash used in operating activities for the year ended December 31, 2020 includes non-cash restructuring and impairment charges of $11.7 million related to the closure of the Shoals Facility and the Roanoke Facility and a non-cash impairment charge of $19.0 million for leased railcars.
Investing Activities. Net cash used in investing activities for the year ended December 31, 2021 was $1.7 million and primarily represented capital expenditures of $2.3 million which were partially offset by the $0.2 million maturity of restricted certificates of deposit and $0.4 million proceeds from sale of property, plant and equipment. Net cash used in investing activities for the year ended December 31, 2020 was $6.1 million and primarily represented capital expenditures of $9.8 million which were partially offset by the $3.6 million maturity of restricted certificates of deposit (net of purchases).
Financing Activities. Net cash provided by financing activities for the year ended December 31, 2021 was $29.3 million and included proceeds from issuance of long-term debt of $16.0 million and net borrowings on revolving line of credit of $15.0 million which were partially offset by deferred financing costs of $1.7 million. Net cash provided by financing activities for the year ended December 31, 2020 was $52.8 million and primarily represented proceeds from issuance of long-term debt of $50.0 million and net borrowings on revolving line of credit of $6.8 million which were partially offset by deferred financing costs of $3.8 million.
Capital Expenditures
Our capital expenditures were $2.3 million for the year ended December 31, 2021 compared to $9.8 million for the year ended December 31, 2020 and primarily related to our new Castaños, Mexico facility. We anticipate capital expenditures during 2022 to be approximately $7.0 million to $8.0 million.
20
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Significant estimates include, useful lives of long-lived assets, warranty accruals, pension benefit assumptions, evaluation of property, plant and equipment for impairment and the valuation of deferred taxes. Actual results could differ from those estimates.
Our critical accounting policies include the following:
Impairment of long-lived assets and right-of-use assets
We monitor the carrying value of long-lived assets and right-of-use assets for potential impairment. The carrying value of long-lived assets and right-of-use assets is considered impaired when the asset's carrying value is not recoverable through undiscounted future cash flows and the asset's carrying value exceeds its fair value. For assets to be held or used, we group a long-lived asset or assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment loss for an asset group reduces only the carrying amounts of a long-lived asset or assets of the group being evaluated. Our estimates of future cash flows used to test the recoverability of a long-lived asset group include only the future cash flows that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset group. Our future cash flow estimates exclude interest charges.
We test long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These changes in circumstances may include a significant decrease in the market price of an asset group, a significant adverse change in the manner in or extent to which an asset group is used, a current year operating loss combined with a history of operating losses or a current expectation that, more likely than not, a long-lived asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. If indicators of impairment are present, we then determine if the carrying value of the asset group is recoverable by comparing the carrying value of the asset group to total undiscounted future cash flows of the asset group. If the carrying value of the asset group is not recoverable, an impairment loss is measured based on the excess of the carrying amount of asset group over the estimated fair value of the asset group.
During the fourth quarter of 2021, we performed a cash flow recoverability test of our small cube covered hopper railcars because we believed our renegotiation of certain leases and our settlement agreement with the lender for our leasing companies constituted an impairment triggering event. This analysis indicated that the carrying value exceeded the estimated undiscounted cash flows, and therefore, we were required to measure the fair value of our fleet of small cube covered hopper railcars and determine the amount of an impairment loss, if any. The results of our analysis indicated an estimated fair value of the asset group of approximately $6.6 million, in comparison to the asset group's carrying amount of $6.8 million. As a result of this analysis we recorded a pre-tax non-cash impairment charge of $0.2 million related to our small cube covered hopper railcars during the fourth quarter of 2021.
During the fourth quarter of 2020, the oil and gas proppants (or “frac sand”) industry continued to experience economic pressure created by low oil prices, reduced fracking activity, and the ongoing economic impact of COVID-19. In particular, small cube covered hopper railcars are primarily used in North America to serve the frac sand industry. Given the decline in global oil prices, reduced fracking activity, and pressure on the oil and gas industry to maintain a low-cost structure, fracking operations, have increasingly shifted away from the use of Northern White sand and towards the use of in-basin sand, which can be sourced locally rather than transporting by rail. Consequently, the cash flows and profitability of the frac sand industry continued to decline during the fourth quarter. As a result, certain small cube covered hopper customers requested rent relief that were renegotiated.
We believe that the events and circumstances that arose during the fourth quarter of 2020 constituted an impairment triggering event related to the small cube covered hopper car type in our leased railcar portfolio.
We performed a cash flow recoverability test of our small cube covered hopper railcars and compared the undiscounted cash flows to the carrying value of the assets. This analysis indicated that the carrying value exceeded the estimated undiscounted cash flows, and therefore, we were required to measure the fair value of our fleet of small cube covered hopper railcars and determine the amount of an impairment loss, if any.
The fair value of the asset group was determined using both a market and cost approach, which we believe most accurately reflects a market participant's viewpoint in valuing these railcars. The results of our analysis indicated an estimated fair value of the asset group of approximately $13.2 million, in comparison to the asset group's carrying amount of $30.1 million. As a result, during the fourth
21
quarter of 2020, we recorded a pre-tax non-cash impairment charge of $17.0 related to our small cube covered hopper railcars. Additionally, we evaluated the right-of-use asset associated with our leased railcar portfolio of small cube covered hopper railcars and determined that these assets were impaired based on consideration of an expected decline in future cash flows over the remaining lease term, which resulted in an additional pre-tax non-cash impairment charge of approximately $2.0 million. The aggregate impairment charge of $19.0 million is reflected in the impairment of leased railcars line of our Consolidated Statements of Operations for the year ended December 31, 2020.
Significant management judgment was used to determine the key assumptions utilized in our impairment analysis, the substantial majority of which represent unobservable (Level 3) inputs. These assumptions include, but are not limited to: estimates regarding the remaining useful life over which the railcars are expected to generate cash flows; average lease rates; and discount rate. Management selected these estimates and assumptions based on our railcar industry expertise. Although we believe the estimates utilized in our analysis were reasonable, any change in these estimates could materially affect the amount of the impairment charge.
Due to the closure of our Shoals Facility, we tested the long-lived assets and right-of-use assets at our Shoals Facility for impairment during the third quarter of 2020. In connection with the announcement, we estimated the fair value of the related asset group because it determined that an impairment trigger had occurred due to the shortened asset recoverability timeframe. Non-cash restructuring and impairment charges totaling $26.6 million were allocated to the asset group and recognized during 2020. These non-cash charges for 2020 related to the right of use (“ROU”) asset were $17.5 million and non-cash impairment charges for property, plant and equipment at the Shoals Facility were $9.0 million. In connection with the impairment the Company reassessed the estimated useful lives of equipment that will continue to be used by the Company (primarily in Castaños) and are depreciating it over their useful lives in accordance with the Company’s policies.
The fair value of the ROU asset for our Shoals Facility was estimated using an income valuation approach known as the “sublease” discounted cash flow (“DCF”) model in which the cash flows were based on current market-based lease pricing over the remaining term of the Shoals Facility lease. The cash flows were discounted to present value using a market-derived rate of return of 6.50%.
The Shoals Facility personal property was abandoned in place at the facility, sold, transferred to another FCA facility (primarily Castaños), or scrapped. The assets abandoned in place represent property, plant and equipment to be transferred to the Shoals landlord as consideration for the landlord’s entry into the lease amendment. The premise of fair value differs for each type of asset disposition. The fair value of the personal property assets to be abandoned in place at the Shoals Facility were analyzed under a fair value in continued use (“In-Use”) premise. This premise assumes that the assets will continue to be used in the ongoing operation of the facility and therefore includes installation, other assembly, freight, engineering, electrical set-up and process piping costs that would be required to make the assets fully operational. Assets to be sold or transferred were analyzed under the In-Exchange (“In-Exchange”) premise of fair value. Under this premise, we considered the value of the assets assuming an orderly sale on a stand-alone basis. It is assumed the assets will be sold on an as-is, where-is basis and alternative uses for the assets from the originally designed purpose are considered. Any remaining personal property assets that will neither be abandoned in place nor sold/transferred were considered unmarketable and were valued under a scrap value premise.
For both the aforementioned In-Use and In Exchange premises, in instances where an asset was found to have no active secondary market, we utilized the cost approach. For assets in which there was an active secondary market where recent comparable sales exist, the market approach was utilized. In instances where market data was available but deemed too incomplete to apply a complete market approach, we used the market relationship data available to influence, confirm, or adjust the cost approach results.
Pensions and postretirement benefits
We historically provided pension and retiree welfare benefits to certain salaried and hourly employees upon their retirement. Benefits under our pension plan are now frozen and will not be impacted by increases due to future service. The most significant assumptions used in determining our net periodic benefit costs are the discount rate used on our pension and postretirement welfare obligations and expected return on pension plan assets.
In 2021, we assumed that the expected long-term rate of return on pension plan assets would be 5.00%. As permitted under ASC 715, the assumed long-term rate of return on assets is applied to a calculated value of plan assets, which recognizes changes in the fair value of plan assets in a systematic manner over five years. This produces the expected return on plan assets that is included in our net periodic benefit cost. The difference between this expected return and the actual return on plan assets is deferred. The net deferral of past asset gains (losses) affects the calculated value of plan assets and, ultimately, future net periodic benefit cost. We review the expected return on plan assets annually and would revise it if conditions should warrant. A change of one hundred basis points in the expected long-term rate of return on plan assets would have the following effect for the year ended December 31, 2021:
22
|
|
|
|
|
|
|
1% Increase |
|
1% Decrease |
|
|
(in thousands) |
||
Effect on net periodic benefit cost |
|
$ (467) |
|
$ 467 |
At the end of each year, we determine the discount rate to be used to calculate the present value of our pension plan liability. The discount rate is an estimate of the current interest rate at which our pension liabilities could be effectively settled at the end of the year. In estimating this rate, we look to rates of return on high-quality, fixed-income investments that receive one of the two highest ratings given by a recognized ratings agency. At December 31, 2021, we determined this rate on our pension plan to be 2.84% an increase of 0.36% from the 2.48% rate used at December 31, 2020. A change of one hundred basis points in the discount rate would have the following effect:
|
|
|
|
|
|
|
1% Increase |
|
1% Decrease |
|
|
(in thousands) |
||
Effect on net periodic benefit cost |
|
$ 102 |
|
$ (150) |
In October 2021, the Society of Actuaries issued base mortality table Pri-2012 which is split by retiree and contingent survivor tables and includes mortality improvement assumptions for U.S. plans, scale (MP-2021with COVID adjustment), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2020) were developed. The Company has historically utilized the Society of Actuaries’ published mortality data in its plan assumptions. Accordingly, the Company adopted Pri-2012 with MP-2021 for purposes of measuring its pension obligations at December 31, 2021.
For the years ended December 31, 2021 and 2020, we recognized consolidated pre-tax pension benefit cost (income) of $(0.8) million and $(0.4) million, respectively. We are not required to make any contributions to our pension plan during 2022. However, we may elect to adjust the level of contributions based on a number of factors, including performance of pension investments and changes in interest rates. The Pension Protection Act of 2006 provided for changes to the method of valuing pension plan assets and liabilities for funding purposes as well as requiring minimum funding levels. Our defined benefit pension plan is in compliance with minimum funding levels established in the Pension Protection Act. Funding levels will be affected by future contributions, investment returns on plan assets, growth in plan liabilities and interest rates. Once the plan is Fully Funded as that term is defined within the Pension Protection Act, we will be required to fund the ongoing growth in plan liabilities on an annual basis. We anticipate funding pension contributions with cash from operations.
Income taxes
We account for income taxes under the asset and liability method prescribed by ASC 740, Income Taxes. We provide for deferred income taxes based on differences between the book and tax bases of our assets and liabilities and for items that are reported for financial statement purposes in periods different from those for income tax reporting purposes. The deferred tax liability or asset amounts are based upon the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized.
Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect our best assessment of estimated future taxes to be paid. Management judgment is required in developing our provision for income taxes, including the determination of deferred tax assets, liabilities and any valuation allowances recorded against the deferred tax assets. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In evaluating whether it is more likely than not that our net deferred tax assets will be realized, we consider both positive and negative evidence including the reversal of existing taxable temporary differences, taxable income in prior carryback years if carryback is permitted under the tax law and such taxable income has not previously been used for carryback, future taxable income exclusive of reversing temporary differences and carryforwards based on near-term and longer-term projections of operating results and the length of the carryforward period. We evaluate the realizability of our net deferred tax assets and assess the valuation allowance on a quarterly basis, adjusting the amount of such allowance, if necessary. Failure to achieve forecasted taxable income might affect the ultimate realization of the net deferred tax assets. Factors that may affect our ability to achieve sufficient forecasted taxable income include, but are not limited to, increased competition, a decline in sales or margins and loss of market share.
As of December 31, 2021 and 2020, we concluded that, based on evaluation of the positive and negative evidence, primarily our history of operating losses, it is not more likely than not that we will realize the benefit of our deferred tax assets. As of December 31, 2021, we had deferred tax assets of $72.0 million for which there was a valuation allowance of $67.2 million and we had total net deferred tax liabilities of $0.05 million.
23
Product warranties
Warranty terms are based on the negotiated railcar sales contracts. We generally warrant that new railcars will be free from defects in material and workmanship under normal use and service identified for a period of up to five years from the time of sale. We also provide limited warranties with respect to certain rebuilt railcars. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been asserted by customers. Second, based on historical claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. We provide for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assess the adequacy of the resulting reserves on a quarterly basis.
Revenue recognition
We generally recognize revenue at a point in time as we satisfy a performance obligation by transferring control over a product or service to a customer. Revenue is measured at the transaction price, which is based on the amount of consideration that we expect to receive in exchange for transferring the promised goods or services to the customer. Performance obligations are typically completed and revenue is recognized for the sale of new and rebuilt railcars when the finished railcar is transferred to a specified railroad connection point. In certain sales contracts, revenue is recognized when a certificate of acceptance has been issued by the customer and control has been transferred to the customer. At that time, the customer directs the use of, and obtains substantially all of the remaining benefits from, the asset. When a railcar sales contract contains multiple performance obligations, we allocate the transaction price to the performance obligations based on the relative stand-alone selling price of the performance obligation determined at the inception of the contract based on an observable market price, expected cost plus margin or market price of similar items. We treat shipping costs that occur after control is transferred as fulfillment costs. Accordingly, gross revenue is recognized, and shipping cost is accrued, when control transfers to the customer. We generally do not provide discounts or rebates in the normal course of business. As a practical expedient, we recognize the incremental costs of obtaining contracts, such as sales commissions, as an expense when incurred since the amortization period of the asset that we otherwise would have recognized is one year or less. Performance obligations are satisfied and we recognize revenue from most parts sales when the parts are shipped to customers. We recognize operating lease revenue on Railcars Available for Lease on a straight-line basis over the contract term. We recognize revenue from the sale of Railcars Available for Lease on a net basis as Gain (Loss) on Sale of Railcars Available for Lease since the sale represents the disposal of a long-term operating asset.
We recognize a loss against related inventory when we have a contractual commitment to manufacture railcars at an estimated cost in excess of the contractual selling price.
RECENT ACCOUNTING PRONOUNCEMENTS (See Note 2, Summary of Significant Accounting Policies, to our Consolidated Financial Statements)
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain forward-looking statements including, in particular, statements about our plans, strategies and prospects. We have used the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “likely,” “unlikely,” “intend” and similar expressions in this Annual Report on Form 10-K to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. However, forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties relate to, among other things, the potential financial and operational impacts of the COVID-19 pandemic; the cyclical nature of our business, the competitive nature of our industry, 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 customer acceptance of orders, fluctuating costs of raw materials, including steel and aluminum, and delays in the delivery of raw materials, the risk of lack of acceptance of our new railcar offerings by our customers and other competitive factors. The factors listed above are not exhaustive. Other sections of this Form 10-K include additional factors that could materially and adversely affect our business, financial condition and results of operations. New factors emerge from time to time and it is not possible for management to predict the impact of all of these factors on our business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, in order to reflect changes in circumstances or expectations or the occurrence of unanticipated events except to the extent required by applicable securities laws.
24
Item 8. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
FreightCar America, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of FreightCar America, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
CO Finance LVS VI LLC Common Stock Warrant
As described further in note 12 to the financial statements, on November 24, 2020, the Company’s stockholders approved the issuance of a warrant (the “Warrant”) under its October 13, 2020 Credit Agreement with financing partner CO Finance LVS VI LLC. The Warrant provides the holder the option to purchase a number of shares of the Company’s common stock, par value $0.01 per share, equal to 36% of the outstanding common stock on a fully-diluted basis at the time the Warrant is exercised (after giving effect to such issuance). The Company determined that the Warrant should be accounted for as a derivative instrument and classified as a liability on its consolidated balance sheet primarily due to the instrument obligating the Company to settle the Warrant in a variable number of shares of common stock. As of December 31, 2021, the Company estimated the fair value of the Warrant liability to be approximately $32.5 million. We identified the assessment of the accounting classification for the common stock warrant as a critical audit matter.
The principal considerations for our determination that accounting for warrants is a critical audit matter are the complex provisions affecting classification that require significant audit effort including evaluating each feature of these warrants and the impact of these features on the classification.
Our audit procedures related to the common stock warrant included the following, among others:
25
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2021.
Chicago, Illinois
March 21, 2022
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of FreightCar America, Inc:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of FreightCar America, Inc and subsidiaries (the “Company”) as of December 31, 2020, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the result of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 24, 2021
We began serving as the Company’s auditor in 1999. In 2021, we became the predecessor auditor.
27
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FreightCar America, Inc. and Subsidiaries |
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CONSOLIDATED BALANCE SHEETS |
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(in thousands, except for share and per share data) |
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December 31, |
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December 31, |
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Assets |
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Current assets |
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Cash, cash equivalents and restricted cash equivalents |
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$ |
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$ |
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Restricted certificates of deposit |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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VAT receivable |
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Inventories, net |
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Assets held for sale |
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Related party asset |
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Prepaid expenses |
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Total current assets |
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Property, plant and equipment, net |
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Railcars available for lease, net |
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Right of use asset |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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Accounts and contractual payables |
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$ |
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$ |
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Related party accounts payable |
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Accrued payroll and other employee costs |
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Reserve for workers' compensation |
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Accrued warranty |
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Customer deposits |
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Deferred income state and local incentives, current |
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Lease liability, current |
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Current portion of long-term debt |
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Other current liabilities |
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Total current liabilities |
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Long-term debt, net of current portion |
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Warrant liability |
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Accrued pension costs |
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Deferred income state and local incentives, long-term |
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Lease liability, long-term |
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Other long-term liabilities |
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Total liabilities |
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Stockholders’ (deficit) equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid in capital |
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Treasury stock, at cost, |
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( |
) |
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Accumulated other comprehensive loss |
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( |
) |
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( |
) |
Accumulated deficit |
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( |
) |
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( |
) |
Total stockholders' (deficit) equity |
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( |
) |
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Total liabilities and stockholders’ (deficit) equity |
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$ |
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$ |
|
||
See notes to consolidated financial statements |
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28
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FreightCar America, Inc. and Subsidiaries |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(in thousands, except for share and per share data) |
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Year Ended December 31, |
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2021 |
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2020 |
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Revenues |
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$ |
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$ |
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Cost of sales |
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Gross profit (loss) |
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( |
) |
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Selling, general and administrative expenses |
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Impairment on leased railcars |
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Restructuring and impairment charges |
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Operating loss |
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( |
) |
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( |
) |
Interest expense |
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( |
) |
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( |
) |
Loss on change in fair market value of warrant liability |
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( |
) |
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( |
) |
Gain on extinguishment of debt |
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Other income |
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Loss before income taxes |
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( |
) |
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( |
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Income tax provision |
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Net loss |
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( |
) |
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( |
) |
Less: Net loss attributable to noncontrolling interest in JV |
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( |
) |
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Net loss attributable to FreightCar America |
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$ |
( |
) |
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$ |
( |
) |
Net loss per common share attributable to FreightCar America- basic |
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$ |
( |
) |
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$ |
( |
) |
Net loss per common share attributable to FreightCar America- diluted |
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$ |
( |
) |
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$ |
( |
) |
Weighted average common shares outstanding – basic |
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Weighted average common shares outstanding – diluted |
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See notes to the consolidated financial statements |
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29
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FreightCar America, Inc. and Subsidiaries |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
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(in thousands) |
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Year Ended December 31, |
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2021 |
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2020 |
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Net loss |
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$ |
( |
) |
|
$ |
( |
) |
Other comprehensive loss net of tax: |
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Pension and postretirement liability adjustments, net of tax |
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( |
) |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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||
See notes to the consolidated financial statements |
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30
FreightCar America, Inc. and Subsidiaries |
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY |
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(in thousands, except for share data) |
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FreightCar America Shareholders |
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Accumulated |
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Total |
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Additional |
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Other |
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Retained |
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Stockholders' |
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|||||||||
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Common Stock |
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Paid In |
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Treasury Stock |
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Comprehensive |
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Earnings |
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Noncontrolling |
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Equity |
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Shares |
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Amount |
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Capital |
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Shares |
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Amount |
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Loss |
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(Deficit) |
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Interest in JV |
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(Deficit) |
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|||||||||
Balance, December 31, 2019 |
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|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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|
$ |
( |
) |
|
$ |
|
|||||
Net loss |
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|
- |
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|
|
- |
|
|
|
- |
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|
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- |
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|
|
- |
|
|
|
- |
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|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Acquisition of JV non-controlling interest |
|
|
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|
|
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|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|||
Other comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Restricted stock awards |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Employee stock settlement |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Forfeiture of restricted stock awards |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Stock-based compensation recognized |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Balance, December 31, 2020 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Other comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Restricted stock awards |
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
||
Employee stock settlement |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Forfeiture of restricted stock awards |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Exercise of stock appreciation rights |
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|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Stock-based compensation recognized |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
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|
||
Equity fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
||||||
Balance, December 31, 2021 |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
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See notes to the consolidated financial statements |
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31
FreightCar America, Inc. and Subsidiaries |
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|
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
|
|
|
|
|
||
|
|
Year Ended December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Cash flows from operating activities |
|
(in thousands) |
|
|||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash flows used in operating activities: |
|
|
|
|
|
|
||
Restructuring and impairment charges |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Non-cash lease expense on right-of-use assets |
|
|
|
|
|
|
||
Recognition of deferred income from state and local incentives |
|
|
( |
) |
|
|
( |
) |
Loss on change in fair market value for warrant liability |
|
|
|
|
|
|
||
Impairment on leased railcars |
|
|
|
|
|
|
||
Stock-based compensation recognized |
|
|
|
|
|
|
||
Non-cash interest expense |
|
|
|
|
|
|
||
Gain on extinguishment of debt |
|
|
( |
) |
|
|
|
|
Other non-cash items, net |
|
|
|
|
|
|
||
Changes in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
VAT receivable |
|
|
( |
) |
|
|
( |
) |
Inventories |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
|
|
Related party asset, net |
|
|
( |
) |
|
|
|
|
Accounts and contractual payables |
|
|
|
|
|
|
||
Accrued payroll and employee benefits |
|
|
|
|
|
( |
) |
|
Income taxes payable |
|
|
|
|
|
|
||
Accrued warranty |
|
|
( |
) |
|
|
( |
) |
Lease liability |
|
|
( |
) |
|
|
( |
) |
Customer deposits |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
|
|
Accrued pension costs and accrued postretirement benefits |
|
|
( |
) |
|
|
( |
) |
Net cash flows used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchase of restricted certificates of deposit |
|
|
|
|
|
( |
) |
|
Maturity of restricted certificates of deposit |
|
|
|
|
|
|
||
Purchase of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of property, plant and equipment and railcars available for lease |
|
|
|
|
|
|
||
Net cash flows used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from issuance of long-term debt |
|
|
|
|
|
|
||
Deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Borrowings on revolving line of credit |
|
|
|
|
|
|
||
Repayments on revolving line of credit |
|
|
( |
) |
|
|
( |
) |
Cash paid to acquire JV non-controlling interest |
|
|
|
|
|
( |
) |
|
Employee stock settlement |
|
|
( |
) |
|
|
( |
) |
Payment for stock appreciation rights exercised |
|
|
( |
) |
|
|
|
|
Net cash flows provided by financing activities |
|
|
|
|
|
|
||
Net decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash equivalents at beginning of year |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash equivalents at end of year |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income tax refunds received, net of payments |
|
$ |
|
|
$ |
|
||
Stock issued for acquisition |
|
$ |
|
|
$ |
|
||
Non-cash transactions |
|
|
|
|
|
|
||
Change in unpaid construction in process |
|
$ |
|
|
$ |
( |
) |
|
Accrued PIK interest paid through issuance of PIK Note |
|
$ |
|
|
$ |
|
||
Issuance of warrants |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
See notes to the consolidated financial statements |
|
|||||||
32
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Note 1 – Description of the Business
FreightCar America, Inc. (“FreightCar”) operates primarily in North America through its direct and indirect subsidiaries, and manufactures a wide range of railroad freight cars, supplies railcar parts and leases freight cars. The Company designs and builds high-quality railcars, including coal cars, bulk commodity cars, covered hopper cars, intermodal and non-intermodal flat cars, mill gondola cars, coil steel cars and boxcars, and also specializes in the conversion of railcars for re-purposed use. The Company is headquartered in Chicago, Illinois and has facilities in the following locations: Johnstown, Pennsylvania; Shanghai, People’s Republic of China, and Castaños, Coahuila, Mexico (“Castaños”).
During 2019, the Company entered into a joint venture arrangement with Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex”), a Mexican company with operations in both Mexico and the United States, to manufacture railcars in Castaños, in exchange for a
The Company ceased operations at its Roanoke, Virginia manufacturing facility (the “Roanoke Facility”) and vacated the facility as of March 31, 2020. On September 10, 2020, the Company announced its plan to permanently close its manufacturing facility in Cherokee, Alabama (the “Shoals Facility”) in light of the ongoing cyclical industry downturn, which has been magnified by the COVID-19 pandemic. The closure will reduce costs and align the Company’s manufacturing capacity with the current rail car market. The Company ceased production at the Shoals Facility in February 2021. See Note 8–Restructuring and Impairment Charges.
The Company is closely monitoring the spread and impact of the COVID-19 pandemic and is continually assessing its potential effects on the Company's business and its financial performance as well as the businesses of its customers and vendors. The Company cannot predict the duration or severity of the COVID-19 pandemic, and it cannot reasonably estimate the financial impact the COVID-19 outbreak will have on the Company's results and significant estimates going forward.
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of FreightCar America, Inc. and all of its direct and indirect subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include, useful lives of long-lived assets, warranty accruals, workers’ compensation accruals, pension benefit assumptions, stock compensation, evaluation of property, plant and equipment for impairment and the valuation of deferred taxes. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation.
Cash and Cash Equivalents
On a daily basis, cash in excess of current operating requirements is invested in various highly liquid investments. The Company considers all unrestricted short-term investments with maturities of three months or less when
33
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
acquired to be cash equivalents. The amortized cost of cash equivalents approximate fair value because of the short maturity of these instruments.
The Company’s cash and cash equivalents are primarily deposited with one U.S. financial institution. Such deposits are in excess of federally insured limits.
Restricted Cash and Restricted Certificates of Deposit
Financial Instruments
Management estimates that all financial instruments (including cash equivalents, restricted cash and restricted certificates of deposit, accounts receivable, accounts payable and long-term debt) as of December 31, 2021 and 2020, have fair values that approximate their carrying values.
Fair Value Measurements
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of assets and liabilities and the placement within the fair value hierarchy levels.
The Company classifies the inputs to valuation techniques used to measure fair value as follows:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 — Inputs other than quoted prices for Level 1 inputs that are either directly or indirectly observable for the asset or liability including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived from observable market data by correlation or other means.
Level 3 — Unobservable inputs for the asset or liability, including situations where there is little, if any, market activity for the asset or liability.
Inventories
Property, Plant and Equipment
Property, plant and equipment are stated at acquisition cost less accumulated depreciation. Depreciation is provided using the straight-line method over the original estimated useful lives of the assets or lease term if shorter, which are as follows:
34
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Description of Assets |
Life |
Buildings and improvements |
|
Leasehold improvements |
|
Machinery and equipment |
|
Software |
Long-Lived Assets
The Company tests long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These changes in circumstances may include a significant decrease in the market price of an asset group, a significant adverse change in the manner or extent in which an asset group is used, a current year operating loss combined with history of operating losses, or a current expectation that, more likely than not, a long-lived asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.
Income Taxes
For federal income tax purposes, the Company files a consolidated federal tax return. The Company also files state tax returns in states where the Company has operations. In conformity with ASC 740, Income Taxes, the Company provides for deferred income taxes on differences between the book and tax bases of its assets and liabilities and for items that are reported for financial statement purposes in periods different from those for income tax reporting purposes. The Company’s deferred tax liability or asset amounts are based upon the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or realized.
Management evaluates net deferred tax assets and provides a valuation allowance when it believes that it is more likely than not that some portion of these assets will not be realized. In making this determination, management evaluates both positive evidence, such as cumulative pre-tax income for previous years, the projection of future taxable income, the reversals of existing taxable temporary differences and tax planning strategies, and negative evidence, such as any recent history of losses and any projected losses. Management also considers the expiration dates of net operating loss carryforwards in the evaluation of net deferred tax assets. Management evaluates the realizability of the Company’s net deferred tax assets and assesses the valuation allowance on a quarterly basis, adjusting the amount of such allowance as necessary.
Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the appropriate taxing authority has completed its examination even though the statute of limitations remains open, or the statute of limitation expires. Interest and penalties related to uncertain tax positions are recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized.
Product Warranties
35
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Warranty terms are based on the negotiated railcar sales contracts. The Company generally warrants that new railcars will be free from defects in material and workmanship under normal use and service identified for a period of up to
State and Local Incentives
The Company records state and local incentives when there is reasonable assurance that the incentive will be received. State and local incentives related to assets are recorded as deferred income and recognized on a straight-line basis over the useful life of the related long-lived assets of to
Revenue Recognition
The following table disaggregates the Company’s revenues by major source:
|
Year Ended |
|
|||||
|
December 31, |
|
|||||
|
2021 |
|
|
2020 |
|
||
Railcar sales |
$ |
|
|
$ |
|
||
Parts sales |
|
|
|
|
|
||
Revenues from contracts with customers |
|
|
|
|
|
||
Leasing revenues |
|
|
|
|
|
||
Total revenues |
$ |
|
|
$ |
|
||
The Company generally recognizes revenue at a point in time as it satisfies a performance obligation by transferring control over a product or service to a customer. Revenue is measured at the transaction price, which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer.
Railcar Sales
Performance obligations are typically completed and revenue is recognized for the sale of new and rebuilt railcars when the finished railcar is transferred to a specified railroad connection point. In certain sales contracts, revenue is recognized when a certificate of acceptance has been issued by the customer and control has been transferred to the customer. At that time, the customer directs the use of, and obtains substantially all of the remaining benefits from, the asset. When a railcar sales contract contains multiple performance obligations, the Company allocates the transaction price to the performance obligations based on the relative stand-alone selling price of the performance obligation determined at the inception of the contract based on an observable market price, expected cost plus margin or market price of similar items. The Company treats shipping costs that occur after control is transferred as fulfillment costs. Accordingly, gross revenue is recognized, and shipping cost is accrued, when control transfers to the customer. The Company does not provide discounts or rebates in the normal course of business.
As a practical expedient, the Company recognizes the incremental costs of obtaining contracts, such as sales commissions, as an expense when incurred since the amortization period of the asset that the Company otherwise would have recognized is generally one year or less.
Parts Sales
36
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The Company sells forged, cast and fabricated parts for all of the railcars it produces, as well as those manufactured by others. Performance obligations are satisfied and the Company recognizes revenue from most parts sales when the parts are shipped to customers.
Leasing Revenue
The Company recognizes operating lease revenue on Railcars Available for Lease on a straight-line basis over the contract term. The Company recognizes revenue from the sale of Railcars Available for Lease on a net basis as Gain (Loss) on Sale of Railcars Available for Lease since the sale represents the disposal of a long-term operating asset.
Contract Balances and Accounts Receivable
Accounts receivable payments for railcar sales are typically due within
Contract assets represent the Company’s rights to consideration for performance obligations that have been satisfied but for which the terms of the contract do not permit billing at the reporting date. The Company has
Performance Obligations
Loss Per Share
The Company computes loss per share using the two-class method, which is a loss allocation formula that determines loss per share for common stock and participating securities. The Company’s participating securities are its grants of restricted stock which contain non-forfeitable rights to dividends. The Company allocates earnings between both classes however, in periods of undistributed losses, they are only allocated to common shares as the unvested restricted stockholders do not contractually participate in losses of the Company. Basic loss per share attributable to common shareholders is computed by dividing net income loss attributable to common shareholders by the weighted average common shares outstanding. Warrants issued in connection with the Company’s long-term debt were issued at a nominal exercise price and are considered outstanding at the date of issuance. The calculation of diluted earnings per share includes the effect of any dilutive equity incentive instruments. The Company uses the treasury stock method to calculate the effect of outstanding dilutive equity incentive instruments, which requires the Company to compute total proceeds as the sum of (1) the amount the employee must pay upon exercise of the award and (2) the amount of unearned stock-based compensation costs attributed to future services. Equity incentive instruments for which the total employee proceeds from exercise exceed the average fair value of the same equity incentive instrument over the period have an anti-dilutive effect on earnings per share during periods with net income from continuing operations, and accordingly, the Company excludes them from the calculation.
37
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General, which modifies the disclosure requirements for defined benefit and other postretirement plans. ASU 2018-14 eliminates certain disclosures related to accumulated other comprehensive income, plan assets, related parties and the effects of interest rate basis point changes on assumed health care costs, and adds disclosures to address significant gains and losses related to changes in benefit obligations. ASU 2018-14 also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Adoption on a retrospective basis for all periods presented is required. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of GAAP. The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. Adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible debt instruments by removing certain accounting separation models as well as the accounting for debt instruments with embedded conversion features that are not required to be accounted for as derivative instruments. The ASU also updates and improves the consistency of earnings per share calculations for convertible instruments. The amendments in this ASU are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Adoption of the new standard is not expected to have a material impact on our consolidated financial statements.
Note 3 – Leases
The Company determines if an arrangement is a lease at inception of a contract. Substantially all of the Company’s leases are operating leases. A significant portion of the Company’s operating lease portfolio includes manufacturing sites, component warehouses and corporate offices. The remaining lease terms on the majority of the Company’s leases are between
ROU assets represent the Company’s right to use an underlying asset during the lease term and the lease liabilities represent the Company’s obligation to make the lease payments arising during the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating lease expense is recognized on a straight-line basis over the lease term. The components of the lease costs were as follows:
38
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
Year Ended |
|
|
|
Year Ended |
|
||
Operating lease costs: |
|
|
|
|
|
|
|
||
Fixed |
|
$ |
|
|
|
$ |
|
||
Short-term |
|
|
|
|
|
|
|
||
Total lease cost |
|
$ |
|
|
|
$ |
|
||
Supplemental balance sheet information related to leases were as follows: |
|
|
|
|
|
||||
|
|
December 31, 2021 |
|
|
|
December 31, 2020 |
|
||
Operating leases: |
|
|
|
|
|
|
|
||
Right of use assets |
|
$ |
|
|
|
$ |
|
||
|
|
|
|
|
|
|
|
||
Lease liabilities: |
|
|
|
|
|
|
|
||
Lease liability, current |
|
$ |
|
|
|
$ |
|
||
Lease liability, long-term |
|
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
|
$ |
|
||
Supplemental cash flow information is as follows: |
|
|
|
|
|
||||
|
|
Year Ended |
|
|
|
Year Ended |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
||
Operating cash flows from operating leases |
|
$ |
|
|
|
$ |
|
||
Total |
|
$ |
|
|
|
$ |
|
||
|
|
|
|
|
|
|
|
||
Right of use assets obtained in exchange for new lease obligations: |
|
|
|
|
|
|
|
||
Operating leases |
|
$ |
|
|
|
$ |
|
||
Total |
|
$ |
|
|
|
$ |
|
||
39
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The aggregate future lease payments for operating leases as of December 31, 2021 are as follows:
|
|
Operating leases |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: interest |
|
|
( |
) |
Total |
|
$ |
|
|
Weighted-average remaining lease term (years) |
|
|
|
|
Operating leases |
|
|
|
|
Weighted-average discount rate |
|
|
|
|
Operating leases |
|
|
% |
|
On October 8, 2020, the Company reached an agreement with the Shoals Facility owner and Landlord, to shorten the Shoals lease term by amending the expiration date to the end of February 2021, with a
Note 4 – Fair Value Measurements
The following table sets forth by level within the ASC 820 Fair Value Measurement fair value hierarchy the Company’s financial assets that were recorded at fair value on a recurring basis and the Company’s non-financial assets that were recorded at fair value on a non-recurring basis.
Recurring Fair Value Measurements |
|
As of December 31, 2021 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-recurring Fair Value Measurements |
|
During the Year Ended December 31, 2021 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Railcars available for lease, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Recurring Fair Value Measurements |
|
As of December 31, 2020 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrant liability |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Non-recurring Fair Value Measurements |
|
During the Year Ended December 31, 2020 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets held for sale |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Right of use assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Railcars available for lease, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
40
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The fair value of the Company’s warrant liability recorded in the Company’s financial statements, determined using the quoted price of the Company’s common stock in an active market, exercise price ($
On September 10, 2020 the Company announced its plan to permanently close its Shoals Facility. In connection with the announcement, the Company estimated the fair value of the related asset group because it determined that an impairment trigger had occurred due to the shortened asset recoverability timeframe. Non-cash impairment charges of $
See Note 7 for more information regarding the non-recurring fair value measurement considerations during the years ended December 31, 2021 and 2020, for the impairment charge related to our leased small cube covered hopper railcars.
Note 5 – Restricted Cash and Restricted Cash Equivalents
The Company establishes restricted cash balances when required by customer contracts and to collateralize standby letters of credit. The carrying value of restricted cash and restricted cash equivalents approximates fair value.
The Company’s restricted cash balances are as follows:
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Restricted cash from customer deposit |
|
$ |
|
|
$ |
|
||
Restricted cash to collateralize standby letters of credit |
|
|
|
|
|
|
||
Restricted cash equivalents to collateralize standby letters of credit |
|
|
|
|
|
|
||
Total restricted cash and restricted cash equivalents |
|
$ |
|
|
$ |
|
||
Note 6 – Inventories
Inventories, net of reserve for excess and obsolete items, consist of the following:
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Work in process |
|
$ |
|
|
$ |
|
||
Parts inventory |
|
|
|
|
|
|
||
Total inventories, net |
|
$ |
|
|
$ |
|
||
Note 7 – Leased Railcars
Railcars available for lease at December 31, 2021 were $
41
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Leased railcars are subject to lease agreements with external customers with remaining terms of up to and are accounted for as operating leases.
Future minimum rental revenues on leases at December 31, 2021 are as follows:
|
|
|
|
|
Year ending December 31, 2022 |
|
$ |
|
|
Year ending December 31, 2023 |
|
|
|
|
Year ending December 31, 2024 |
|
|
|
|
Year ending December 31, 2025 |
|
|
|
|
Year ending December 31, 2026 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
During the fourth quarter of 2020, the oil and gas proppants (or “frac sand”) industry continued to experience economic pressure created by low oil prices, reduced fracking activity, and the ongoing economic impact of COVID-19. In particular, small cube covered hopper railcars are primarily used in North America to serve the frac sand industry. Given the decline in global oil prices, reduced fracking activity, and pressure on the oil and gas industry to maintain a low-cost structure, fracking operations, have increasingly shifted away from the use of Northern White sand and towards the use of in-basin sand, which can be sourced locally rather than transporting by rail. Consequently, the cash flows and profitability of the frac sand industry continued to decline during the fourth quarter. As a result, certain small cube covered hopper customers requested rent relief that were renegotiated.
We believe that the events and circumstances that arose during the fourth quarter of 2020 constituted an impairment triggering event related to the small cube covered hopper car type in our leased railcar portfolio.
We performed a cash flow recoverability test of our small cube covered hopper railcars and compared the undiscounted cash flows to the carrying value of the assets. This analysis indicated that the carrying value exceeded the estimated undiscounted cash flows, and therefore, we were required to measure the fair value of our fleet of small cube covered hopper railcars and determine the amount of an impairment loss, if any.
The fair value of the asset group, which is part of the Company’s Manufacturing segment, was determined using both a market and cost approach, which we believe most accurately reflects a market participant's viewpoint in valuing these railcars. The results of our analysis indicated an estimated fair value of the asset group of approximately $
Significant management judgment was used to determine the key assumptions utilized in our impairment analysis, the substantial majority of which represent unobservable (Level 3) inputs. These assumptions include, but are not limited to: estimates regarding the remaining useful life over which the railcars are expected to generate cash flows (
42
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Note 8 – Restructuring and Impairment Charges
On September 10, 2020, the Company announced its plan to permanently close its Shoals Facility in light of the ongoing cyclical industry downturn, which has been magnified by the COVID-19 pandemic. The Company ceased production at the Shoals Facility in February 2021. In connection with the announcement, the Company estimated the fair value of the related asset group because it determined that an impairment trigger had occurred due to the shortened asset recoverability timeframe. Non-cash restructuring and impairment charges totaling $
The fair value of the ROU asset was estimated using an income valuation approach known as the “sublease” discounted cash flow (“DCF”) model in which the cash flows were based on current market-based lease pricing ($
The Shoals Facility personal property was abandoned in place at the facility, sold, transferred to another FCA facility (primarily Castaños), or scrapped. The assets abandoned in place represent property, plant and equipment transferred to the Shoals landlord as consideration for the landlord’s entry into the lease amendment described below. The premise of fair value differs for each type of asset disposition. The fair value of the personal property assets abandoned in place at the Shoals Facility were analyzed under a fair value in continued use (“In-Use”) premise. This premise assumes that the assets will continue to be used in the ongoing operation of the facility and therefore includes installation, other assembly, freight, engineering, electrical set-up and process piping costs that would be required to make the assets fully operational. Assets sold or transferred were analyzed under the In-Exchange (“In-Exchange”) premise of fair value. Under this premise, we considered the value of the assets assuming an orderly sale on a stand-alone basis. It is assumed the assets were sold on an as-is, where-is basis and alternative uses for the assets from the originally designed purpose are considered. Any remaining personal property assets that were neither abandoned in place nor sold/transferred were considered unmarketable and were valued under a scrap value premise.
For both the aforementioned In-Use and In Exchange premises, in instances where an asset was found to have no used market resale exposure, we utilized the cost approach. For assets in which there was an active secondary market where recent sales comparables exist, the market approach was utilized. In instances where market data was available but deemed too incomplete to apply a complete market approach, we used the market relationship data available to influence, confirm, or adjust the cost approach results.
On October 8, 2020, the Company reached an agreement with the Shoals facility owner and landlord, to shorten the Shoals lease term by amending the expiration date to the end of February 2021. In addition, the landlord agreed to waive the base rent payable under the original lease for the months of October 2020 through February 2021. The lease termination resulted in a lease termination gain of $
Restructuring and impairment charges are reported as a separate line item on the Company’s consolidated statements of operations for the years ended December 31, 2021 and 2020, and are detailed below:
43
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
Year Ended |
|
|||||
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Impairment and loss on right of use asset |
|
$ |
|
|
$ |
|
||
Lease termination gain |
|
|
|
|
|
( |
) |
|
Impairment and loss on disposal of machinery and equipment |
|
|
|
|
|
|
||
Employee severance and retention |
|
|
( |
) |
|
|
|
|
Other charges related to facility closure |
|
|
|
|
|
|
||
Total restructuring and impairment costs |
|
$ |
|
|
$ |
|
||
Accrued restructuring and impairment charges primarily related to the Manufacturing segment and are detailed below:
|
|
Accrued as of December 31, 2020 |
|
|
Cash |
|
|
Non-cash charges |
|
|
Cash payments |
|
|
Accrued as of December 31, 2021 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairment and loss on disposal of machinery and |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Employee severance and retention |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Other charges related to facility closure |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Total restructuring and impairment costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
Accrued as of December 31, 2019 |
|
|
Cash |
|
|
Non-cash charges |
|
|
Cash payments |
|
|
Accrued as of December 31, 2020 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Impairment and loss on right of use asset |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Impairment and loss on disposal of machinery and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Lease termination gain |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Employee severance and retention |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Other charges related to facility closure |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|||
Total restructuring and impairment costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Note 9 – Property, Plant and Equipment
Property, plant and equipment consists of the following:
|
|
|
December 31, |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
|
|
|
|
|
|
|
|
|
||
Buildings and improvements |
|
|
$ |
|
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
|
|
||
Machinery and equipment |
|
|
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
|
|
||
Construction in process |
|
|
|
|
|
|
|
|
||
Total cost |
|
|
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
|
( |
) |
|
|
|
( |
) |
Total property, plant and equipment, net |
|
|
$ |
|
|
|
$ |
|
||
44
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Depreciation expense for the years ended December 31, 2021 and 2020, was $
Note 10 – Product Warranties
Warranty terms are based on the negotiated railcar sales contracts. The Company generally warrants that new railcars produced by it will be free from defects in material and workmanship under normal use and service identified for a period of up to
|
|
|
December 31, |
|
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
|
||
|
|
|
|
|
|
|
|
|
|
||
Balance at the beginning of the year |
|
|
$ |
|
|
|
$ |
|
|
||
Current year provision |
|
|
|
|
|
|
|
|
|
||
Reductions for payments, costs of repairs and other |
|
|
|
( |
) |
|
|
|
( |
) |
|
Adjustments to prior warranties |
|
|
|
( |
) |
|
|
|
( |
) |
|
Balance at the end of the year |
|
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
||
Adjustments to prior warranties includes changes in the warranty reserve for warranties issued in prior periods due to expiration of the warranty period, revised warranty cost estimates and other factors.
Note 11 – State and Local Incentives
During the year ended December 31, 2015, the Company received cash payments of $
The changes in deferred income from these incentives for the years ended December 31, 2021 and 2020, are as follows:
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Balance at the beginning of the year |
|
$ |
|
|
$ |
|
||
Recognition of state and local incentives as a reduction of cost of sales |
|
|
( |
) |
|
|
( |
) |
Balance at the end of the year, including current portion |
|
$ |
|
|
$ |
|
||
Note 12 – Debt Financing and Revolving Credit Facilities
Term Loan Credit Agreement
On October 13, 2020, the Company entered into a Credit Agreement (the “Term Loan Credit Agreement”) by and among the Company, as guarantor, FreightCar North America (“Borrower” and together with the Company and certain other subsidiary guarantors, collectively, the “Loan Parties”), CO Finance LVS VI LLC, as lender (the “Lender”), and U.S. Bank National Association, as disbursing agent and collateral agent (“Agent”). Pursuant to the Term Loan Credit Agreement, the Lender committed to the extension of a term loan credit facility in the principal amount of $
45
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
common stock underlying the Warrant described below (the funding date of such term loan, the “Closing Date”). FreightCar America, Inc. stockholders approved the issuance of the common stock underlying the Warrant at a special stockholders’ meeting on November 24, 2020. The $
The Term Loan Credit Agreement has a term ending
The Term Loan Credit Agreement has both affirmative and negative covenants, including, without limitation, minimum liquidity, limitations on indebtedness, liens and investments. The Term Loan Credit Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Term Loan Credit Agreement and the related loan documents, each of the Loan Parties granted to Agent a continuing lien upon all of such Loan Parties’ assets to secure the obligations of the Loan Parties under the Term Loan Credit Agreement.
On May 14, 2021, the Loan Parties entered into an Amendment No. 2 to the Term Loan Credit Agreement (the “Second Amendment” and together with the Term Loan Credit Agreement, the “Term Loan Credit Agreement”) with Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $
The Additional Loan bears interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement. As of December 31, 2021, the interest rate on the Additional Loan was
Pursuant to the Second Amendment, in the event that the Additional Loan is not repaid in full by March 31, 2022, the Company shall issue to the Lender and/or an affiliate of the Lender a warrant (the “March 2022 Warrant”) to purchase a number of shares of the Company’s common stock, par value $
Pursuant to the Second Amendment, the Company was required to, among other things, i) obtain a term sheet for additional financing of no less than $
On July 30, 2021, the Loan Parties entered into an Amendment No. 3 to Credit Agreement (the “Third Amendment” and together with the Credit Agreement, as amended, the “Term Loan Credit Agreement”) with the Lender and the Agent, pursuant to which, among other things, Lender obtained a standby letter of credit (as may be amended from time to time, the “Third Amendment Letter of Credit”) from Wells Fargo Bank, N.A., in the principal amount of
46
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
$
On December 30, 2021, the Loan Parties entered into an Amendment No. 4 to Credit Agreement (the “Fourth Amendment” and together with the Credit Agreement, the “Term Loan Credit Agreement”) with the Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $
The Delayed Draw Loan, if funded, will bear interest, at Borrower’s option and subject to the provisions of the Term Loan Credit Agreement, at the Base Rate (as defined in the Term Loan Credit Agreement) or Eurodollar Rate (as defined in the Term Loan Credit Agreement) plus the Applicable Margin (as defined in the Term Loan Credit Agreement) for each such interest rate set forth in the Term Loan Credit Agreement.
Reimbursement Agreement
Pursuant to the Third Amendment, on July 30, 2021, the Company, the Lender, Alter Domus (US) LLC, as calculation agent, and the Agent entered into a reimbursement agreement (the “Reimbursement Agreement”), pursuant to which, among other things, the Company agreed to reimburse the Agent, for the account of the Lender, in the event of any drawings under the Third Amendment Letter of Credit by the Revolving Loan Lender.
In addition, pursuant to the Reimbursement Agreement, the Company shall make certain other payments as set forth below, so long as the Third Amendment Letter of Credit remains outstanding:
Letter of Credit Fee
The Company shall pay to Agent, for the account of Lender, an annual fee of $
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender (or, so long as Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if Lender has timely notified the Company in writing of such designation) a fee (the “Equity Fee”) payable in shares of common stock, par value $
The Equity Fee shall no longer be paid once the Company has issued to Lender and/or OC III LVS XII LP Equity Fees in an amount of Common Stock equal to
47
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The issuance of each Equity Fee under the Reimbursement Agreement will be made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act for offers and sales of securities that do not involve a “public offering.”
Cash Fee
The Company shall pay to the Agent, for the account of the Lender (or, so long as the Lender is the sole provider of the Third Amendment Letter of Credit, to OC III LVS XII LP, if the Lender has timely notified the Company in writing of such designation) a cash fee (the “Cash Fee”) which shall be due and payable in cash quarterly beginning on the date that the Maximum Equity has been issued and thereafter on the business day immediately succeeding the last business day of the applicable Measurement Period. The Cash Fee shall be equal to $
Warrant
In connection with the entry into the Term Loan Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020 (the “Warrant Acquisition Agreement”), by and between the Company and the Lender to purchase a number of shares of the Company’s common stock, par value $
Pursuant to the Second Amendment, in the event that the Additional Loan is
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021 (the “Warrant Acquisition Agreement”), the Company issued to the Lender a warrant (the “December 2021 Warrant”) to purchase a number of shares of the Company’s common stock, par value $
In addition, to the extent the Delayed Draw Loan is funded, the Company has agreed to issue to the Lender a warrant (the “
48
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The following schedule shows the change in fair value of the Warrant as of December 31, 2021.
Warrant liability as of December 31, 2020 |
|
$ |
|
|
Change in fair value |
|
|
|
|
Warrants issued |
|
|
|
|
Warrant liability as of December 31, 2021 |
|
$ |
|
The change in fair value of the Warrant is reported on a separate line in the consolidated statement of operations. The Term Loan Credit Agreement is presented net of the unamortized discount and unamortized deferred financing costs.
Siena Loan and Security Agreement
On October 8, 2020, the Company entered into a Loan and Security Agreement (the “Siena Loan Agreement”) by and among the Company, as guarantor, and certain of its subsidiaries, as borrowers (together with the Company, the “Loan Parties”), and Siena Lending Group LLC, as lender (“Siena”). Pursuant to the Siena Loan Agreement, Siena provided an asset backed credit facility, in the maximum aggregate principal amount of up to $
The Siena Loan Agreement replaced the Company’s prior revolving credit facility under the Credit and Security Agreement (the “BMO Credit Agreement”) dated as of April 12, 2019, among the Company and certain of its subsidiaries, as borrowers and guarantors, and BMO Harris Bank N.A., as lender, as amended from time to time, which was terminated effective October 8, 2020 and otherwise would have matured on April 12, 2024.
The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $
On July 30, 2021, the Loan Parties and Siena entered into an Amended and Restated Loan and Security Agreement (the “Amended and Restated Loan and Security Agreement”), which amended and restated the terms and conditions of the Siena Loan Agreement in its entirety.
Pursuant to the Amended and Restated Loan and Security Agreement, the Maximum Revolving Facility Amount was increased to $
The Amended and Restated Loan and Security Agreement has a term ending on October 8, 2023. Revolving Loans outstanding under the Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the Amended and Restated Loan and Security Agreement, at an interest rate of
The Amended and Restated Loan and Security Agreement contains affirmative and negative covenants, including, without limitation, limitations on future indebtedness, liens and investments. The Amended and Restated Loan and Security Agreement also provides for customary events of default. Pursuant to the terms and conditions set forth in the Amended and Restated Loan and Security Agreement, each of the Loan Parties granted Siena a continuing lien upon certain assets of the Loan Parties to secure the obligations of the Loan Parties under the Amended and Restated Loan and Security Agreement.
49
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
As of December 31, 2021, the Company had $
SBA Paycheck Protection Program Loan
In March 2020, Congress passed the Paycheck Protection Program (“PPP”), authorizing loans to small businesses for use in paying employees that they continue to employ throughout the COVID-19 pandemic and for rent, utilities and interest on mortgages. In June 2020, Congress enacted the Paycheck Protection Program Flexibility Act (“PPPFA”), amending the PPP.
Loans obtained through the PPP, as amended, are eligible to be forgiven as long as the proceeds are used for qualifying purposes and certain other conditions are met. On April 16, 2020, the Company received a loan from BMO Harris Bank N.A. in the amount of $
M&T Credit Agreement
On April 16, 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of the Company (“Freightcar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”). Pursuant to the M&T Credit Agreement, M&T extended a revolving credit facility to Freightcar Leasing Borrower in an aggregate amount of up to $
On April 16, 2019, Freightcar Leasing Borrower also entered into a Security Agreement (the “M&T Security Agreement”) pursuant to which it granted a security interest in all of its assets to M&T to secure its obligations under the M&T Credit Agreement.
On April 16, 2019, FreightCar America Leasing, LLC, a wholly-owned subsidiary of the Company and parent of Freightcar Leasing Borrower (“Freightcar Leasing Guarantor”), entered into (i) a Guaranty Agreement (the “M&T Guaranty Agreement”) pursuant to which Freightcar Leasing Guarantor guarantees the repayment and performance of certain obligations of Freightcar Leasing Borrower and (ii) a Pledge Agreement (the “M&T Pledge Agreement”) pursuant to which Freightcar Leasing Guarantor pledged all of the equity of Freightcar Leasing Borrower held by Freightcar Leasing Guarantor.
The loans under the M&T Credit Agreement are non-recourse to the assets of the Company or its subsidiaries other than the assets of Freightcar Leasing Borrower and Freightcar Leasing Guarantor.
The M&T Credit Agreement had a term ending on April 16, 2021 (the “Term End”). Loans outstanding thereunder will bear interest, accrued daily, at the Adjusted LIBOR Rate (as defined in the M&T Credit Agreement) or the Adjusted Base Rate (as defined in the M&T Credit Agreement). The M&T Credit Agreement has both affirmative and negative covenants, including, without limitation, maintaining an Interest Coverage Ratio (as defined in the
50
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
M&T Credit Agreement) of not less than
On August 7, 2020, FreightCar Leasing Borrower received notice (the “First Notice”) from M&T that, based on an appraisal (the “Appraisal”) conducted by a third party at the request of M&T with respect to the railcars in FreightCar Leasing Borrower’s Borrowing Base (as defined in the M&T Credit Agreement) under the M&T Credit Agreement, the unpaid principal balance under the M&T Credit Agreement exceeded the availability under the M&T Credit Agreement as of the date of the Appraisal by $
On December 18, 2020, FreightCar Leasing Borrower received a revised notice (the “Second Notice,” and together with the First Notice, the “Notices”) from M&T asserting that: (a) as a result of the continuing Event of Default that M&T alleged to have occurred under the M&T Credit Agreement, M&T has declared a default and accelerated and demands immediate payment by FreightCar Leasing Borrower of $
On April 20, 2021, FreightCar Leasing Borrower received a notice from M&T that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not be paid by the Term End.
On December 28, 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC, a Delaware limited liability company (“FCA Management”), and M&T, entered into a Forbearance and Settlement Agreement (the “Forbearance Agreement”) with respect to M&T Credit Agreement and its related Credit Documents (as defined in the M&T Credit Agreement), as well as certain intercompany services agreements related thereto.
Pursuant to the Forbearance Agreement, the Obligors will continue to perform and comply with all of their performance obligations (as opposed to payment obligations) under certain provisions of the M&T Credit Agreement (primarily related to information obligations and the preservation of the collateral pledged by the Borrower to M&T pursuant to the M&T Security Agreement (the “Collateral”)) and all the provisions of the M&T Security Agreement. During the period from Execution Date until the termination of the Forbearance Agreement, M&T may not take any action against the Obligors or exercise or enforce any rights or remedies provided for in the Credit Documents or otherwise available to it. The M&T Credit Agreement is not being amended.
On December 1, 2023, or sooner if requested by the Lender (the “Turnover Date”), the Borrower shall execute and deliver to M&T documents required to deliver and assign to the Lender all the leased railcars and related leases serving as Collateral for the M&T Credit Agreement.
Upon the Turnover Date and the Obligors’ performance of their respective obligations under the Forbearance Agreement, including the delivery of certain Collateral to M&T upon the Turnover Date, all Obligations (as defined in the M&T Credit Agreement) shall be deemed satisfied in full, M&T shall no longer have any further claims against the Obligors under the Credit Documents and the Credit Documents shall automatically terminate and be of no further force or effect except for the provisions thereof that expressly survive termination.
The Forbearance Agreement contains customary releases at execution for all affiliates of the Company (other than the Obligors) and agreements to deliver final releases with respect to the Obligors upon their performance under the Forbearance Agreement. The Company also agreed to turn over to M&T on the Effective Date certain rents in the amount of $
51
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
services through the Turnover Date without a service fee, and after the Turnover Date through the return of the railcars serving as Collateral, for a service fee.
As of December 31, 2021 and December 31, 2020, FreightCar Leasing Borrower had $
Long-term debt consists of the following as of December 31, 2021.
|
|
December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
M&T Credit Agreement outstanding |
|
$ |
|
|
$ |
|
||
SBA Payroll Protection Program Loan outstanding |
|
|
|
|
|
|
||
Siena Loan Agreement outstanding |
|
|
|
|
|
|
||
Term Loan Credit Agreement outstanding |
|
|
|
|
|
|
||
Total debt |
|
|
|
|
|
|
||
Less Term Loan Credit Agreement discount |
|
|
( |
) |
|
|
( |
) |
Less Term Loan Credit Agreement deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Total debt, net of discount and deferred financing costs |
|
|
|
|
|
|
||
Less amounts due within one year |
|
|
|
|
|
( |
) |
|
Long-term debt, net of current portion |
|
$ |
|
|
$ |
|
||
The fair value of long-term debt approximates its carrying value as of December 31, 2021 and 2020.
Estimated annual maturities of long-term debt, including the current portion at December 31, 2021 are as follows based on the most recent debt agreements.
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
Note 13 – Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss consist of the following:
52
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
Pre-Tax |
|
|
Tax |
|
|
After-Tax |
|
|||
Year ended December 31, 2021 |
|
|
|
|
|
|
|
|
|
|||
Pension liability activity: |
|
|
|
|
|
|
|
|
|
|||
Actuarial gain |
|
$ |
|
|
$ |
- |
|
|
$ |
|
||
Reclassification adjustment for amortization of net loss (pre-tax other income) |
|
|
|
|
|
- |
|
|
|
|
||
|
|
$ |
|
|
$ |
- |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
Pre-Tax |
|
|
Tax |
|
|
After-Tax |
|
|||
Year ended December 31, 2020 |
|
|
|
|
|
|
|
|
|
|||
Pension liability activity: |
|
|
|
|
|
|
|
|
|
|||
Actuarial loss |
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
( |
) |
Reclassification adjustment for amortization of net loss (pre-tax other income) |
|
|
|
|
|
- |
|
|
|
|
||
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
The components of accumulated other comprehensive loss consist of the following:
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Unrecognized pension cost, net of tax of $ |
|
$ |
( |
) |
|
$ |
( |
) |
Note 14 – Employee Benefit Plans
The Company has a qualified, defined benefit pension plan that was established to provide benefits to certain employees. The plan is frozen and participants are no longer accruing benefits. Generally, contributions to the plan are not less than the minimum amounts required under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and not more than the maximum amount that can be deducted for federal income tax purposes. The plan’s assets are held by independent trustees and consist primarily of equity and fixed income securities.
The Company has elected to utilize a full yield curve approach in estimating the interest component for pension benefits by applying the specific spot rates along the yield curve used in determining the benefit obligation to the relevant projected cash flows.
The changes in benefit obligation, change in plan assets and funded status as of December 31, 2021 and 2020, are as follows:
|
|
|
Pension Benefits |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
Change in benefit obligation |
|
|
|
|
|
|
|
|
||
Benefit obligation – Beginning of year |
|
|
$ |
|
|
|
$ |
|
||
Interest cost |
|
|
|
|
|
|
|
|
||
Actuarial (gain) loss |
|
|
|
( |
) |
|
|
|
|
|
Benefits paid |
|
|
|
( |
) |
|
|
|
( |
) |
Benefit obligation – End of year |
|
|
|
|
|
|
|
|
||
Change in plan assets |
|
|
|
|
|
|
|
|
||
Plan assets – Beginning of year |
|
|
|
|
|
|
|
|
||
Return on plan assets |
|
|
|
|
|
|
|
|
||
Benefits paid |
|
|
|
( |
) |
|
|
|
( |
) |
Plan assets at fair value – End of year |
|
|
|
|
|
|
|
|
||
Funded status of plans – End of year |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
53
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
|
Pension Benefits |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
Amounts recognized in the Consolidated Balance Sheets |
|
|
|
|
|
|
|
|
||
Current liabilities |
|
|
$ |
|
|
|
$ |
|
||
Noncurrent liabilities |
|
|
|
( |
) |
|
|
|
( |
) |
Net amount recognized at December 31 |
|
|
$ |
( |
) |
|
|
$ |
( |
) |
Amounts recognized in accumulated other comprehensive loss but not yet recognized in earnings at December 31, 2021 and 2020, are as follows:
|
|
|
Pension Benefits |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
|
|
|
|
|
|
|
|
|
||
Net actuarial loss |
|
|
$ |
|
|
|
$ |
|
||
|
|
|
$ |
|
|
|
$ |
|
||
Components of net periodic benefit cost for the years ended December 31, 2021 and 2020, are as follows:
|
|
|
Pension Benefits |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
Components of net periodic benefit cost |
|
|
|
|
|
|
|
|
||
Interest cost |
|
$ |
|
|
|
$ |
|
|
||
Expected return on plan assets |
|
|
|
( |
) |
|
|
|
( |
) |
Amortization of unrecognized net loss (gain) |
|
|
|
|
|
|
|
|
||
Total net periodic (income) benefit cost |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
The increase (decrease) in accumulated other comprehensive loss (pre-tax) for the years ended December 31, 2021 and 2020, are as follows:
|
|
|
Pension Benefits |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
Net actuarial (gain) loss |
|
|
$ |
( |
) |
|
|
$ |
|
|
Amortization of net actuarial (gain) loss |
|
|
|
( |
) |
|
|
|
( |
) |
Total recognized in accumulated other comprehensive loss |
|
|
$ |
( |
) |
|
|
$ |
|
|
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2021:
|
|
|
Pension Benefits |
|
|
|
|
|
|
|
|
2022 |
|
|
$ |
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 through 2031 |
|
|
|
|
|
The Company is
The assumptions used to determine end of year benefit obligations are shown in the following table:
54
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
|
Pension Benefits |
|||
|
|
|
2021 |
|
|
2020 |
Discount rates |
|
|
|
|
||
The discount rate is determined using a yield curve model that uses yields on high quality corporate bonds (AA rated or better) to produce a single equivalent rate. The yield curve model excludes callable bonds except those with make-whole provisions, private placements and bonds with variable rates.
In October 2021, the Society of Actuaries issued base mortality table Pri-2012 which is split by retiree and contingent survivor tables and includes mortality improvement assumptions for U.S. plans, scale (MP-2021with COVID adjustment), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2020) were developed. The Company has historically utilized the Society of Actuaries’ published mortality data in its plan assumptions. Accordingly, the Company adopted Pri-2012 with MP-2021 for purposes of measuring its pension obligations at December 31, 2021.
The 2021 actuarial gain of $
The assumptions used in the measurement of net periodic cost are shown in the following table:
|
|
|
Pension Benefits |
||||
|
|
|
2021 |
|
|
2020 |
|
Discount rate for benefit obligations |
|
|
|
|
|
||
Expected return on plan assets |
|
|
|
|
|
||
Rate for interest on benefit obligations |
|
|
|
|
|
||
Discount rate for service cost |
|
|
N/A |
|
|
N/A |
|
The Company’s pension plan’s weighted average asset allocations at December 31, 2021 and 2020, and target allocations for 2022, by asset category, are as follows:
|
|
|
Plan Assets at December 31, |
|
|
|
|
||||||
|
|
|
|
|
|
Target Allocation |
|
||||||
|
|
|
2021 |
|
|
2020 |
|
|
2022 |
|
|||
Asset Category |
|
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents |
|
|
|
% |
|
|
% |
|
|
||||
Equity securities |
|
|
|
% |
|
|
% |
|
|
||||
Fixed income securities |
|
|
|
% |
|
|
% |
|
|
||||
Real estate |
|
|
|
% |
|
|
% |
|
|
||||
|
|
|
|
% |
|
|
% |
|
|
% |
|||
The basic goal underlying the pension plan investment policy is to ensure that the assets of the plans, along with expected plan sponsor contributions, will be invested in a prudent manner to meet the obligations of the plans as those obligations come due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within the capital markets to protect asset values against adverse movements in any one market. The Company’s investment strategy balances the requirement to maximize returns using potentially higher return
generating assets, such as equity securities, with the need to manage the risk of such investments with less volatile assets, such as fixed-income securities. Investment practices must comply with the requirements of ERISA and any other applicable laws and regulations. The Company, in consultation with its investment advisors, has determined a targeted allocation of invested assets by category and it works with its advisors to reasonably maintain the actual allocation of assets near the target. The long term return on assets was estimated based upon historical market
55
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
performance, expectations of future market performance for debt and equity securities and the related risks of various allocations between debt and equity securities. Numerous asset classes with differing expected rates of return, return volatility and correlations are utilized to reduce risk through diversification.
The Company’s pension plan assets are invested in one mutual fund for each fund classification.
Pension Plan Assets |
|
|
As of December 31, 2021 |
|
||||||||||||||||
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
||||
Mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income funds |
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
||
Large cap funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Small cap funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
International funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Real estate funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Cash and equivalents |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Total |
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
||
Pension Plan Assets |
|
|
As of December 31, 2020 |
|
||||||||||||||||
|
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
||||
Mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed income funds |
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
||
Large cap funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Small cap funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
International funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Real estate funds |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Cash and equivalents |
|
|
|
|
|
|
|
- |
|
|
|
|
- |
|
|
|
|
|
||
Total |
|
|
$ |
|
|
|
$ |
- |
|
|
|
$ |
- |
|
|
|
$ |
|
||
The Company also maintains qualified defined contribution plans, which provide benefits to their employees based on employee contributions and employee earnings, with discretionary contributions allowed. Expenses related to these plans were $
Note 15 - Income Taxes
The provision (benefit) for income taxes for the periods indicated includes current and deferred components as follows:
|
|
|
Year Ended December 31 |
|
||||||
|
|
|
2021 |
|
|
|
2020 |
|
||
Current Tax Expense/(Benefit) |
|
|
|
|
|
|
|
|
||
Federal |
|
$ |
|
( |
) |
|
$ |
|
( |
) |
Foreign |
|
|
|
|
|
|
|
|
||
State |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Deferred Tax Expense/(Benefit) |
|
|
|
|
|
|
|
|
||
Federal |
|
|
|
|
|
|
|
|
||
Foreign |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
) |
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
|
||
56
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The (provision) benefit for income taxes for the periods indicated differs from the amounts computed by applying the federal statutory rate as follows:
|
|
|
|
|
|
Year Ended December 31 |
|
|
|||||||
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
||||
Statutory U.S. federal income tax rate |
|
|
|
% |
|
|
|
|
% |
||||||
State income taxes, net of federal tax benefit |
|
|
|
% |
|
|
|
|
% |
||||||
Valuation allowance |
|
|
( |
) |
% |
|
|
|
( |
) |
% |
||||
Foreign Rate Differential |
|
|
( |
) |
% |
|
|
|
( |
) |
% |
||||
State rate and other changes on deferred taxes |
|
|
|
% |
|
|
|
( |
) |
% |
|||||
Federal and state tax credits |
|
|
|
% |
|
|
|
|
% |
||||||
Nondeductible expenses and other |
|
|
( |
) |
% |
|
|
|
( |
) |
% |
||||
Effective income tax rate |
|
|
( |
) |
% |
|
|
|
( |
) |
% |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Deferred income taxes result from temporary differences in the financial and tax basis of assets and liabilities.
Components of deferred tax assets (liabilities) consisted of the following:
|
|
December 31, 2021 |
|
|
December 31, 2020 |
|
||||||||||
Description |
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|||||
Accrued post-retirement and pension benefits |
|
$ |
|
|
$ |
- |
|
|
$ |
|
|
$ |
- |
|
||
Intangible assets |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Accrued expenses |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Deferred state and local incentive revenue |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Inventory valuation |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Property, plant and equipment and railcars on operating leases |
|
|
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
Net operating loss and tax credit carryforwards |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Stock-based compensation expense |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Other |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
Right of use asset |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Lease liability |
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
||
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Valuation Allowance |
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
Deferred tax assets (liabilities) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Increase (decrease) in valuation allowance |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management has concluded that, based on evaluation of the positive and negative evidence, primarily the history of operating losses, we will not more likely than not realize the benefit of the deferred tax assets. The Company has certain pretax state net operating loss carryforwards of $
The Company does
57
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
as a component of income tax expense. However, as there are no unrecognized tax benefits for the year ended 2021 and 2020, the Company has
The Company and/or its subsidiaries file income tax returns with the U.S. federal government and in various state and foreign jurisdictions.
Jurisdiction |
|
|
|
|
|
Earliest Year |
U.S. Federal |
|
|
|
|
|
|
States: |
|
|
|
|
|
|
Pennsylvania |
|
|
|
|
|
|
Texas |
|
|
|
|
|
|
Illinois |
|
|
|
|
|
|
Virginia |
|
|
|
|
|
|
Colorado |
|
|
|
|
|
|
Indiana |
|
|
|
|
|
|
Nebraska |
|
|
|
|
|
|
Alabama |
|
|
|
|
|
|
Foreign: |
|
|
|
|
|
|
China |
|
|
|
|
|
|
Mexico |
|
|
|
|
|
Note 16 - Stock-Based Compensation
The Company’s incentive compensation plans, titled “The 2005 Long Term Incentive Plan” (as restated to incorporate all amendments, the “2005 Plan”) and “The FreightCar America, Inc. 2018 Long Term Incentive Plan (the “2018 Plan” and, collectively, the “Incentive Plans”), were approved by the Company’s board of directors and ratified by the stockholders. The Incentive Plans provide for the grant to eligible persons of stock options, share appreciation rights (“SAR”), restricted shares, restricted share units (“RSU”), performance shares, performance units, dividend equivalents and other share-based awards, referred to collectively as the awards. Time-vested stock option awards generally vest based on to
Stock Options
The Company recognizes stock-based compensation expense for time-vested stock option awards based on the fair value of the award on the grant date using the Black-Scholes option valuation model. Expected life in years for time-vested stock option awards was determined using the simplified method. The Company believes that it is appropriate to use the simplified method in determining the expected life for time-vested stock options because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for time-vested stock options. Expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury bond rate for the expected life of the option. The expected dividend yield was based on the latest annualized dividend rate and the current market price of the underlying common stock on the date of the grant. The Company recognizes stock-based compensation for restricted stock awards over the vesting period based on the fair market value of the stock on the date of the award, calculated as the average of the high and low trading prices for the Company’s common stock on the award date.
58
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Grant date fair values of time-vested stock option awards were estimated using the Black-Scholes option valuation model with the following assumptions:
|
|
|
|
|
|
|
|
Expected |
|
Risk Free |
|
Grant Date |
|
|
|
|
|
|
|
|
Expected |
|
Dividend |
|
Interest |
|
Fair Value |
|
|
Grant Year |
|
Grant Date |
|
Expected Life |
|
Volatility |
|
Yield |
|
Rate |
|
Per Award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
A summary of the Company’s time-vested stock options activity and related information at December 31, 2021 and 2020, and changes during the years then ended, is presented below:
|
|
|
|
|
December 31, |
|
|
|
|
|||||||
|
|
2021 |
|
|
2020 |
|
||||||||||
|
|
|
|
|
Weighted- |
|
|
|
|
|
Weighted- |
|
||||
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
||||
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
||||
|
|
Options |
|
|
Price |
|
|
Options |
|
|
Price |
|
||||
|
|
Outstanding |
|
|
(per share) |
|
|
Outstanding |
|
|
(per share) |
|
||||
Outstanding at the beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
||
Exercised |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited or expired |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Outstanding at the end of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at the end of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
A summary of the Company’s time vested stock options outstanding as of December 31, 2021 is presented below:
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Weighted- |
|
|
|
|
||||
|
|
|
|
|
Remaining |
|
|
Average |
|
|
|
|
||||
|
|
|
|
|
Contractual |
|
|
Exercise |
|
|
Aggregate |
|
||||
|
|
Options |
|
|
Term |
|
|
Price |
|
|
Intrinsic |
|
||||
|
|
Outstanding |
|
|
(in years) |
|
|
(per share) |
|
|
Value |
|
||||
Options outstanding |
|
|
|
|
|
|
|
$ |
|
|
$ |
- |
|
|||
Vested or expected to vest |
|
|
|
|
|
|
|
$ |
|
|
$ |
- |
|
|||
Options exercisable |
|
|
|
|
|
|
|
$ |
|
|
$ |
- |
|
|||
There were
59
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Stock Appreciation Rights
2020 Grants of Stock Appreciation Rights
During 2020, the Company granted
2021 Grants of Stock Appreciation Rights
During 2021, the Company granted
The 2021 cash settled stock appreciation rights are classified as liabilities. Because vesting of the 2021 cash settled stock appreciation rights included a market condition, the grant date fair market value of the 2021 cash settled stock appreciation rights of $
The estimated fair value of the cash settled stock appreciation rights as of December 31, 2021 was $
The fair value of cash settled stock appreciation rights as of December 31, 2021 was estimated using the Black-Scholes option valuation model with the following assumptions:
60
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
Expected |
|
Risk Free |
|
|
|
|
|
|
|
|
|
|
Expected |
|
Dividend |
|
Interest |
|
Fair Value |
|
|
Grant Year |
|
Grant Date |
|
Expected Life |
|
Volatility |
|
Yield |
|
Rate |
|
Per Award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
|
|
|
|
|
|
$ |
|
|||||||
A summary of the Company’s cash settled stock appreciation rights activity and related information at December 31, 2021 and 2020 and changes during the year is presented below:
|
|
|
|
|
December 31, |
|
|
|
|
|||||||
|
|
2021 |
|
|
2020 |
|
||||||||||
|
|
|
|
|
Weighted- |
|
|
|
|
|
Weighted- |
|
||||
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
||||
|
|
|
|
|
Exercise |
|
|
|
|
|
Exercise |
|
||||
|
|
SARS |
|
|
Price |
|
|
SARS |
|
|
Price |
|
||||
|
|
Outstanding |
|
|
(per share) |
|
|
Outstanding |
|
|
(per share) |
|
||||
Outstanding at the beginning of the year |
|
|
|
|
$ |
|
|
|
- |
|
|
$ |
- |
|
||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
- |
|
|
|
- |
|
|
Forfeited or expired |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Outstanding at the end of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercisable at the end of the year |
|
|
|
|
$ |
|
|
|
- |
|
|
$ |
- |
|
||
A summary of the Company’s cash settled stock appreciation rights outstanding as of December 31, 2021 is presented below:
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Weighted- |
|
|
|
|
||||
|
|
|
|
|
Remaining |
|
|
Average |
|
|
|
|
||||
|
|
|
|
|
Contractual |
|
|
Exercise |
|
|
Aggregate |
|
||||
|
|
SARS |
|
|
Term |
|
|
Price |
|
|
Intrinsic |
|
||||
|
|
Outstanding |
|
|
(in years) |
|
|
(per share) |
|
|
Value |
|
||||
SARS outstanding |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Vested or expected to vest |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
SARS exercisable |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
Restricted Shares
A summary of the Company’s nonvested restricted shares as of December 31, 2021 and 2020, and changes during the years then ended is presented below:
61
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
December 31, |
|
|
|
|
|||||||
|
|
2021 |
|
|
2020 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
Weighted- |
|
|
|
|
|
Weighted- |
|
||||
|
|
|
|
|
Average |
|
|
|
|
|
Average |
|
||||
|
|
|
|
|
Grant Date |
|
|
|
|
|
Grant Date |
|
||||
|
|
|
|
|
Fair Value |
|
|
|
|
|
Fair Value |
|
||||
|
|
Shares |
|
|
(per share) |
|
|
Shares |
|
|
(per share) |
|
||||
Nonvested at the beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Nonvested at the end of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Expected to vest |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The fair value of stock awards vested during the years ended December 31, 2021 and 2020, was $
Stock-based compensation expense of $
Note 17 - Risks and Contingencies
The Company is involved in various warranty and repair claims and, in certain cases, related pending and threatened legal proceedings with its customers in the normal course of business. In the opinion of management, the Company’s potential losses in excess of the accrued warranty and legal provisions, if any, are not expected to be material to the Company’s consolidated financial condition, results of operations or cash flows.
As part of a settlement agreement reached with
In addition to the foregoing, the Company is involved in certain other pending and threatened legal proceedings, including commercial disputes and workers’ compensation and employee matters arising out of the conduct of its business. The Company has reserved $
Note 18 – Earnings Per Share
The weighted average common shares outstanding are as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
|
|
|
|
|
|
|
||
Weighted average common shares outstanding |
|
|
|
|
|
|
||
Issuance of warrants |
|
|
|
|
|
|
||
Weighted average common shares outstanding - basic |
|
|
|
|
|
|
||
Weighted average common shares outstanding - diluted |
|
|
|
|
|
|
||
62
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
The Company computes earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities. The Company’s participating securities are its grants of restricted stock which contain non-forfeitable rights to dividends. The Company allocates earnings between both classes; however, in periods of undistributed losses, they are only allocated to common shares as the unvested restricted stockholders do not contractually participate in losses of the Company. The Company computes basic earnings per share by dividing net income allocated to common shareholders by the weighted average number of shares outstanding during the year. Warrants issued in connection with the Company's long-term debt were issued at a nominal exercise price and are considered outstanding at the date of issuance. Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year. Weighted average diluted common shares outstanding include the incremental shares that would be issued upon the assumed exercise of stock options and the assumed vesting of nonvested share awards. For the years ended December 31, 2021 and 2020,
Note 19 – Revenue Sources and Concentration of Sales
The following table sets forth the Company’s sales resulting from various revenue sources for the periods indicated below:
|
Year Ended December 31, |
|
|||||
|
2021 |
|
|
2020 |
|
||
Railcar sales |
$ |
|
|
$ |
|
||
Parts sales |
|
|
|
|
|
||
Leasing revenues |
|
|
|
|
|
||
Total revenues |
$ |
|
|
$ |
|
||
Due to the nature of its operations, the Company is subject to significant concentration of risks related to business with a few customers. Sales to the Company’s top three customers accounted for
Note 20 – Segment Information
The Company’s operations comprise
Segment operating income is an internal performance measure used by the Company’s Chief Operating Decision Maker to assess the performance of each segment in a given period. Segment operating income includes all external revenues attributable to the segments as well as operating costs and income that management believes are directly attributable to the current production of goods and services. The Company’s management reporting package does not include interest revenue, interest expense or income taxes allocated to individual segments and these items are not considered as a component of segment operating income. Segment assets represent operating assets and exclude intersegment accounts, deferred tax assets and income tax receivables. The Company does not allocate cash and cash equivalents to its operating segments as the Company’s treasury function is managed at the corporate level. Intersegment revenues were not material in any period presented.
63
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
|
|
Year Ended |
|
|
|||||
|
|
December 31, |
|
|
|||||
|
|
2021 |
|
|
2020 |
|
|
||
Revenues: |
|
|
|
|
|
|
|
||
Manufacturing |
|
$ |
|
|
$ |
|
|
||
Corporate and Other |
|
|
|
|
|
|
|
||
Consolidated revenues |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Operating loss: |
|
|
|
|
|
|
|
||
Manufacturing (1) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Corporate and Other |
|
|
( |
) |
|
|
( |
) |
|
Consolidated operating loss |
|
|
( |
) |
|
|
( |
) |
|
Consolidated interest expense |
|
|
( |
) |
|
|
( |
) |
|
Gain (loss) on change in fair market value of warrant liability |
|
|
( |
) |
|
|
( |
) |
|
Gain on extinguishment of debt |
|
|
|
|
|
|
|
||
Consolidated other income |
|
|
|
|
|
|
|
||
Consolidated loss before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
||
Depreciation and amortization: |
|
|
|
|
|
|
|
||
Manufacturing |
|
$ |
|
|
$ |
|
|
||
Corporate and Other |
|
|
|
|
|
|
|
||
Consolidated depreciation and amortization |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Capital expenditures: |
|
|
|
|
|
|
|
||
Manufacturing |
|
$ |
|
|
$ |
|
|
||
Corporate and Other |
|
|
|
|
|
|
|
||
Consolidated capital expenditures |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
(1) Results for the year ended December 31, 2021 include restructuring and impairment charges of $ |
|||||||||
|
|
December 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Assets: |
|
|
|
|
|
|
||
Manufacturing |
|
$ |
|
|
$ |
|
||
Corporate and Other |
|
|
|
|
|
|
||
Total operating assets |
|
|
|
|
|
|
||
Consolidated income taxes receivable |
|
|
|
|
|
|
||
Consolidated assets |
|
$ |
|
|
$ |
|
||
Geographic Information |
|
|||||||||||||||
|
|
Revenues |
|
|
Long Lived Assets(a) |
|
||||||||||
|
|
Year Ended |
|
|
|
|
|
|
|
|||||||
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Mexico |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
(a) Long lived assets include property, plant and equipment, net, railcars available for lease, and ROU assets. |
|
|||||||||||||||
64
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Note 21 – Acquisition
On October 16, 2020, FreightCar America, Inc. (the “Company”), through its wholly owned subsidiary, FreightCar North America, LLC (f/k/a FCAI Holdings, LLC) (“FreightCar North America”), entered into an equity purchase agreement (the “Equity Purchase Agreement”) with Fasemex, Inc. (the “US Seller”), Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex Mexico”) and Agben de Mexico, S.A. de C.V. (“Agben” and, together with Fasemex Mexico, the “MX Sellers”, and the MX Sellers, together with the US Seller, the “Sellers”). Pursuant to the Equity Purchase Agreement, FreightCar North America acquired from Sellers
The JV Companies collectively represented the Company’s joint venture with the Sellers to manufacture railcars in Castaños, which was formed in September 2019. Prior to the execution of the Equity Purchase Agreement, FreightCar North America owned a
The consideration for the Seller Interests includes $
The Equity Purchase Agreement contains certain customary representations, warranties, indemnities and covenants, including a non-competition covenant from the Sellers and their affiliates until the later of
Note 22 – Related Parties
The following persons are owners of Fasemex: Jesus Gil, VP Operations and director of the Company; Alejandro Gil and Salvador Gil, siblings of Jesus Gil. Fasemex provides steel fabrication services to the Company and, at December 31, 2021, was the lessor for the Company’s leased facility in Castaños. The Company paid $
The Company paid $
65
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2021 and 2020
(in thousands, except for share and per share data)
Note 23 – Subsequent Events
On February 23, 2022, the Loan Parties and Siena Lending Group LLC ( the "Revolving Loan Lender") entered into a First Amendment to Amended and Restated Loan and Security Agreement (the “First Amendment to Amended and Restated Loan and Security Agreement”), pursuant to which, among other things, the Maximum Revolving Facility Amount was increased to $
Revolving Loans outstanding under the First Amendment to Amended and Restated Loan and Security Agreement bear interest, subject to the provisions of the First Amendment to Amended and Restated Loan and Security Agreement, at a rate of
66
Item 9A. Controls and Procedures.
Remediation of Material Weakness
During the quarter ended September 30, 2021, management concluded the Company’s controls were ineffective to ensure the existence of inventory at its Mexico facility. During the quarter ended December 31, 2021, we determined that we maintained effective controls over our inventory processes and the material weakness was remediated.
With oversight from the Audit Committee, we took significant steps to remediate our internal control deficiencies in our inventory processes by redesigning our controls. Our efforts consisted of implementing new policies over the operational processes supporting inventory and production reporting to ensure that inventory and cost of goods sold was recorded at the appropriate amounts in the proper periods as well as implementing a quarterly full physical inventory count. During 2021, we completed the necessary testing to conclude that the material weakness has been remediated as of December 31, 2021.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by our annual report on Form 10-K for the fiscal year ended December 31, 2021 (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management, under the supervision of the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by the board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that:
As of the end of the Company’s 2021 fiscal year, management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and board of directors regarding the reliability of financial records used in
67
preparation of the Company’s published financial statements. As all internal control systems have inherent limitations, even systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Based on its assessment, management has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2021.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
Other than described above, there has been no change in our internal control over financial reporting during the last fiscal quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Because the Company qualifies as a smaller reporting company, it is not required to obtain an attestation of their internal control over financial reporting by an outside independent registered public accounting firm.
Item 9B. Other Information.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 21, 2022, the Company announced that it has appointed Michael A. Riordan, the Company’s current Chief Accounting Officer and Controller, to also serve as its Vice President, Finance, Chief Financial Officer, and Treasurer, effective March 21, 2022 (the “Effective Date”). Mr. Riordan will succeed Terrence R. Rogers, who served as Vice President, Finance, Chief Financial Officer, Treasurer and Corporate Secretary for the Company until the Effective Date, at which time he became a non-executive employee of the Company and will serve in an advisory role for a transition period.
Mr. Riordan, age 37, joined the Company in November 2020 and, in addition to his new positions with the Company, currently serves as the Company’s Chief Accounting Officer and Controller. He has over 15 years of experience in finance, accounting and operations. Prior to joining the Company, Mr. Riordan was Controller at InnerWorkings from 2017 to 2020. Prior to joining InnerWorkings, Mr. Riordan served in several financial management positions at Wheatland Tube, LLC, a subsidiary of Zekelman Industries, from 2013 to 2017. Mr. Riordan also held various positions at PricewaterhouseCoopers. He holds a bachelor’s degree in Accounting and Finance from Miami University and is a Certified Public Accountant.
There are no family relationships between Mr. Riordan and any of the directors and executive officers of the Company, nor are there transactions in which Mr. Riordan has an interest requiring disclosure under Item 404(a) of Regulation S-K. Except for Mr. Riordan’s letter agreement with the Company (described below), there are no arrangements or understandings between Mr. Riordan and the Company, its officers or directors, or, to the Company’s knowledge, any other person, pursuant to which Mr. Riordan was selected as an officer of the Company.
In connection with Mr. Riordan’s appointment, the Company and Mr. Riordan entered into a letter agreement regarding the terms of employment (the “Agreement”) dated March 18, 2022 and effective as of the Effective Date.
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A description of the material terms of the Agreement is set forth above, which is qualified in its entirety by reference to its full text, a copy of which will be filed as an exhibit to the Company’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2022.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Information required to be disclosed by this item is hereby incorporated by reference to the information under the captions “Governance of the Company,” “Stock Ownership,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Executive Officers,” “Compensation Overview” and “Executive Compensation” in our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2021.
Item 11. Executive Compensation.
Information required to be disclosed by this item is hereby incorporated by reference to the information under the captions “Executive Compensation,” “Board of Directors,” “Compensation Overview and “Director Compensation” in our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information required to be disclosed by this item is hereby incorporated by reference to the information under the caption “Stock Ownership” in our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2021.
EQUITY COMPENSATION PLAN INFORMATION
This table contains information as of December 31, 2021 about the Company’s equity compensation plans, all of which have been approved by the Company’s stockholders.
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Number of common shares to be issued upon exercise of outstanding options, warrants and rights |
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Weighted-average exercise price of outstanding options, warrants and rights |
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Number of common shares remaining available for future issuance under equity compensation plans (excluding common shares reflected in the first column) |
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Equity compensation plans approved by stockholders |
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1,575,206 |
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(1) |
$ |
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9.14 |
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(2) |
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1,224,480 |
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(3) |
Equity compensation plans not approved by stockholders |
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- |
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N/A |
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- |
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1,575,206 |
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$ |
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9.14 |
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1,224,480 |
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|
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Information required to be disclosed by this item is hereby incorporated by reference to the information under the captions “Certain Transactions” and “Board of Directors” in our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2021.
Item 14. Principal Accounting Fees and Services.
Information required to be disclosed by this item is hereby incorporated by reference to the information under the caption “Fees of Independent Registered Public Accounting Firm and Audit Committee Report” in our definitive Proxy Statement to be filed pursuant to Regulation 14A, which Proxy Statement is anticipated to be filed with the Securities and Exchange Commission within 120 days after the end of our fiscal year ended December 31, 2021.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Exhibits
The following financial statements are included in this Form10-K:
1. Consolidated Financial Statements of FreightCar America, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm,
Report of Independent Registered Public Accounting Firm,
Consolidated Balance Sheets as of December 31, 2021 and 2020.
Consolidated Statements of Operations for the years ended December 31, 2021 and 2020.
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020..
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021 and 2020..
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020.
Notes to Consolidated Financial Statements.
2. The exhibits listed on the “Exhibit Index” to this Form 10-K are filed with this Form 10-K or incorporated by reference as set forth below.
None.
Item 16. Form 10-K Summary.
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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FREIGHTCAR AMERICA, INC. |
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Date: March 21, 2022 |
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By: |
/s/ JAMES R. MEYER |
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James R. Meyer |
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President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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s/ JAMES R. MEYER James R. Meyer |
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President and Chief Executive Officer (principal executive officer) and Director |
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March 21, 2022 |
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/s/ MICHAEL A. RIORDAN Michael A. Riordan |
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Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer) |
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March 21, 2022 |
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/s/ WILLIAM D. GEHL William D. Gehl |
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Chairman of the Board and Director |
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March 21, 2022 |
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/s/ ELIZABETH K. ARNOLD Elizabeth K. Arnold |
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Director |
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March 21, 2022 |
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/s/ JESUS SALVADOR GIL BENAVIDES Jesus Salvador Gil Benavides |
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Director |
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March 21, 2022 |
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/s/ MALCOLM F. MOORE Malcolm F. Moore |
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Director |
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March 21, 2022 |
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/s/ ANDREW B. SCHMITT Andrew B. Schmitt |
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Director |
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March 21, 2022 |
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EXHIBIT INDEX
2.1 |
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2.2 |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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10.1 |
|
10.2 |
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10.3 |
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10.4 |
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10.5 |
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10.6 |
|
10.7 |
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10.8 |
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10.9 |
FreightCar America, Inc. 2018 Long Term Incentive Plan (incorporated by reference to Appendix I to the Company’s Proxy Statement for the annual meeting of stockholders held on May 10, 2018 filed with the Commission on March 30, 2018). |
10.10 |
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10.11 |
73
10.12 |
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10.13 |
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10.14 |
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10.15 |
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10.16 |
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10.17 |
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10.18 |
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10.19 |
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10.20 |
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10.21 |
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10.22 |
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10.23 |
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10.24 |
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10.25 |
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10.26 |
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10.27 |
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10.28 |
74
10.29 |
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10.30 |
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10.31 |
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10.32 |
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10.33 |
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10.34 |
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10.35 |
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10.36 |
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10.37 |
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10.38 |
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10.39 |
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10.40 |
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10.41 |
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10.42 |
75
10.43 |
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10.44 |
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10.45 |
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10.46 |
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10.47 |
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10.48 |
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10.49 |
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10.50 |
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10.51 |
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10.52 |
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10.53 |
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10.54 |
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10.55 |
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10.56 |
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10.57 |
Amendment No. 4 to Credit Agreement dated as of December 30, 2021. † |
10.58 |
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10.59 |
Warrant issued by the Company to CO Finance LVS VI LLC dated as of December 30, 2021. † |
10.60 |
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10.61 |
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10.62 |
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21 |
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23.1 |
76
23.2 |
|
31.1 |
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31.2 |
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32 |
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99.1 |
Press release of FreightCar America, Inc. dated March 21, 2022 |
101.INS |
Inline XBRL Instance Document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
101PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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Exhibit 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Confidential treatment has been granted for the redacted portions of this exhibit. A complete copy of the exhibit, including the redacted portions, has been filed separately with the Securities and Exchange Commission.
** Portions of this document have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
† Filed herewith
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