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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2024

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-51237

FREIGHTCAR AMERICA, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

25-1837219

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

125 South Wacker Drive, Suite 1500

Chicago, Illinois

 

60606

(Address of principal executive offices)

 

(Zip Code)

(800) 458-2235

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

RAIL

The Nasdaq Global Market

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.

Yes No

 

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes No

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

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

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.

 

 

As of August 6, 2024, there were 18,873,850 shares of the registrant’s common stock outstanding.


 

FREIGHTCAR AMERICA, INC.

INDEX TO FORM 10-Q

 

 

 

Item
Number

 

Page
Number

 

PART I – FINANCIAL INFORMATION

 

1.

Financial Statements:

 

 

Condensed Consolidated Balance Sheets (Unaudited) as of
June 30, 2024 and December 31, 2023

3

 

Condensed Consolidated Statements of Operations (Unaudited) for the
Three and Six Months Ended June 30, 2024 and 2023

4

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the
Three and Six Months Ended June 30, 2024 and 2023

5

 

Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Deficit (Unaudited) for the
Three and Six Months Ended June 30, 2024 and 2023

6

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the
Six Months Ended June 30, 2024 and 2023

8

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

4.

Controls and Procedures

24

 

PART II – OTHER INFORMATION

 

1.

Legal Proceedings

25

2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

3.

Defaults Upon Senior Securities

25

4.

Mine Safety Disclosures

25

5.

Other Information

25

6.

Exhibits

25

Signatures

26

 

 

 

2


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FreightCar America, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except for share data)

(Unaudited)

 

 

 

June 30,
2024

 

 

December 31,
2023

 

Assets

 

 

 

Current assets

 

 

 

 

 

 

Cash, cash equivalents and restricted cash equivalents

 

$

39,370

 

 

$

40,560

 

Accounts receivable, net of allowance for doubtful accounts of $88 and $18 respectively

 

 

12,815

 

 

 

6,408

 

VAT receivable

 

 

2,895

 

 

 

2,926

 

Inventories, net

 

 

64,479

 

 

 

125,022

 

Assets held for sale

 

 

629

 

 

 

 

Related party asset

 

 

1,010

 

 

 

638

 

Prepaid expenses

 

 

5,915

 

 

 

4,867

 

Total current assets

 

 

127,113

 

 

 

180,421

 

Property, plant and equipment, net

 

 

30,489

 

 

 

31,258

 

Railcars available for lease, net

 

 

 

 

 

2,842

 

Right of use asset operating lease

 

 

2,620

 

 

 

2,826

 

Right of use asset finance lease

 

 

44,507

 

 

 

40,277

 

Other long-term assets

 

 

2,492

 

 

 

1,835

 

Total assets

 

$

207,221

 

 

$

259,459

 

Liabilities, Mezzanine Equity and Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts and contractual payables

 

$

45,102

 

 

$

84,417

 

Related party accounts payable

 

 

1,083

 

 

 

2,478

 

Accrued payroll and other employee costs

 

 

5,255

 

 

 

5,738

 

Accrued warranty

 

 

1,361

 

 

 

1,602

 

Customer deposits

 

 

8,709

 

 

 

 

Current portion of long-term debt

 

 

 

 

 

29,415

 

Other current liabilities

 

 

6,616

 

 

 

13,711

 

Total current liabilities

 

 

68,126

 

 

 

137,361

 

Warrant liability

 

 

52,342

 

 

 

36,801

 

Accrued pension costs

 

 

1,165

 

 

 

1,046

 

Lease liability operating lease, long-term

 

 

2,909

 

 

 

3,164

 

Lease liability finance lease, long-term

 

 

45,747

 

 

 

41,273

 

Other long-term liabilities

 

 

2,016

 

 

 

2,562

 

Total liabilities

 

 

172,305

 

 

 

222,207

 

Commitments and contingencies

 

 

 

 

 

 

Mezzanine equity

 

 

 

 

 

 

Series C Preferred stock, $0.01 par value, 85,412 shares authorized, 85,412 shares issued and outstanding at each of June 30, 2024 and December 31, 2023, respectively. Liquidation value $103,712 and $95,048 at June 30, 2024 and December 31, 2023, respectively.

 

 

83,745

 

 

 

83,458

 

Stockholders’ deficit

 

 

 

 

 

 

Preferred stock, $0.01 par value, 2,500,000 shares authorized (100,000 shares each
   designated as Series A voting and Series B non-voting,
0 shares issued and outstanding
   at June 30, 2024 and December 31, 2023)

 

 

 

 

 

 

Common stock, $0.01 par value, 50,000,000 shares authorized, 18,873,850 and 17,903,437
   shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

 

 

220

 

 

 

210

 

Additional paid-in capital

 

 

96,312

 

 

 

94,067

 

Accumulated other comprehensive income

 

 

1,168

 

 

 

2,365

 

  Accumulated deficit

 

 

(146,529

)

 

 

(142,848

)

Total stockholders’ deficit

 

 

(48,829

)

 

 

(46,206

)

Total liabilities, mezzanine equity and stockholders’ deficit

 

$

207,221

 

 

$

259,459

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

3


 

FreightCar America, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except for share and per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

Revenues

 

$

147,416

 

 

$

88,596

 

 

$

308,474

 

 

$

169,595

 

Cost of sales

 

 

128,986

 

 

 

75,641

 

 

 

278,641

 

 

 

149,155

 

Gross profit

 

 

18,430

 

 

 

12,955

 

 

 

29,833

 

 

 

20,440

 

Selling, general and administrative expenses

 

 

8,510

 

 

 

5,851

 

 

 

16,003

 

 

 

12,239

 

Gain on sale of railcars available for lease

 

 

 

 

 

(622

)

 

 

 

 

 

(622

)

Litigation settlement

 

 

(3,214

)

 

 

 

 

 

(3,214

)

 

 

 

Operating income

 

 

13,134

 

 

 

7,726

 

 

 

17,044

 

 

 

8,823

 

Interest expense

 

 

(1,847

)

 

 

(4,351

)

 

 

(4,238

)

 

 

(10,951

)

Gain (loss) on change in fair market value of Warrant liability

 

 

112

 

 

 

(6,755

)

 

 

(15,541

)

 

 

(6,142

)

Loss on extinguishment of debt

 

 

 

 

 

(14,880

)

 

 

 

 

 

(14,880

)

Other expense

 

 

(725

)

 

 

(69

)

 

 

(739

)

 

 

(105

)

Income (loss) before income taxes

 

 

10,674

 

 

 

(18,329

)

 

 

(3,474

)

 

 

(23,255

)

Income tax provision (benefit)

 

 

2,497

 

 

 

560

 

 

 

(80

)

 

 

671

 

Net income (loss)

 

$

8,177

 

 

$

(18,889

)

 

$

(3,394

)

 

$

(23,926

)

Net income (loss) per common share – basic

 

$

0.12

 

 

$

(0.73

)

 

$

(0.41

)

 

$

(0.93

)

Net income (loss) per common share – diluted

 

$

0.11

 

 

$

(0.73

)

 

$

(0.41

)

 

$

(0.93

)

Weighted average common shares outstanding – basic

 

 

30,641,193

 

 

 

28,113,825

 

 

 

30,235,876

 

 

 

27,552,297

 

Weighted average common shares outstanding – diluted

 

 

32,277,506

 

 

 

28,113,825

 

 

 

30,235,876

 

 

 

27,552,297

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

4


 

FreightCar America, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,177

 

 

$

(18,889

)

 

$

(3,394

)

 

$

(23,926

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on foreign currency derivatives

 

 

(1,474

)

 

 

 

 

 

(1,267

)

 

 

 

Pension and postretirement liability adjustments

 

 

35

 

 

 

36

 

 

 

70

 

 

 

77

 

Comprehensive income (loss)

 

$

6,738

 

 

$

(18,853

)

 

$

(4,591

)

 

$

(23,849

)

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

5


 

FreightCar America, Inc.

Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Deficit

(In thousands, except for share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

FreightCar America Stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Mezzanine Equity

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Series C Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Deficit

 

Balance, March 31, 2023

 

 

-

 

 

$

-

 

 

 

 

17,702,459

 

 

$

208

 

 

$

90,165

 

 

$

1,063

 

 

$

(123,950

)

 

$

(32,514

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(18,889

)

 

 

(18,889

)

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

36

 

 

 

-

 

 

 

36

 

Issuance of Series C preferred shares, net of issuance costs

 

 

85,412

 

 

 

83,253

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(57

)

 

 

(57

)

Restricted stock awards

 

 

-

 

 

 

-

 

 

 

 

143,910

 

 

 

1

 

 

 

(1

)

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock appreciation rights

 

 

-

 

 

 

-

 

 

 

 

738

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock appreciation rights classification modification

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,738

 

 

 

-

 

 

 

-

 

 

 

1,738

 

Stock-based compensation recognized

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

582

 

 

 

-

 

 

 

-

 

 

 

582

 

Equity Fees

 

 

-

 

 

 

-

 

 

 

 

52,084

 

 

 

1

 

 

 

149

 

 

 

-

 

 

 

-

 

 

 

150

 

Balance, June 30, 2023

 

 

85,412

 

 

$

83,253

 

 

 

 

17,899,191

 

 

$

210

 

 

$

92,633

 

 

$

1,099

 

 

$

(142,896

)

 

$

(48,954

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2024

 

 

85,412

 

 

$

83,602

 

 

 

 

18,345,488

 

 

$

214

 

 

$

94,783

 

 

$

2,607

 

 

$

(154,563

)

 

$

(56,959

)

Net income

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8,177

 

 

 

8,177

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,439

)

 

 

-

 

 

 

(1,439

)

Accretion of Series C preferred shares issuance costs

 

 

-

 

 

 

143

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(143

)

 

 

(143

)

Restricted stock awards

 

 

-

 

 

 

-

 

 

 

 

211,340

 

 

 

3

 

 

 

(3

)

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options and appreciation rights

 

 

-

 

 

 

-

 

 

 

 

317,022

 

 

 

3

 

 

 

766

 

 

 

-

 

 

 

-

 

 

 

769

 

Stock-based compensation recognized

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

766

 

 

 

-

 

 

 

-

 

 

 

766

 

Balance, June 30, 2024

 

 

85,412

 

 

$

83,745

 

 

 

 

18,873,850

 

 

$

220

 

 

$

96,312

 

 

$

1,168

 

 

$

(146,529

)

 

$

(48,829

)

 

 

6


 

FreightCar America, Inc.

Condensed Consolidated Statements of Mezzanine Equity and Stockholders’ Deficit

(In thousands, except for share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

FreightCar America Stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Mezzanine Equity

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Series C Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Retained

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2022

 

 

-

 

 

$

-

 

 

 

 

17,223,306

 

 

$

203

 

 

$

89,104

 

 

$

1,022

 

 

$

(118,913

)

 

$

(28,584

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23,926

)

 

 

(23,926

)

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

77

 

 

 

-

 

 

 

77

 

Issuance of Series C preferred shares, net of issuance costs

 

 

85,412

 

 

 

83,253

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(57

)

 

 

(57

)

Restricted stock awards

 

 

-

 

 

 

-

 

 

 

 

453,258

 

 

 

4

 

 

 

(4

)

 

 

-

 

 

 

-

 

 

 

-

 

Employee stock settlement

 

 

-

 

 

 

-

 

 

 

 

(31,888

)

 

 

-

 

 

 

(106

)

 

 

-

 

 

 

-

 

 

 

(106

)

Exercise of stock appreciation rights

 

 

-

 

 

 

-

 

 

 

 

738

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock appreciation rights classification modification

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,738

 

 

 

-

 

 

 

-

 

 

 

1,738

 

Vesting of restricted stock units

 

 

-

 

 

 

-

 

 

 

 

42,815

 

 

 

-

 

 

 

145

 

 

 

-

 

 

 

-

 

 

 

145

 

Stock-based compensation recognized

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,074

 

 

 

-

 

 

 

-

 

 

 

1,074

 

Equity Fees

 

 

-

 

 

 

-

 

 

 

 

210,962

 

 

 

3

 

 

 

682

 

 

 

-

 

 

 

-

 

 

 

685

 

Balance, June 30, 2023

 

 

85,412

 

 

$

83,253

 

 

 

 

17,899,191

 

 

$

210

 

 

$

92,633

 

 

$

1,099

 

 

$

(142,896

)

 

$

(48,954

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2023

 

 

85,412

 

 

$

83,458

 

 

 

 

17,903,437

 

 

$

210

 

 

$

94,067

 

 

$

2,365

 

 

$

(142,848

)

 

$

(46,206

)

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,394

)

 

 

(3,394

)

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,197

)

 

 

-

 

 

 

(1,197

)

Accretion of Series C preferred shares issuance costs

 

 

-

 

 

 

287

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(287

)

 

 

(287

)

Restricted stock awards

 

 

-

 

 

 

-

 

 

 

 

774,796

 

 

 

8

 

 

 

(8

)

 

 

-

 

 

 

-

 

 

 

-

 

Employee stock settlement

 

 

-

 

 

 

-

 

 

 

 

(14,615

)

 

 

-

 

 

 

(40

)

 

 

-

 

 

 

-

 

 

 

(40

)

Forfeiture of restricted stock awards

 

 

-

 

 

 

-

 

 

 

 

(106,790

)

 

 

(1

)

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

Exercise of stock options and appreciation rights

 

 

-

 

 

 

-

 

 

 

 

317,022

 

 

 

3

 

 

 

766

 

 

 

-

 

 

 

-

 

 

 

769

 

Stock-based compensation recognized

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,526

 

 

 

-

 

 

 

-

 

 

 

1,526

 

Balance, June 30, 2024

 

 

85,412

 

 

$

83,745

 

 

 

 

18,873,850

 

 

$

220

 

 

$

96,312

 

 

$

1,168

 

 

$

(146,529

)

 

$

(48,829

)

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

7


 

FreightCar America, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

Net loss

 

$

(3,394

)

 

$

(23,926

)

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,810

 

 

 

2,105

 

Non-cash lease expense on right-of-use assets

 

 

1,436

 

 

 

1,307

 

Loss on change in fair market value for Warrant liability

 

 

15,541

 

 

 

6,142

 

Stock-based compensation recognized

 

 

1,526

 

 

 

(191

)

Non-cash interest expense

 

 

2,315

 

 

 

7,593

 

Loss on extinguishment of debt

 

 

 

 

 

14,880

 

Other non-cash items, net

 

 

(480

)

 

 

(472

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(6,407

)

 

 

(11,922

)

Inventories

 

 

63,723

 

 

 

(25,110

)

Accounts and contractual payables

 

 

(40,066

)

 

 

(6,050

)

Income taxes payable, net

 

 

(4,949

)

 

 

(1,456

)

Lease liability

 

 

(1,790

)

 

 

(1,991

)

Customer deposits

 

 

8,709

 

 

 

19,644

 

Other assets and liabilities

 

 

(7,099

)

 

 

(6,129

)

Net cash flows provided by (used in) operating activities

 

 

31,875

 

 

 

(25,576

)

Cash flows from investing activities

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(2,269

)

 

 

(4,954

)

Proceeds from sale of railcars available for lease, net of selling costs

 

 

 

 

 

8,356

 

Net cash flows (used in) provided by investing activities

 

 

(2,269

)

 

 

3,402

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of preferred shares, net of issuance costs

 

 

 

 

 

13,339

 

Borrowings on revolving line of credit

 

 

26,595

 

 

 

89,223

 

Repayments on revolving line of credit

 

 

(56,010

)

 

 

(105,882

)

Employee stock settlement

 

 

(40

)

 

 

(106

)

Payment for stock appreciation rights exercised

 

 

 

 

 

(6

)

Financing lease payments

 

 

(1,341

)

 

 

(307

)

Net cash flows used in financing activities

 

 

(30,796

)

 

 

(3,739

)

Net decrease in cash and cash equivalents

 

 

(1,190

)

 

 

(25,913

)

Cash, cash equivalents and restricted cash equivalents at beginning of period

 

 

40,560

 

 

 

37,912

 

Cash, cash equivalents and restricted cash equivalents at end of period

 

$

39,370

 

 

$

11,999

 

Supplemental cash flow information

 

 

 

 

 

 

Interest paid

 

$

1,930

 

 

$

3,319

 

Income taxes paid

 

$

4,207

 

 

$

1,516

 

Non-cash transactions

 

 

 

 

 

 

Change in unpaid construction in process

 

$

(210

)

 

$

332

 

Accrued PIK interest paid through issuance of PIK Note

 

$

 

 

$

3,161

 

Issuance of preferred shares in exchange of term loan

 

$

 

 

$

72,607

 

Issuance of warrants

 

$

 

 

$

3,010

 

Issuance of equity fee

 

$

 

 

$

685

 

 

 

 

 

 

 

 

 

See Notes to Condensed Consolidated Financial Statements (Unaudited).

 

8


 

FreightCar America, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(In thousands, except for share and per share data and unless otherwise noted)

 

Note 1 – Description of the Business

 

FreightCar America, Inc. (“FreightCar”, the “Company”, “we” or “our”) operates primarily in North America through its direct and indirect subsidiaries, and designs and manufactures a wide range of railroad freight cars, completes railcar rebody services and railcar conversions that repurpose idled rail assets back into revenue service, supplies railcar parts, and services freight cars. The Company designs and builds high-quality railcars, including bulk commodity cars, covered hopper cars, intermodal and non-intermodal flat cars, mill gondola cars, coil steel cars, coal cars and boxcars, and also specializes in railcar repairs, complete rebody services and the conversion of railcars for re-purposed use. The Company is headquartered in Chicago, Illinois and has facilities in the following locations: Johnstown, Pennsylvania; Qingdao, People’s Republic of China; and Castaños, Coahuila, Mexico (the “Castaños Facility”).

 

Note 2 – Basis of Presentation

 

The accompanying condensed consolidated financial statements include the accounts of FreightCar and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The foregoing financial information has been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) and rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial reporting. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. The accompanying interim financial information is unaudited; however, the Company believes the financial information reflects all adjustments (consisting of items of a normal recurring nature) necessary for a fair presentation of financial position, results of operations and cash flows in conformity with GAAP. The 2023 year-end balance sheet data was derived from the audited financial statements as of December 31, 2023. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted. Certain prior year amounts have been reclassified, where necessary, to conform to the current year presentation. These interim financial statements should be read in conjunction with the audited financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

Note 3 – Revenue Recognition

 

The following table disaggregates the Company’s revenues by major source:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Railcar sales

 

$

141,077

 

 

$

85,349

 

 

$

296,674

 

 

$

162,345

 

Parts sales

 

 

4,888

 

 

 

2,873

 

 

 

10,218

 

 

 

6,273

 

Revenues from contracts with customers

 

 

145,965

 

 

 

88,222

 

 

 

306,892

 

 

 

168,618

 

Leasing revenues

 

 

1,451

 

 

 

374

 

 

 

1,582

 

 

 

977

 

Total revenues

 

$

147,416

 

 

$

88,596

 

 

$

308,474

 

 

$

169,595

 

 

Contract Balances and Accounts Receivable

 

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 had no contract assets as of June 30, 2024 and December 31, 2023. The Company may receive cash payments from customers in advance of the Company satisfying performance obligations under its sales contracts resulting in deferred revenue or customer deposits, which are considered contract liabilities. Deferred revenue and customer deposits are classified as either current or long-term liabilities in the condensed consolidated balance sheet based on the timing of when the Company expects to recognize the related revenue. Customer deposits and deferred revenue, included in customer deposits and other current liabilities, respectively, in the Company’s condensed consolidated balance sheet, were $8,709 as of June 30, 2024 and $5,686 as of December 31, 2023 which was recognized as revenue during the first quarter of 2024. The Company has not experienced significant historical credit losses.

 

Performance Obligations

 

 

9


 

The Company is electing not to disclose the value of the remaining unsatisfied performance obligations with a duration of one year or less as permitted by ASU 2014-09, Revenue from Contracts with Customers. The Company had remaining unsatisfied performance obligations as of June 30, 2024 with expected duration of greater than one year of $119,744.

 

Note 4 – Segment Information

 

The Company’s operations consist of two operating segments, Manufacturing and Parts, and one reportable segment, Manufacturing. The Company’s Manufacturing segment includes new railcar manufacturing, railcar repairs, complete railcar rebody services, railcar conversions for repurposed use, and servicing railcars. The Company’s Parts operating segment is not significant for reporting purposes and has been combined with corporate and other non-operating activities as Corporate and Other.

 

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 internal 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 and restricted cash and restricted 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.

 

 

 

Three Months Ended

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

June 30,

 

 

 

2024

 

 

2023

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

$

142,528

 

 

$

85,724

 

 

 

$

298,256

 

 

$

163,323

 

Corporate and Other

 

 

4,888

 

 

 

2,872

 

 

 

 

10,218

 

 

 

6,272

 

Consolidated revenues

 

$

147,416

 

 

$

88,596

 

 

 

$

308,474

 

 

$

169,595

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing (1)

 

$

18,714

 

 

$

11,769

 

 

 

$

26,993

 

 

$

17,397

 

Corporate and Other

 

 

(5,580

)

 

 

(4,043

)

 

 

 

(9,949

)

 

 

(8,574

)

Consolidated operating income

 

$

13,134

 

 

$

7,726

 

 

 

$

17,044

 

 

$

8,823

 

Consolidated interest expense

 

 

(1,847

)

 

 

(4,351

)

 

 

 

(4,238

)

 

 

(10,951

)

Gain (loss) on change in fair market value of Warrant liability

 

 

112

 

 

 

(6,755

)

 

 

 

(15,541

)

 

 

(6,142

)

Loss on extinguishment of debt

 

 

-

 

 

 

(14,880

)

 

 

 

-

 

 

 

(14,880

)

Consolidated other expense

 

 

(725

)

 

 

(69

)

 

 

 

(739

)

 

 

(105

)

Consolidated income (loss) before income taxes

 

$

10,674

 

 

$

(18,329

)

 

 

$

(3,474

)

 

$

(23,255

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

$

1,302

 

 

$

891

 

 

 

$

2,575

 

 

$

1,823

 

Corporate and Other

 

 

112

 

 

 

142

 

 

 

 

235

 

 

 

282

 

Consolidated depreciation and amortization

 

$

1,414

 

 

$

1,033

 

 

 

$

2,810

 

 

$

2,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

Manufacturing

 

$

1,287

 

 

$

2,947

 

 

 

$

2,208

 

 

$

4,826

 

Corporate and Other

 

 

16

 

 

 

47

 

 

 

 

61

 

 

 

128

 

Consolidated capital expenditures

 

$

1,303

 

 

$

2,994

 

 

 

$

2,269

 

 

$

4,954

 

 

(1) Results for the three and six months ended June 30, 2024 include a litigation settlement, of which $1,386 was allocated to leasing revenues and $3,214 was allocated to litigation settlement. Results for the three and six months ended June 30, 2023 include a gain on sale of railcars available for lease of $622.

 

10


 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets:

 

 

 

 

 

 

Manufacturing

 

$

148,802

 

 

$

207,093

 

Corporate and Other

 

 

55,207

 

 

 

51,158

 

Total operating assets

 

 

204,009

 

 

 

258,251

 

Consolidated income taxes receivable

 

 

3,212

 

 

 

1,208

 

Consolidated assets

 

$

207,221

 

 

$

259,459

 

 

 

Geographic Information

 

 

 

Revenues

 

 

Long Lived Assets(a)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

 

 

 

 

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

United States

 

$

147,416

 

 

$

88,596

 

 

$

308,474

 

 

$

169,595

 

 

$

4,107

 

 

$

7,377

 

Mexico

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

73,509

 

 

 

69,826

 

Total

 

$

147,416

 

 

$

88,596

 

 

$

308,474

 

 

$

169,595

 

 

$

77,616

 

 

$

77,203

 

 

 

(a) Long lived assets include property plant and equipment, net, railcars available for lease, net, and right-of-use (ROU) assets.

 

Note 5 – Fair Value Measurements

 

The following table sets forth by level within the 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 June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

-

 

 

$

52,342

 

 

$

-

 

 

$

52,342

 

Foreign currency derivative liability

 

$

-

 

 

$

661

 

 

$

-

 

 

$

661

 

 

Recurring Fair Value Measurements

 

As of December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

-

 

 

$

36,801

 

 

$

-

 

 

$

36,801

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency derivative asset

 

$

-

 

 

$

606

 

 

$

-

 

 

$

606

 

 

Non-recurring Fair Value Measurements

 

During the Six Months Ended June 30, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Assets held for sale

 

$

-

 

 

$

-

 

 

$

629

 

 

$

629

 

 

 

Non-recurring Fair Value Measurements

 

During the Year Ended December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Railcars available for lease, net

 

$

-

 

 

$

-

 

 

$

2,842

 

 

$

2,842

 

 

 

The fair value of the Company’s Warrant (as defined below) liability recorded in the Company’s financial statements, determined using the quoted price of the Company’s common stock, par value $0.01 per share (the “Common Stock”), in an active market, exercise prices of $0.01 per share and $3.57 per share, and number of shares exercisable at June 30, 2024 and December 31, 2023, is a Level 2 measurement.

The fair value of the Company’s foreign currency derivative (liability) asset determined using exit prices obtained from each counterparty, which are based on currency spot and forward rates at June 30, 2024 and December 31, 2023 in an active market, is a Level 2 measurement. See Note 15 - Derivatives.

 

 

11


 

The fair value of the Company's fleet of triple hopper aggregate railcars determined using a cost plus market approach for a portion of the assets and a market-based approach for the remainder of the assets at December 31, 2023, is a Level 3 measurement. In the first quarter of 2024, the Company gained possession of these railcars. The portion of railcars intended to be sold in their current condition were classified as assets held for sale, while the remaining railcars intended to be converted into a new car type were classified as inventory.

 

Note 6 – Restricted Cash

 

The Company establishes restricted cash balances when required by customer contracts and to collateralize standby letters of credit. The carrying value of restricted cash approximates fair value.

 

The Company’s restricted cash balances are as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Restricted cash from customer deposit

 

$

282

 

 

$

282

 

Restricted cash to collateralize standby letters of credit

 

 

103

 

 

 

103

 

Restricted cash to collateralize foreign currency derivatives

 

 

2,070

 

 

 

320

 

Total restricted cash and restricted cash equivalents

 

$

2,455

 

 

$

705

 

 

Note 7 – Inventories

 

Inventories, net of reserve for excess and obsolete items, consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Raw materials

 

$

38,651

 

 

$

65,639

 

Work in process

 

 

12,537

 

 

 

31,138

 

Finished railcars

 

 

7,903

 

 

 

23,196

 

Parts inventory

 

 

5,388

 

 

 

5,049

 

Total inventories, net

 

$

64,479

 

 

$

125,022

 

 

Inventory on the Company’s condensed consolidated balance sheets includes reserves of $2,027 and $1,594 relating to excess or slow-moving inventory for parts and raw materials at June 30, 2024 and December 31, 2023, respectively.

 

Note 8 – Product Warranties

 

Warranty terms are based on the negotiated railcar sale, rebody or conversion contract, as applicable. Changes in the warranty reserve for the six months ended June 30, 2024 and 2023 are as follows:

 

 

 

 

For the Six Months Ended June 30,

 

 

 

 

 

2024

 

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

Balance at the beginning of the year

 

 

$

1,602

 

 

 

$

1,940

 

 

Current year provision

 

 

 

313

 

 

 

 

603

 

 

Reductions for payments, costs of repairs and other

 

 

 

(305

)

 

 

 

(819

)

 

Adjustments to prior warranties

 

 

 

(249

)

 

 

 

(91

)

 

Balance at the end of the period

 

 

$

1,361

 

 

 

$

1,633

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12


 

 

Adjustments to prior warranties include 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 9 – Revolving Credit Facility

 

The Company had no outstanding debt and remaining availability of $39,586 under the Company’s revolving credit facility as of June 30, 2024. As of December 31, 2023, the Company had $29,415 in outstanding debt and remaining availability of $10,853 under the revolving credit facility.

 

As of June 30, 2024, a revolving line of credit maturing on October 31, 2024 exists in the maximum aggregate principal amount of up to $45,000, secured by a standby letter of credit in the principal amount of $25,000 and the Company’s accounts receivable. In connection with the standby letter of credit, the Company has agreed to pay an affiliate of OC III LFE (as defined below) a fee due and payable in cash of $375 per quarter.

 

The standby letter of credit bears interest at the prime rate of interest (“Prime”) plus 1.5%, or 10% as of June 30, 2024. Advances secured by the Company’s accounts receivable bear interest at Prime plus 2%, or 10.5% as of June 30, 2024.

 

The fair value of debt approximates its carrying value as of December 31, 2023.

 

Note 10 – Warrants

 

The Company issued warrants to OC III LFE II LP (“OC III LFE”) and various affiliates of OC III LFE (collectively, the “Warrantholder”) in previous years to purchase a number of shares of Common Stock equal to 23% (the “2020 Warrant”), 5% (the “2021 Warrant”), and 5% (the “2022 Warrant”) of the outstanding Common Stock (after giving effect to such issuance) on a fully-diluted basis at the time the warrants are exercised. The 2020 Warrant, 2021 Warrant, and 2022 Warrant each have a per share exercise price of $0.01 and a term of ten (10) years from date of issuance.

 

The 2020 Warrant, issued in November 2020, was exercisable for an aggregate of 9,623,191 and 8,712,618 shares of Common Stock as of June 30, 2024 and December 31, 2023, respectively. The 2021 Warrant, issued in December 2021, was exercisable for an aggregate of 2,091,998 and 1,894,047 shares of Common Stock as of June 30, 2024 and December 31, 2023, respectively. The 2022 Warrant, issued in April 2022, was exercisable for an aggregate of 2,091,998 and 1,894,047 shares of Common Stock as of June 30, 2024 and December 31, 2023, respectively. The Company also issued a warrant to the Warrantholder in May 2023 to purchase an aggregate of 1,636,313 shares of Common Stock (the “2023 Warrant”), exercisable for a term of ten (10) years from date of issuance with a per share exercise price of $3.57.

 

The 2020 Warrant, 2021 Warrant, 2022 Warrant and 2023 Warrant are collectively referred to herein as the “Warrant”. As of June 30, 2024, the Warrant is classified as a liability and subject to fair value remeasurement at each balance sheet date. The fair value of the Warrant at June 30, 2024 and December 31, 2023 was $52,342 and $36,801, respectively. The change in fair value of the Warrant is reported on a separate line in the condensed consolidated statements of operations.

 

Note 11 – Mezzanine Equity

 

In May 2023, the Company issued to OC III LFE 85,412 shares of non-convertible Series C Preferred Stock, $0.01 par value per share, with an initial stated and fair value of $85,412 or $1,000 per share (the “Preferred Stock”). As of June 30, 2024, 85,412 shares of the Preferred Stock remain issued and outstanding. The Company classifies the Preferred Stock as mezzanine equity (temporary equity outside of permanent equity) because a deemed liquidation event following a change of control may require redemption of the Preferred Stock that is not solely within the control of the Company.

 

The Preferred Stock ranks senior to the Common Stock with respect to payment of dividends and distribution of assets upon liquidation, dissolution and winding up. Dividends accrue at a rate of 17.5% per annum on the initial stated value of the Preferred Stock. Accrued dividends, whether or not declared, are cumulative. OC III LFE will not participate in any dividends paid to holders of Common Stock.

The Company may redeem outstanding shares of Preferred Stock at any time by payment of the initial stated value plus accrued dividends. If the Company has not redeemed all of the outstanding shares of Preferred Stock on or prior to the fourth anniversary of issuance, the dividend rate will increase by 0.5% for every quarter thereafter until redeemed in full (the “Dividend Rate Increase”). OC III LFE has the right to request the Company redeem all of the outstanding shares of Preferred Stock at any time after the sixth

 

13


 

anniversary of issuance. If the Company does not redeem all of the outstanding shares of Preferred Stock within six months after receipt of a redemption request, OC III LFE will be entitled to certain limited voting rights.

The Preferred Stock has similar characteristics of an “Increasing Rate Security” as described by SEC Staff Accounting Bulletin Topic 5Q, Increasing Rate Preferred Stock. As a result, and as the Company has the ability to redeem all of the outstanding shares of the Preferred Stock before the occurrence of a Dividend Rate Increase, the discount on outstanding shares of Preferred Stock is considered an unstated dividend cost that is amortized over the period preceding commencement of the Dividend Rate Increase using the effective interest method, by charging imputed dividend cost against retained earnings, or additional paid in capital in the absence of retained earnings, and increasing the carrying amount of the outstanding shares of Preferred Stock by a corresponding amount. Accordingly, the discount is amortized over four years using the effective yield method. Issuance costs of $2,301 were allocated against the outstanding shares of the Preferred Stock upon issuance. The Company recognized discount amortization of $143 and $287 during the three and six months ended June 30, 2024, respectively, and $57 during the three and six months ended June 30, 2023.

 

Note 12 – Accumulated Other Comprehensive Income

The changes in accumulated other comprehensive income consist of the following:

 

 

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

Three months ended June 30, 2024

 

 

 

 

 

 

 

 

 

Pension liability activity:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of net loss (pre-tax other income)

 

$

35

 

 

$

-

 

 

$

35

 

Foreign currency derivative liability activity:

 

 

 

 

 

 

 

 

 

Unrealized loss on foreign currency derivatives

 

$

(1,474

)

 

$

-

 

 

$

(1,474

)

 

 

$

(1,439

)

 

$

-

 

 

$

(1,439

)

 

Three months ended June 30, 2023

 

 

 

 

 

 

 

 

 

Pension liability activity:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of net loss (pre-tax other income)

 

$

36

 

 

$

-

 

 

$

36

 

 

Six months ended June 30, 2024

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

Pension liability activity:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of net loss (pre-tax other income)

 

$

70

 

 

$

-

 

 

$

70

 

Foreign currency derivative liability activity:

 

 

 

 

 

 

 

 

 

Unrealized loss on foreign currency derivatives

 

$

(1,267

)

 

$

-

 

 

$

(1,267

)

 

 

$

(1,197

)

 

$

-

 

 

$

(1,197

)

 

Six months ended June 30, 2023

 

 

 

 

 

 

 

 

 

Pension liability activity:

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of net loss (pre-tax other income)

 

$

77

 

 

$

-

 

 

 

77

 

 

The components of accumulated other comprehensive income consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

2024

 

 

2023

 

Unrecognized pension income, net of tax of $6,282 and $6,282, respectively

 

$

1,829

 

 

$

1,759

 

Unrealized (loss) gain on foreign currency derivatives

 

 

(661

)

 

 

606

 

 

 

$

1,168

 

 

$

2,365

 

 

Note 13 – Stock-Based Compensation

 

Total stock-based compensation was $766 and $(100) for the three months ended June 30, 2024 and 2023, respectively, and $1,526 and $(191) for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, there was $2,500 of unearned compensation expense related to restricted stock awards, which will be recognized over the remaining weighted average requisite service period of 23 months. As of June 30, 2024, there was $2,031 of unearned compensation expense related to time-vested stock options, which will be recognized over the remaining requisite service period of 26 months. As of June 30, 2024, there was no unearned compensation expense related to cash settled stock appreciation rights.

 

 

14


 

In June 2023, the Company issued 300,000 inducement stock options (the “Inducement Options”) outside of The FreightCar America, Inc. 2022 Long Term Incentive Plan to one individual. As of June 30, 2024, there was $209 of unrecognized compensation expense related to the Inducement Options, which will be recognized over the remaining requisite service period of 24 months.

 

Note 14 – Employee Benefit Plans

 

The Company has a qualified, defined benefit pension plan (the “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 were 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 assets are held by an independent trustee and consist primarily of equity and fixed income securities.

 

The components of net periodic benefit cost (benefit) for the three and six months ended June 30, 2024 and 2023, are as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

Pension Benefits

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Interest cost

 

$

134

 

 

$

151

 

 

$

269

 

 

$

302

 

Expected return on plan assets

 

 

(75

)

 

 

(86

)

 

 

(150

)

 

 

(167

)

Amortization of unrecognized net income

 

 

35

 

 

 

36

 

 

 

70

 

 

 

77

 

 

 

$

94

 

 

$

101

 

 

$

189

 

 

$

212

 

 

The Company made no contributions to the Plan for the three and six months ended June 30, 2024 and 2023. The Company expects to make no contributions to the Plan in 2024.

 

The Company also maintains qualified defined contribution plans, which provide benefits to employees based on employee contributions and employee earnings with discretionary contributions allowed.

Note 15 – Derivatives

 

The Company’s operations and expenditures in its normal course of business are subject to opportunities and risks related to foreign currency fluctuations. The Company currently utilizes foreign currency forward contracts to protect against downward currency exposure by hedging Mexican Peso denominated expenses against the risk of volatility in foreign currency exchange rates between the Mexican Peso and the U.S. Dollar.

During 2023 and 2024, the Company entered into forward contracts to hedge the Company’s anticipated and probable Mexican Peso denominated expenses against the foreign currency rate exposure. The contracts have terms between one and 12 months and require the Company to exchange currencies at agreed-upon rates at each settlement date. The counterparties to the contracts consist of a limited number of domestic and international financial institutions. The Company classifies these contracts as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. The Company does not have any non-designated derivatives.

The Company assesses the assumed effectiveness of the contracts at each reporting period. The foreign currency derivatives are recorded on the balance sheet at fair value. The Company records unrealized gains or losses related to changes in the fair value of the forward contracts in other comprehensive income as long as the contracts are assumed to be effective. Amounts accumulated in other comprehensive income (loss) are reclassified to the condensed consolidated statements of operations on the same line as the items being hedged when the hedged item impacts earnings or upon determination that the contract is no longer assumed to be effective.
 

The notional amounts of outstanding foreign currency derivatives are as follows:

 

 

 

June 30,

 

 

December 31,

 

Notional Amount

 

2024

 

 

2023

 

Derivative instruments designated as hedges:

 

 

 

 

 

 

Foreign currency derivatives

 

$

14,705

 

 

$

11,562

 

 

The fair value of outstanding foreign currency derivatives designated as hedges are as follows:

 

 

15


 

 

 

June 30,

 

 

December 31,

 

Fair Value

 

2024

 

 

2023

 

Other current liabilities:

 

 

 

 

 

 

Foreign currency derivatives

 

$

661

 

 

$

-

 

Prepaid expenses:

 

 

 

 

 

 

Foreign currency derivatives

 

$

-

 

 

$

606

 

 

The pre-tax realized gain on foreign currency derivatives is recognized in the condensed consolidated statements of operations as follows:

 

 

 

 

 

Amount of (Gain) Recognized

 

 

Amount of (Gain) Recognized

 

 

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

Location of Realized (Gain) Recognized in the Condensed Consolidated Statements of Operations

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Derivative instruments designated as cash flow hedges:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency derivatives

 

Cost of sales

 

$

(290

)

 

$

-

 

 

$

(520

)

 

$

-

 

 

Note 16 - Commitments and Contingencies

 

The Company is involved in various litigation matters, including intellectual property litigation, and warranty and repair claims incidental to the conduct of our business. Although the Company is taking actions to vigorously contest these matters, it is not possible to determine the outcome of these matters and proceedings. The Company does not believe these actions will have a material adverse effect on our financial position, results of operations or cash flows.

 

 

Note 17 – Earnings (Loss) Per Share

 

The net income (loss) available to common stockholders and weighted-average common shares outstanding are as follows:

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

8,177

 

 

$

(18,889

)

 

$

(3,394

)

 

$

(23,926

)

Accretion of financing fees

 

 

(143

)

 

 

(57

)

 

 

(287

)

 

 

(57

)

Accrued dividends on Series C Preferred Stock

 

 

(4,427

)

 

 

(1,612

)

 

 

(8,664

)

 

 

(1,612

)

Net income (loss) available to common stockholders - basic

 

$

3,607

 

 

$

(20,558

)

 

$

(12,345

)

 

$

(25,595

)

Net income (loss) available to common stockholders - diluted

 

$

3,607

 

 

$

(20,558

)

 

$

(12,345

)

 

$

(25,595

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

17,536,190

 

 

 

16,974,593

 

 

 

17,332,304

 

 

 

16,883,946

 

Issuance of Warrants

 

 

13,105,003

 

 

 

11,139,232

 

 

 

12,903,572

 

 

 

10,668,351

 

Weighted average common shares outstanding - basic

 

 

30,641,193

 

 

 

28,113,825

 

 

 

30,235,876

 

 

 

27,552,297

 

Issuance of Fixed Warrants

 

 

1,636,313

 

 

 

-

 

 

 

-

 

 

 

-

 

Weighted average common shares outstanding - diluted

 

 

32,277,506

 

 

 

28,113,825

 

 

 

30,235,876

 

 

 

27,552,297

 

 

 

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 period. 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 2023 Warrant was issued

 

16


 

out-of-the money and the Company will apply the treasury stock method to the 2023 Warrant when computing earnings per share. Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the period. 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 three months ended June 30, 2024 and 2023, 3,130,304 and 5,893,935 shares, respectively, were not included in the weighted average common shares outstanding calculation as they were anti-dilutive. For the six months ended June 30, 2024 and 2023, 4,780,208 and 5,865,863 shares, respectively, were not included in the weighted average common shares outstanding calculation as they were anti-dilutive.

 

Note 18 – Related Parties

 

The following persons are owners of Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex”): Jesús Gil, a director of the Company; and Alejandro Gil and Salvador Gil, siblings of Jesús Gil. Fasemex owns approximately 10.3% of the outstanding shares of Common Stock as of June 30, 2024 and provides steel fabrication services to the Company. The lessors of the Castaños Facility are Jesús Gil, Alejandro Gil, and Salvador Gil. Distribuciones Industriales JAS S.A. de C.V. (“DI”) is owned by Alejandro Gil and Salvador Gil and provides material and safety supplies to the Company. Maquinaria y equipo de transporte Jova S.A. de C.V (“METJ”) is owned by Jorge Gil, a sibling of Jesús Gil, and provides trucking services to the Company. Fasemex, DI, METJ, Jesús Gil, Alejandro Gil, Salvador Gil, and Jorge Gil are collectively referred to as the “Gil Family”.

The Company paid $7,006 and $14,653 to the Gil Family during the three and six months ended June 30, 2024, respectively, and $4,130 and $9,766 during the three and six months ended June 30, 2023, respectively, related to steel fabrication services, rent and security deposit payments for the Castaños Facility, material and safety supplies, trucking services and royalty payments.

Commercial Specialty Truck Holdings, LLC (“CSTH”) is minority owned by James R. Meyer, a member of our Board, our former CEO, and beneficial owner of over 5% of our Common Stock. The Company sold specialty parts supplies in an amount equal to $207 and $415 to CSTH during the three and six months ended June 30, 2024, respectively. The Company sold no specialty parts supplies to CSTH during the three and six months ended June 30, 2023.

 

Related party asset on the condensed consolidated balance sheet of $1,010 as of June 30, 2024 includes other receivables of $293 from CSTH and other assets of $717 from the Gil Family. Related party accounts payable on the condensed consolidated balance sheet of $1,083 as of June 30, 2024 is payable to the Gil Family. Related party asset on the condensed consolidated balance sheet of $638 as of December 31, 2023 includes other receivables of $517 from the Gil Family and $121 from CSTH. Related party accounts payable on the condensed consolidated balance sheet of $2,478 as of December 31, 2023 is payable to the Gil Family.

 

Note 19 – Income Taxes

 

The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items. The Company’s effective income tax rate was 23.4% and (3.1)% for the three months ended June 30, 2024 and 2023, respectively, and 2.3% and (2.9)% for the six months ended June 30, 2024 and 2023, respectively. The Company’s effective income tax rates for the respective periods of 2024 and 2023 differed from the U.S. statutory tax rate of 21% primarily due to earnings from international jurisdictions taxed at a higher rate, permanent differences and discrete events, predominantly in Mexico, and a full valuation allowance in the U.S.

 

17


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q 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 report 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 potential risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These potential risks and uncertainties relate to, among other things, the cyclical nature of our business; adverse economic and market conditions, including inflation; material disruption in the movement of rail traffic for deliveries; fluctuating costs of raw materials, including steel and aluminum; delays in the delivery of raw materials; our ability to maintain relationships with our suppliers of railcar components; our reliance upon a small number of customers that represent a large percentage of our sales; the variable purchase patterns of our customers and the timing of completion; delivery and customer acceptance of orders; the highly competitive nature of our industry; the risk of lack of acceptance of our new railcar offerings; and other competitive factors. The factors listed above are not exhaustive. Other sections of this Quarterly Report on Form 10-Q 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.

 

OVERVIEW

 

You should read the following discussion in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. 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 “Cautionary Statement Regarding 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. We also provide railcar rebody services and railcar conversions that repurpose idled rail assets back into revenue service, supply railcar parts, and service freight cars. We have been manufacturing railcars since 1901.

 

Total net railcar orders received for the six months ended June 30, 2024 were 3,301 units, consisting of 1,906 new railcars and 1,395 rebuilt railcars, compared to orders for 2,341 units, consisting of 2,151 new railcars and 190 rebuilt railcars for the six months ended June 30, 2023. Total backlog of unfilled orders was 3,833 units at June 30, 2024, compared to 2,914 railcars as of December 31, 2023. The estimated sales value of the backlog was $382 million and $348 million as of June 30, 2024 and December 31, 2023, respectively. The increase in the number of net railcar orders received for the six months ended June 30, 2024 compared to the prior year period is primarily a reflection of improvement in the railcar equipment market.

 

RESULTS OF OPERATIONS

 

Three Months Ended June 30, 2024 compared to Three Months Ended June 30, 2023

 

Revenues

 

Our consolidated revenues for the three months ended June 30, 2024 were $147.4 million compared to $88.6 million for the three months ended June 30, 2023. Manufacturing segment revenues for the three months ended June 30, 2024 were $142.5 million compared to $85.7 million for the corresponding prior year period. The $56.8 million increase in Manufacturing segment revenues was primarily driven by an increase in the volume of railcar units delivered during the quarter. Railcar deliveries in the three months ended June 30, 2024 totaled 1,159 units, consisting of 1,049 new railcars and 110 rebuilt railcars, compared to 760 units in the same period of 2023, consisting of 665 new railcars and 95 rebuilt railcars. Corporate and Other revenues were $4.9 million for the three months ended June 30, 2024 compared to $2.9 million for the three months ended June 30, 2023.

 

 

18


 

Gross Profit

 

Our consolidated gross profit was $18.4 million for the three months ended June 30, 2024 compared to $13.0 million for the three months ended June 30, 2023. Manufacturing segment gross profit was $16.0 million for the three months ended June 30, 2024 compared to $11.7 million for the three months ended June 30, 2023. The $5.4 million increase in consolidated gross profit and $4.3 million increase in Manufacturing segment gross profit primarily reflects a favorable volume variance.

 

Selling, General and Administrative Expenses

 

Consolidated selling, general and administrative expenses for the three months ended June 30, 2024 were $8.5 million compared to $5.9 million for the three months ended June 30, 2023. The $2.7 million increase in consolidated selling, general and administrative expenses for the three months ended June 30, 2024 was primarily due to increases in stock-based compensation expenses of $0.9 million and legal expenses of $1.0 million. Manufacturing segment selling, general and administrative expenses were $0.5 million for each of the three months ended June 30, 2024 and 2023. Manufacturing segment selling, general and administrative expenses for the three months ended June 30, 2024 were 0.4% of revenue, compared to 0.6% of revenue for the three months ended June 30, 2023. Corporate and Other selling, general and administrative expenses were $8.0 million for the three months ended June 30, 2024 compared to $5.3 million for the three months ended June 30, 2023. The $2.7 million increase in Corporate and Other selling, general and administrative expenses is primarily a result of the previously mentioned increases in stock-based compensation expenses and legal expenses in the current year.

 

Gain on Sale of Railcars Available for Lease

 

There was no gain on sale of railcars available for lease for the three months ended June 30, 2024. Gain on sale of railcars available for lease for the three months ended June 30, 2023 was $0.6 million and represented the gain on sale of 424 leased railcars with a net book value of $7.7 million.

 

Litigation Settlement

 

During the three months ended June 30, 2024, we recorded a pre-tax litigation settlement of $3.2 million related to a dispute with a former lessee of our railcars. During the three months ended June 30, 2023, we did not record any litigation settlements.

 

Operating Income (Loss)

 

Our consolidated operating income for the three months ended June 30, 2024 was $13.1 million compared to a $7.7 million consolidated operating income for the three months ended June 30, 2023 driven primarily by the previously mentioned gross profit, partially offset by the previously mentioned increase in selling, general and administrative expenses. Operating income for the Manufacturing segment was $18.7 million for the three months ended June 30, 2024 compared to an operating income of $11.7 million for the three months ended June 30, 2023, reflecting the increase in railcars delivered during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Corporate and Other operating loss was $5.6 million for the three months ended June 30, 2024 compared to $4.0 million for the three months ended June 30, 2023. The $1.6 million increase in operating loss is primarily a result of the previously mentioned increases in selling, general and administrative expenses.

 

Loss on Extinguishment of Debt

 

There was no loss on extinguishment of debt for the three months ended June 30, 2024. Loss on extinguishment of debt for the three months ended June 30, 2023 was $14.9 million due to the settlement of the Term Loan Credit Agreement through the issuance of Series C Preferred Stock and the termination of the M&T Credit Agreement and Forbearance Agreement.

 

Income Taxes

 

Our income tax provision was $2.5 million for the three months ended June 30, 2024 compared to our income tax provision of $0.6 million for the three months ended June 30, 2023 primarily due to an increase in the mix of forecasted earnings and permanent items generated mainly in jurisdictions with higher tax rates.

 

Net Income (Loss)

 

As a result of the changes and results discussed above, as well as the change in fair value of the Warrant liability, net income was $8.2 million for the three months ended June 30, 2024 compared to net loss of $18.9 million for the three months ended June 30, 2023. For

 

19


 

the three months ended June 30, 2024, basic net income per share was $0.12 and diluted net income per share was $0.11 compared to basic and diluted net loss per share of $0.73 for the three months ended June 30, 2023.

 

 

Six Months Ended June 30, 2024 compared to Six Months Ended June 30, 2023

 

Revenues

 

Our consolidated revenues for the six months ended June 30, 2024 were $308.5 million compared to $169.6 million for the six months ended June 30, 2023. Manufacturing segment revenues for the six months ended June 30, 2024 were $298.3 million compared to $163.3 million for the corresponding prior year period. The $135 million increase in Manufacturing segment revenues was primarily driven by an increase in the volume of railcar units delivered during the current period, which includes the railcars impacted by the closure of the U.S.-Mexico border in December 2023. Railcar deliveries in the six months ended June 30, 2024 totaled 2,382 units, consisting of 2,272 new railcars and 110 rebuilt railcars, compared to 1,498 units in the same period of 2023, consisting of 1,304 new railcars and 194 rebuilt railcars. Corporate and Other revenues were $10.2 million for the six months ended June 30, 2024 compared to $6.3 million for the six months ended June 30, 2023.

 

Gross Profit

 

Our consolidated gross profit was $29.8 million for the six months ended June 30, 2024 compared to $20.4 million for the six months ended June 30, 2023. Manufacturing segment gross profit was $24.7 million for the six months ended June 30, 2024 compared to $18.1 million for the six months ended June 30, 2023. The $9.4 million increase in consolidated gross profit and $6.6 million increase in Manufacturing segment gross profit primarily reflects a favorable volume variance.

 

Selling, General and Administrative Expenses

 

Consolidated selling, general and administrative expenses for the six months ended June 30, 2024 were $16.0 million compared to $12.2 million for the six months ended June 30, 2023. The $3.8 million increase in consolidated selling, general and administrative expenses for the six months ended June 30, 2024 was primarily due to a increases in stock-based compensation expenses of $1.7 million and legal expenses of $1.0 million. Manufacturing segment selling, general and administrative expenses were $0.9 million for the six months ended June 30, 2024 compared to $1.3 million for the six months ended June 30, 2023. The $0.4 million decrease in Manufacturing selling, general and administrative expenses for the six months ended June 30, 2024 was primarily due to a $0.3 million decrease in consulting expenses. Manufacturing segment selling, general and administrative expenses for the six months ended June 30, 2024 were 0.3% of revenue, compared to 0.8% of revenue for the six months ended June 30, 2023. Corporate and Other selling, general and administrative expenses were $15.1 million for the six months ended June 30, 2024 compared to $10.9 million for the six months ended June 30, 2023. The $4.2 million increase in Corporate and Other selling, general and administrative expenses is primarily a result of the previously mentioned increases in stock-based compensation expenses and legal expenses in the current year.

 

Gain on Sale of Railcars Available for Lease

 

There was no gain on sale of railcars available for lease for the six months ended June 30, 2024. Gain on sale of railcars available for lease for the six months ended June 30, 2023 was $0.6 million and represented the gain on sale of 424 leased railcars with a net book value of $7.7 million.

 

Litigation Settlement

 

During the six months ended June 30, 2024, we recorded a pre-tax litigation settlement of $3.2 million related to a dispute with a former lessee of our railcars. During the six months ended June 30, 2023, we did not record any litigation settlements.

 

Operating Income (Loss)

 

Our consolidated operating income for the six months ended June 30, 2024 was $17.0 million compared to a $8.8 million consolidated operating income for the six months ended June 30, 2023 driven primarily by the previously mentioned gross profit, partially offset by the previously mentioned increase in selling, general and administrative expenses. Operating income for the Manufacturing segment was $26.9 million for the six months ended June 30, 2024 compared to an operating income of $17.4 million for the six months ended June 30, 2023, reflecting the increase in railcars delivered during the six months ended June 30, 2024 compared to the three months ended June 30, 2023. Corporate and Other operating loss was $9.9 million for the six months ended June 30, 2024 compared to $8.6 million for the six months ended June 30, 2023. The $1.3 million increase in operating loss is primarily a result of the previously mentioned increases in selling, general and administrative expenses.

 

20


 

 

Loss on Extinguishment of Debt

 

There was no loss on extinguishment of debt for the six months ended June 30, 2024. Loss on extinguishment of debt for the six months ended June 30, 2023 was $14.9 million due to the settlement of the Term Loan Credit Agreement through the issuance of Series C Preferred Stock and the termination of the M&T Credit Agreement and Forbearance Agreement.

 

Income Taxes

 

Our income tax benefit was $0.1 million for the six months ended June 30, 2024 compared to our income tax provision of $0.7 million for the six months ended June 30, 2023 primarily due to an increase in the mix of forecasted earnings and permanent items generated mainly in jurisdictions with higher tax rates.

 

Net Loss

 

As a result of the changes and results discussed above, as well as the change in fair value of the Warrant liability, net loss was $3.4 million for the six months ended June 30, 2024 compared to $23.9 million for the six months ended June 30, 2023. For the six months ended June 30, 2024, basic and diluted net loss per share was $0.41 compared to $0.93 for the six months ended June 30, 2023.

 

LIQUIDITY AND CAPITAL RESOURCES

(In thousands, except for share and per share data and unless otherwise noted)

 

Our primary sources of liquidity are our cash and cash equivalent balances on hand and our credit and debt facilities outlined below.

 

Revolving Credit Facility

 

The Company had no outstanding debt and remaining availability of $39,586 under the Company’s revolving credit facility as of June 30, 2024. As of December 31, 2023, the Company had $29,415 in outstanding debt and remaining availability of $10,853 under the revolving credit facility.

 

As of June 30, 2024, a revolving line of credit maturing on October 31, 2024 existed in the maximum aggregate principal amount of up to $45,000, secured by a standby letter of credit in the principal amount of $25,000 and the Company’s accounts receivable. In connection with the standby letter of credit, the Company has agreed to pay an affiliate of OCI III LFE (as defined below) a fee due and payable in cash of $375 per quarter.

 

The standby letter of credit bears interest at the prime rate of interest (“Prime”) plus 1.5%, or 10% as of June 30, 2024. Advances secured by the Company’s accounts receivable bear interest at Prime plus 2%, or 10.5% as of June 30, 2024.

 

Warrant

 

The Company issued warrants to OC III LFE II LP (“OC III LFE”) and various affiliates of OC III LFE (collectively, the “Warrantholder”) in previous years which are exercisable on the terms described in Note 10 - Warrants.

 

Preferred Shares

 

In May 2023, the Company issued to OC III LFE 85,412 shares of non-convertible Series C Preferred Stock, $0.01 par value per share, with an initial stated and fair value of $85,412 or $1,000 per share (the “Preferred Stock”). As of June 30, 2024, 85,412 shares of the Preferred Stock remain issued and outstanding. The Company classifies the Preferred Stock as mezzanine equity (temporary equity outside of permanent equity) since a deemed liquidation event following a change of control may require redemption of the Preferred Stock that is not solely within the control of the Company.

The Preferred Stock ranks senior to the Common Stock with respect to payment of dividends and distribution of assets upon liquidation, dissolution and winding up. Dividends accrue at a rate of 17.5% per annum on the initial stated value. Accrued dividends, whether or not declared, are cumulative. The Preferred Stock will not participate in any dividends paid to the holders of shares of Common Stock.

The Company may redeem the outstanding Preferred Stock at any time by payment of the initial stated value plus accrued dividends. If the Company has not redeemed on or prior to the fourth anniversary of issuance, the dividend rate will increase by 0.5% for every quarter thereafter until redeemed in full. OC III LFE has the right to request the Company redeem at any time after the sixth

 

21


 

anniversary of issuance. If the Company does not redeem within six months after receipt of a redemption request, OC III LFE will be entitled to certain limited voting rights.

 

Additional Liquidity Factors

 

Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $2.5 million and $0.7 million as of June 30, 2024 and December 31, 2023, respectively. Restricted deposits of $0.3 million as of each of June 30, 2024 and December 31, 2023 relate to a customer deposit for the purchase of railcars. Restricted deposits of $0.1 million as of each of June 30, 2024 and December 31, 2023 are used to collateralize standby letters of credit with respect to performance guarantees. The standby letters of credit outstanding as of June 30, 2024 are a requirement as long as the performance guarantees are in place. Restricted deposits of $2.1 million and $0.3 million as of June 30, 2024 and December 31, 2023, respectively, are used to collateralize foreign currency derivatives.

 

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, any other indebtedness and the availability of additional financing if needed. We may also require additional capital in the future to fund working capital for future railcar demand, 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.

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 equity or debt and through long-term borrowings. 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 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.

 

Cash Flows

 

The following table summarizes our cash flow activities for the six months ended June 30, 2024 and 2023:

 

 

 

2024

 

 

2023

 

 

 

(In thousands)

 

Net cash provided by (used in):

 

 

 

 

 

 

Operating activities

 

$

31,875

 

 

$

(25,576

)

Investing activities

 

 

(2,269

)

 

 

3,402

 

Financing activities

 

 

(30,796

)

 

 

(3,739

)

Total

 

$

(1,190

)

 

$

(25,913

)

 

Operating Activities. Our net cash provided by (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 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 could lead to significant fluctuations in our operating profits and cash from operating activities.

 

Our net cash provided by operating activities for the six months ended June 30, 2024 was $31.9 million compared to net cash used in operating activities of $25.6 million for the six months ended June 30, 2023. Our net cash provided by operating activities for the six months ended June 30, 2024 reflects changes in working capital, including a decrease in inventory of $63.7 million, offset by an increase in accounts receivable of $6.4 million. The decrease in inventory relates to inventory on hand at December 31, 2023 used in production of railcars delivered in the first half of 2024. The increase in accounts receivable relates to the timing of collections with current railcar builds based on contractual payment terms. Our net cash used in operating activities for the six months ended June 30, 2023 reflects changes in working capital, primarily an increase in inventory of $25.1 million related to inventory to be used in production of railcars to be delivered during the second half of 2023. VAT receivable decreased $3.0 million as a result of recovering VAT refunds during the six months ended June 30, 2023.

 

 

22


 

Investing Activities. Net cash used in investing activities for the six months ended June 30, 2024 was $2.3 million and consisted of capital expenditures related to maintenance of current production lines of the Castaños Facility. Net cash provided by investing activities for the six months ended June 30, 2023 was $3.4 million and consisted of $8.4 million proceeds from the sale of railcars available for lease, net of selling costs, offset by capital expenditures of $5.0 million related to the expansion of the Castaños Facility.

 

Financing Activities. Net cash used in financing activities for the six months ended June 30, 2024 was $30.8 million which included net repayments on revolving line of credit of $29.4 million and principal payments on the finance lease of $1.3 million. Net cash used in financing activities for the six months ended June 30, 2023 was $3.7 million which primarily included net repayments on revolving line of credit of $16.7 million and $13.3 million proceeds from the issuance of Series C Preferred Stock, net of issuance costs.

 

Capital Expenditures

 

Our capital expenditures were $2.3 million in the six months ended June 30, 2024, compared to $5.0 million in the six months ended June 30, 2023, a decrease primarily due to the completion of the Castaños Facility expansion in 2023. We anticipate capital expenditures during 2024 to be in the range of $5.0 million to $7.0 million, primarily related to maintenance of current production lines at the Castaños Facility.

 

 

23


 

Item 4. Controls and Procedures.

Management’s Report on Internal Control over Financial Reporting

 

The Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of June 30, 2024. Based on their evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2024.

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a–15(f) and 15d–15(f) under the Exchange Act) during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Information regarding legal proceedings is available in Note 16 - Commitments and Contingencies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

(a)
Exhibits filed as part of this Form 10-Q:

 

10.1

Amendment No. 3 to the FreightCar America, Inc. 2022 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated May 14, 2024 filed with the Commission on May 20, 2024).

31.1

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

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

  101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

Exhibit 104

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

 

 

25


 

SIGNATURES

 

Pursuant to the requirements 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.

 

 

 

 

 

 

 

 

 

 

 

FREIGHTCAR AMERICA, INC.

 

 

 

 

Date: August 12, 2024

 

By:

/s/ NICHOLAS J. RANDALL

 

 

 

Nicholas J. Randall, President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

Date: August 12, 2024

 

By:

/s/ MICHAEL A. RIORDAN

 

 

 

Michael A. Riordan, Vice President, Finance, Chief Financial Officer and Treasurer (Principal Financial Officer)

 

 

 

 

Date: August 12, 2024

 

By:

/s/ JUAN CARLOS FUENTES SIERRA

 

 

 

Juan Carlos Fuentes Sierra, Corporate Controller and Chief Accounting Officer

(Principal Accounting Officer)

 

 

 

 

 

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