EDGAR 10-K Filing

Company CIK: 1320854
Filing Year: 2023
Filename: 1320854_10-K_2023_0000950170-23-010051.json

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ITEM 1. BUSINESS
Item 1. Business.
OVERVIEW
FreightCar America, Inc., a Delaware corporation (“FCA”) and its subsidiaries (the “Company”, “we”, “us”, and “our” refers to FCA and its subsidiaries) 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 reduced costs and aligned our manufacturing capacity with the current railcar market. We ceased production at the Shoals Facility in February 2021.
We lease freight cars through our leasing entities, including JAIX Leasing Company, and FreightCar America Leasing 1, LLC. 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 shippers, railroads, and financial institutions which represented 38%, 36% and 22%, respectively, of our total sales attributable to each type of customer for the year ended December 31, 2022. In the year ended December 31, 2022, we delivered 3,184 railcars, including 2,281 new railcars and 903 rebuilt railcars, compared to 1,731 railcars, including 1,354 new railcars and 377 rebuilt railcars, delivered in the year ended December 31, 2021. Our total backlog of firm orders for railcars increased from 2,323 railcars as of December 31, 2021 to 2,445 railcars as of December 31, 2022. Our backlog as of December 31, 2022 includes a variety of railcar types and the estimated sales value of the backlog is $288 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 our Board of Directors (the “Board”) 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 seven years, we have added 22 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; (longitudinal trough and 5, 7, 9, and 10 transverse trough) coil gondolas; woodchip 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. 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 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.
•VersaFlood Hopper Cars. The VersaFlood™ product series offers versatile design options for transportation of aggregates, sand or minerals. Our VersaFlood™ series open-top hopper railcars include steel, stainless steel or hybrid steel and aluminum-bodied designs equipped with three-pocket (transverse gate) or two-pocket (longitudinal gate) discharge door systems with manual, independent or fully automatic door operation.
•Covered Hopper Cars. Our covered hopper railcar product offerings encompass a wide range of cubic foot (cf) capacity designs for shipping dry bulk commodities of varying densities including: 3,282 cf covered hopper cars for cement, sand and roofing granules; 4,300 cf covered hopper cars for potash or similar commodities; 5,200 cf, 5,400 cf and 5700 cf covered hopper cars for grain and other agricultural products; and 5,800 cf and 6,250 cf covered hopper cars for plastic pellets.
•DynaStack Series. Our intermodal doublestack railcar product offering includes the DynaStack articulated 3-unit, 53’ well cars for transportation of international and domestic containers.
•Steel Products Cars. Our portfolio of railcar types also includes 52’ and 66’ mill gondola railcars used to transport steel products and scrap; slab, hot slab and coil steel railcars designed specifically for transportation of steel slabs and coil steel products, respectively.
•Boxcars. Our high capacity boxcar railcar product offerings, featuring inside length of 50’, single plug door and 60’9”, double plug doors, galvanized steel roof panels and nailable steel floors, primarily designed for transporting paper products, paper rolls, lumber and wood products and foodstuffs.
•Aluminum Coal Cars. The BethGon is the leader in the aluminum-bodied coal gondola railcar segment. Since we introduced the steel BethGon railcar in the late 1970s and the aluminum BethGon railcar in 1986, the BethGon railcar has become the most widely used coal car in North America. Our current BethGon II features lighter weight, higher capacity and increased durability suitable for long-haul coal carrying railcar service. We have received several patents on the features of the BethGon II and continue to explore ways to increase the BethGon II’s capacity and reliability.
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.
•Stainless Steel and Hybrid Stainless Steel/Aluminum Coal Cars. We manufacture a series of stainless steel and hybrid stainless steel and aluminum AutoFlood and BethGon coal cars designed to serve the Eastern railroads. These coal cars are designed to withstand the rigors of Eastern coal transportation service. They offer a unique balance of maximized payload, light weight, efficient unloading and long service life. Our coal car product offerings include aluminum-bodied flat-bottom gondola railcars and steel or stainless steel-bodied triple hopper railcars for coal, metallurgical coke and petroleum coke service.
•Other Railcar Types. Our other railcar types include non-intermodal flat railcars and bulkhead flat railcars designed to transport a variety of products, including machinery and equipment, steel and structural steel components (including pipe), wood and forest products and other bulk industrial products; woodchip hopper and gondola railcars designed to haul woodchips and municipal waste or other low-density commodities; and a variety of commodity carrying open top hopper railcars designed to carry ballast, iron ore, taconite pellets and other bulk commodities; the AVC™ Aluminum Vehicle Carrier design used to transport commercial and light vehicles (automobiles and trucks) from assembly plants and ports to rail distribution centers; and the articulated bulk container railcar designed to carry dense bulk products such as waste products in 20’ containers.
•Railcar Conversions. We are a leader in rebuilding and repurposing freight car assets. From complete car rebuilds to transforming unused railcars into the latest designs, we deliver customer-focused solutions. We have completed over 14,000 total conversions and rebuilds in the last decade and offer a broad portfolio of over 20 car conversion options. Our new, purpose-built facility supports a wide variety of conversion options including small cube covered hopper conversions, aluminum body railcar conversions, sand railcar modularized lengthening modification programs and railcar modularized modification programs altering the nature of the center sill in the modified railcar.
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 shippers, railroads, and financial institutions. 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 2022, revenue from three customers, Union Pacific Railroad, Vulcan Materials Company and Infinity Transportation, accounted for approximately 20%, 19% and 16%, respectively, of total revenue. In 2022, sales to our top five customers accounted for approximately 76% of total revenue. 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. We did not have any railcar sales to customers outside the United States in 2022 and 2021. Many of our customers do not purchase railcars every year because 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 (“VPs”), contract administrators, a manager of customer service, a director of field support, and support staff. The VPs 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 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 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.
Year Ended December 31,
Railcar backlog at start of period
2,323
1,389
Net railcar orders received
3,306
2,665
Railcars delivered
(3,184
)
(1,731
)
Railcar backlog at end of period (1)
2,445
2,323
Estimated revenue from backlog at end of period (in thousands) (2)
$
287,969
$
240,160
(1)Railcar backlog includes 423 and 605 rebuilt railcars as of December 31, 2022 and 2021, respectively.
(2)Estimated revenue from backlog reflects the total revenue attributable to the backlog reported at the end of the period as if such backlog were converted to actual sales. Estimated revenue from backlog as of December 31, 2022 includes $40.6 million that is not expected to be converted to sales within one year. Estimated revenue from backlog does not reflect potential price increases and decreases under customer contracts that provide for variable pricing based on changes in the cost of raw materials. 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.
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 Ryerson 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. Our primary steel suppliers are Feralloy Corporation and Reibus International. Steel prices generally are not fixed at the time a railcar order is accepted due to fluctuations in market prices. In 2022 we primarily bought fabrications from local suppliers, with Fasemex being the largest of the local suppliers. In the third quarter of 2022, we initiated the process of opening our fabrication shop at our Castaños Facility. However, we continued to buy fabrications from our local suppliers during this time.
Our primary component suppliers include Wabtec, Amsted, Standard Steel, SKF, 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 53% and 20% of our new railcars produced in 2022 and 2021, 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 and various other components. The railcar industry is periodically subject to supply constraints for some of the key railcar components.
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 62% and 80% of our total purchases in 2022 and 2021, 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. Our key patent includes our hopper railcar with automatic individual door system. The protection of our intellectual property is important to our business.
HUMAN CAPITAL
Employees
As of December 31, 2022, we had 1,435 employees, of which 319 were salaried and 1,116 were hourly wage earners. As of December 31, 2022, 1,381 of our employees were based in Mexico, 52 were based in the U.S. and 2 were based in China. 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, 54 were based in the U.S. 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 including 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.
COMMITMENT TO SUSTAINABILITY
Consistent with our vision, we are committed to growing our business in a sustainable and socially responsible manner. Our Nominating and Corporate Governance Committee has undertaken a comprehensive review of our governance policies in light of recent trends relating to environmental, social and governance (“ESG”) topics and disclosure. The Nominating and Corporate Governance Committee meets periodically with senior management 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 than other modes of transportation to fuel the North American supply chain. 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 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 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.
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. 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, the costs of such activities 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.

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ITEM 1A. RISK FACTORS

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
The following table presents information on our primary leased and owned operating properties as of December 31, 2022:
Use
Location
Size
Leased or Owned
Lease Expiration Date
Corporate headquarters
Chicago, Illinois
8,800 square feet
Leased
November 30, 2031
Railcar assembly and component manufacturing
Castaños, Mexico
488,725 square feet on 40.7 acres of land
Leased
September 30, 2040
Administrative and parts warehouse
Johnstown, Pennsylvania
86,000 square feet
Leased
December 31, 2023
Sourcing office
Qingdao, China
1,485 square feet
Leased
October 31, 2023

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ITEM 3. LEGAL PROCEEDINGS
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.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock has been quoted on the Nasdaq Global Market under the symbol “RAIL” since April 6, 2005. As of March 16, 2023, there were approximately 65 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 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 considers to be relevant. The ability of our Board to declare a dividend on our common stock is limited by Delaware law.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
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. 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.
In September 2020, we announced our plan to permanently close the Shoals Facility in light of the cyclical industry downturn, which was magnified by the global pandemic. The closure reduced costs and aligned our manufacturing capacity with the current railcar 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.
Railcar deliveries totaled 3,184 railcars, consisting of 2,281 new railcars and 903 rebuilt railcars, for the year ended December 31, 2022, compared to 1,731 railcars delivered in the year ended December 31, 2021, consisting of 1,354 new railcars and 377 rebuilt railcars. Our total backlog of firm orders for railcars increased from 2,323 railcars as of December 31, 2021 to 2,445 railcars as of December 31, 2022. The estimated sales value of the backlog was $288 million and $240 million, respectively, as of December 31, 2022 and 2021.
The Company recognized an increase in revenue compared to the corresponding prior year which we attribute primarily to improvement in the railcar market in 2022.
Since the COVID-19 pandemic first being reported in December 2019, the Company continues to monitor and assess the impact of the COVID-19 pandemic, as well as the impact on the global economy, government reactions to the pandemic, and disruptions in global supply chain. Our management is focused on mitigating the impact of the COVID-19 pandemic on our business and the risk to our employees.
FINANCIAL STATEMENT PRESENTATION
Revenues
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, 2022 are fixed-rate contracts. Therefore, if material costs were to increase as a result of changes in economic conditions, imposition of tariffs or other governmental regulations, 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 pension settlement, and selling, general and administrative expenses.
RESULTS OF OPERATIONS
Year Ended December 31, 2022 compared to Year Ended December 31, 2021
Revenues
Our consolidated revenues for the year ended December 31, 2022 were $364.8 million compared to $203.1 million for the year ended December 31, 2021. Manufacturing segment revenues for the year ended December 31, 2022 were $352.9 million compared to $192.8 million for the year ended December 31, 2021. The increase in Manufacturing segment revenues for 2022 compared to 2021 reflects an increase in the number of railcars delivered from 1,731 railcars in 2021 to 3,184 railcars in 2022, as well as a higher average selling price for new railcars. Corporate and Other revenues for the year ended December 31, 2022 were $11.9 million compared to $10.2 million for the year ended December 31, 2021, reflecting higher parts sales.
Gross Profit
Our consolidated gross profit for the year ended December 31, 2022 was $25.8 million compared to $11.5 million for the year ended December 31, 2021. Our consolidated gross margin was 7.1% for the year ended December 31, 2022 compared to 5.6% for the year ended December 31, 2021. Manufacturing segment gross profit for the year ended December 31, 2022 was $22.2 million compared to $8.5 million for the year ended December 31, 2021. The $14.3 million increase in consolidated gross profit and $13.7 million increase in Manufacturing segment gross profit reflect a favorable volume variance and improved margins per car.
Selling, General and Administrative Expenses
Consolidated selling, general and administrative expenses for the year ended December 31, 2022 were $28.2 million compared to $27.5 million for the year ended December 31, 2021. Consolidated selling, general and administrative expenses for the year ended December 31, 2022 included increases in insurance expenses of $1.0 million, corporate incentive plan bonus expenses of $0.7 million, and bad debt expenses of $0.6 million, which were partially offset by a decrease in legal expenses of $1.5 million. Consolidated selling, general and administrative expenses for the year ended December 31, 2022 were 7.7% of revenue, compared to 13.6% of revenue for the year ended December 31, 2021. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2022 were $2.8 million compared to $2.6 million for the year ended December 31, 2021. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2022 were 0.8% of revenue compared to 1.3% of revenue for the year ended December 31, 2021. Corporate and Other selling, general and administrative expenses were $25.4 million for the year ended December 31, 2022 compared to $24.9 million for the year ended December 31, 2021. Corporate and Other selling, general and administrative expenses for the year ended December 31, 2022 included increases in insurance expenses of $1.0 million and corporate incentive plan bonus expenses of $0.9 million, which were partially offset by decreases in legal expenses of $1.4 million.
Impairment on Leased Railcars
For the year ended December 31, 2022, we recorded a pre-tax non-cash impairment charge related to our small cube covered hopper railcars of $4.5 million due to a proposal to purchase a portion of the railcars in the first quarter of 2023. 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 the renegotiation of certain leases and our settlement agreement with the lender for our leasing companies. See Note 7 - Leased Railcars and Note 22 - Subsequent Event to our consolidated financial statements.
Restructuring and Impairment Charges
There were no restructuring and impairment charges for the year ended December 31, 2022. Restructuring and impairment charges of $6.5 million for the year ended December 31, 2021 related to relocating some of the former Shoals facility’s equipment to Castaños as well as shutting down the Shoals facility.
Operating Income (Loss)
Our consolidated operating loss for the year ended December 31, 2022 was $15.0 million compared to $22.8 million for the year ended December 31, 2021. Operating income for the Manufacturing segment was $14.8 million for the year ended December 31, 2022 compared to operating loss of $0.8 million for the year ended December 31, 2021. Corporate and Other operating loss was $29.8 million for the year ended December 31, 2022 compared to $22.0 million for the year ended December 31, 2021.
Interest Expense
Interest expense was $25.4 million for the year ended December 31, 2022 compared to $13.3 million for the year ended December 31, 2021 reflecting increased borrowings on our revolving line of credit and modification of lease classification on the Castaños Facility from an operating to a finance lease.
Gain (loss) on Change in Fair Market Value of Warrant Liability
Gain on change in fair market value of warrant liability was $1.5 million for the year ended December 31, 2022 compared to loss on change in fair market value of warrant liability of $14.9 million for the year ended December 31, 2021. The increase in the gain was primarily driven by depreciation in the Company’s stock price during the year ended December 31, 2022 which is the primary driver in the valuation of the warrants.
Gain on Extinguishment of Debt
There were no gains or losses on extinguishment of debt in the year ended December 31, 2022. 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 $2.3 million for the year ended December 31, 2022 compared to $1.4 million for the year ended December 31, 2021. Our income tax provision for the year ended December 31, 2022 reflects pre-tax income for our Mexico subsidiary. Our effective tax rate for the year ended December 31, 2022 was (6.3)% compared to (3.5)% for the year ended December 31, 2021.
Net Loss
As a result of the foregoing, our net loss was $38.8 million for the year ended December 31, 2022, compared to a net loss of $41.4 million for the year ended December 31, 2021. For the year ended December 31, 2022 our net loss per share was $1.56 compared to net loss per share of 2.00 for the year ended December 31, 2021.
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.
Credit Agreement
In October 2020, the Company entered into a $40.0 million Credit Agreement (as amended from time to time, the “Credit Agreement”) by and among FCA, as guarantor, FreightCar North America, LLC (“Borrower” and together with FCA 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”). The $40.0 million term loan under the Credit Agreement closed and was funded on November 24, 2020.
The Company incurred $2.9 million in deferred financing costs that are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Credit Agreement.
The term loan outstanding under the Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Credit Agreement, at Base Rate (as defined in the Credit Agreement) or Eurodollar Rate (as defined in the Credit Agreement) plus the Applicable Margin (as defined in the Credit Agreement) for each such interest rate set forth in the Credit Agreement. As of December 31, 2022, the interest rate on the original advance under the Credit Agreement was 17.2%.
In May 2021, the Loan Parties entered into Amendment No. 2 to the Credit Agreement (the “Second Amendment”) with Lender and the Agent, pursuant to which the principal amount of the Credit Agreement was increased by $16.0 million to a total of $56.0 million (the “Additional Loan”). 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. As of December 31, 2022, the interest rate on the Second Amendment under the Credit Agreement was 17.2%. The Credit Agreement contains customary affirmative and negative covenants and events of default, and is secured by a pledge of all assets of the Loan Parties.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company was to issue to the Lender and/or a Lender affiliate, a warrant (the “2022 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the Company’s outstanding Common Stock on a fully-diluted basis at the time the 2022 Warrant is exercised. The Company believed it was probable that the 2022 Warrant would be issued and recorded an additional Warrant liability of $7.4 million during the third quarter of 2021. The 2022 Warrant was issued on April 4, 2022 with an exercise price of $0.01 and a term of ten (10) years. As of December 31, 2022 and 2021, the 2022 Warrant was exercisable for an aggregate of 1,473,726 and zero (0) shares of Common Stock, respectively with a per share exercise price of $0.01.
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 by no later than August 31, 2021. The Company has met each of the aforementioned obligations. The Form S-3 registering Company securities was filed with the Securities and Exchange Commission on August 27, 2021 and became effective on September 9, 2021.
In July 2021, the Loan Parties entered into Amendment No. 3 to Credit Agreement (the “Third Amendment”) 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 $25.0 million for the account of the Company and for the benefit of the Revolving Loan Lender (as defined below).
In December 2021, the Loan Parties entered into Amendment No. 4 to Credit Agreement (the “Fourth Amendment”) with the 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 had the option to draw on the Delayed Draw Loan through January 31, 2023. The Delayed Draw Loan, if funded, would bear the same interest rate as the original term loan.
In January 2023, the Loan Parties entered into an Amendment No. 6 to Credit Agreement (the “Sixth Amendment”) to extend the date for the Company to draw on the delayed draw loan of $15.0 million from January 31, 2023 to March 3, 2023. See Note 22 - Subsequent Event.
In February 2023, the Loan Parties entered into Amendment No. 7 to Credit Agreement (the “Seventh Amendment”) to extend the date for the Company to draw on the delayed draw loan of $15.0 million from March 3, 2023 to April 3, 2023. See Note 22 - Subsequent Events.
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.
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.
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender or designee thereof a fee (the “Equity Fee”) payable in shares of Common Stock. The Equity Fee shall be calculated by dividing $1.0 million by the volume weighted average price of the Common Stock on the Nasdaq Global Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company may pay the Equity Fee in cash if certain conditions are met.
The Equity Fee shall no longer be paid once the Company has issued 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, or 1,547,266 shares of Common Stock (the “Maximum Equity”). Through December 31, 2022, the Company has paid Equity Fees totaling 1,388,388 shares of Common Stock.
Cash Fee
The Company shall pay to the Agent, for the account of the Lender or a designee thereof 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 Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “2020 Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020, by and between the Company and the Lender, to purchase a number of shares of Common Stock equal to 23% of the outstanding Common Stock on a fully-diluted basis at the time the 2020 Warrant is exercised (after giving effect to such issuance). The 2020 Warrant was issued on November 24, 2020 and is exercisable for a term of ten (10) years from the date of the issuance of the 2020 Warrant. As of December 31, 2022 and 2021, the 2020 Warrant was exercisable for an aggregate of 6,799,139 and 6,098,217 shares, respectively, of Common Stock with a per share exercise price of $0.01. The Company determined that the 2020 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 2020 Warrant in a variable number of shares of Common Stock. The 2020 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 Credit Agreement and included in interest expense.
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021, the Company issued to the Lender a warrant (the “2021 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the outstanding Common Stock on a fully-diluted basis at the time the 2021 Warrant is exercised. The 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of December 31, 2022 and 2021, the 2021 Warrant was exercisable for an aggregate of 1,473,726 and 1,325,699 shares of Common Stock, respectively with a per share exercise price of $0.01.
The 2022 Warrant was issued on April 4, 2022 with an exercise price of $0.01 and a term of ten (10) years. As of December 31, 2022 and 2021, the 2022 Warrant was exercisable for an aggregate of 1,473,726 and zero (0) shares of Common Stock, respectively with a per share exercise price of $0.01.
The 2020 Warrant, 2021 Warrant, and 2022 Warrant collectively are referred to herein as the “Warrant”. The following schedule shows the change in fair value of the Warrant as of December 31, 2022.
Warrant liability as of December 31, 2021
$
32,514
Change in fair value
(1,486
)
Warrant liability as of December 31, 2022
$
31,028
The change in fair value of the Warrant is reported on a separate line in the consolidated statements of operations. The Term Loan Credit Agreement is presented net of the unamortized discount and unamortized deferred financing costs.
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 Common Stock equal to 3% of the 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
In October 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 “Revolving Loan Parties”), and Siena Lending Group LLC, as lender (“Revolving Loan Lender”). Pursuant to the Siena Loan Agreement, the Revolving Loan Lender 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 provided for a revolving credit facility with maximum availability of $20.0 million, subject to certain borrowing base requirements set forth in the Siena Loan Agreement.
In July 2021, the Revolving Loan Parties and the Revolving Loan Lender 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, including, among other things, an increase of $25.0 million to the Maximum Revolving Facility Amount.
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). The Amended and Restated Loan and Security Agreement contains customary affirmative and negative covenants and events of default, and is secured by a pledge of all assets of the Revolving Loan Parties.
In February 2022, the Revolving Loan Parties and 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 $35.0 million.
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 2% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). Notwithstanding the foregoing, Revolving Loans made in respect of Excess Availability (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) arising from clause (b) of the definition of “Borrowing Base” (as defined in 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 1.5% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). As of December 31, 2022, the interest rate on outstanding debt under the Amended and Restated Loan and Security Agreement was 9.00% and under the First Amendment to Amended and Restated Loan and Security Agreement was 9.50%.
As of December 31, 2022, the Company had $33.8 million in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of zero. 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. The Company incurred $1.1 million in deferred financing costs related to the Siena Loan Agreement during the fourth quarter of 2020 and incurred $1.0 million in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement during the third quarter of 2021. 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.
SBA Paycheck Protection Program Loan
In April 2020, the Company received a loan from BMO Harris Bank N.A. in the amount of $10.0 million pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In July 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
In April 2019, FreightCar America Leasing 1, LLC, an indirect wholly-owned subsidiary of FCA (“FreightCar Leasing Borrower”), entered into a Credit Agreement (the “M&T Credit Agreement”) with M & T Bank, N.A., as lender (“M&T”), with a term that initially ended on April 16, 2021 (the “Term End”). 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 to be leased to third parties. In connection with the M&T Credit Agreement, (i) FreightCar Leasing LLC, a wholly owned subsidiary of FCA and parent of FreightCar Leasing Borrower (“FreightCar Leasing Guarantor”), entered into a Guaranty Agreement (the “M&T Guaranty Agreement”) and Pledge Agreement (the “M&T Pledge Agreement”) with M&T and (ii) FreightCar Leasing Borrower 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.
The Loans outstanding 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), and 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).
Between August 2020 and April 2021, FreightCar Leasing Borrower received notices from M&T that various Events of Default (as defined in the M&T Credit Agreement) had occurred, including a notice in April 2021 that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not been paid by the Term End.
In December 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC (“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 Company turned over to M&T certain rents in the amount of $0.7 million that it had previously collected as servicing agent for FreightCar Leasing Borrower and 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 FreightCar Leasing Borrower to M&T pursuant to the M&T Security Agreement (the “Collateral”)) and all the provisions of the M&T Security Agreement.
On December 1, 2023, or sooner if requested by the Lender (the “Turnover Date”), FreightCar Leasing 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 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.
As of December 31, 2022 and December 31, 2021, FreightCar Leasing Borrower had $6.9 million and $7.9 million, respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $4.1 million and $6.6 million, respectively. As of December 31, 2022, the interest rate on outstanding debt under the M&T Credit Agreement was 8.50%.
Additional Liquidity Factors
Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $4.1 million and $5.0 million as of December 31, 2022 and 2021, respectively. Restricted deposits of $0.3 million as of each of December 31, 2022 and 2021, respectively, relate to a customer deposit for purchase of railcars. Restricted deposits of $3.6 million and $4.7 million as of December 31, 2022 and 2021, respectively, are used to collateralize standby letters of credit with respect to performance guarantees. The standby letters of credit outstanding as of December 31, 2022 are a requirement as long as the performance guarantees are in place.
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 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.
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.
Benefits under our pension plan are 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, 2022, our benefit obligation under our defined benefit pension plan was $12.4 million, which exceeded the fair value of plan assets by $1.0 million. We made no contributions to our defined benefit pension plan during 2022 and are not required to make any contributions to our defined benefit pension plan in 2023. During 2022, the Company purchased a non-participating annuity contract and transferred about 67.7% of its future benefit obligations to OneAmerica. See Note 14 - Employee Benefit Plans. 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, 2022 and 2021:
(In thousands)
Net cash (used in) provided by:
Operating activities
$
11,503
$
(55,397
)
Investing activities
(7,816
)
(1,675
)
Financing activities
7,985
29,265
Total
$
11,672
$
(27,807
)
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 provided by operating activities for the year ended December 31, 2022 was $11.5 million compared to net cash used in operating activities of $55.4 million for the year ended December 31, 2021. Our net cash provided by operating activities for the year ended December 31, 2022 reflects changes in working capital, including a decrease in VAT receivable of $24.9 million due to the Company’s receipt of VAT refunds, partially offset by an increase in inventory of $8.5 million to meet production needs for the start-up of several new railcar orders. 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 production needs for the start-up of several new railcar orders.
Investing Activities. Net cash used in investing activities for the year ended December 31, 2022 was $7.8 million primarily as a result of capital expenditures. 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.
Financing Activities. Net cash provided by financing activities for the year ended December 31, 2022 was $8.0 million and included net borrowings on revolving line of credit of $8.8 million and principal payments on the finance lease of $0.7 million. Net cash provided by financing activities for the year ended December 31, 2021 was $29.3 million and primarily represented proceeds from the 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.
Capital Expenditures
Our capital expenditures were $8.5 million for the year ended December 31, 2022 compared to $2.3 million for the year ended December 31, 2021 and primarily related to the expansion of the Castaños Facility. We anticipate capital expenditures during 2023 to be between approximately $11.0 million and $12.0 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). 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.
For the fourth quarter of 2022, we performed a cash flow recoverability test of our small cube covered hopper railcars because we believed it to be more likely than not that a portion of the leased railcars would be sold or disposed of in 2023, before the end of the estimated useful life. 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 $7.8 million, in comparison to the asset group's carrying amount of $12.3 million. As a result of this analysis we recorded a pre-tax non-cash impairment charge of $4.5 million related to our small cube covered hopper railcars during the fourth quarter of 2022.
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 2022, 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, 2022:
1% Increase
1% Decrease
(in thousands)
Effect on net periodic benefit cost
$ (329)
$ 329
Effect on pension settlement
(183)
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, 2022, we determined this rate on our pension plan to be 5.22%, an increase of 2.38% from the 2.84% rate used at December 31, 2021. A change of one hundred basis points in the discount rates used during the year ended December 31, 2022 would have the following effect:
1% Increase
1% Decrease
(in thousands)
Effect on net periodic benefit cost
$ 41
$ (78)
Effect on pension settlement
(698)
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-2021 with COVID adjustment), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2020) were developed. The Company used the base mortality table Pri-2012 projected generationally using a modified MP-2021 with Endemic COVID adjustment for purposes of measuring its pension obligations at December 31, 2022.
For the years ended December 31, 2022 and 2021, we recognized consolidated pre-tax pension benefit cost (income) of $(0.6) million and $(0.8) million, respectively. We are not required to make any contributions to our pension plan during 2023. 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, 2022 and 2021, 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, 2022, we had deferred tax assets of $82.6 million for which there was a valuation allowance of $67.8 million and we had total net deferred tax assets of $0.07 million.
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 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, delays in the delivery of raw materials, the risk of lack of acceptance of our new railcar offerings, the potential financial and operational impacts of the COVID-19 pandemic, 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.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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 sheets of FreightCar America Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 audits 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 audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
Critical audit matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Pension Remeasurement
As described within Note 14 to the consolidated statements, as of December 31, 2022, the Company’s projected benefit obligation under its defined pension plan was $12.4 million. In the third quarter of 2022, the Company purchased a non-participating group annuity contract to transfer 67.7% of the obligation to pay remaining retirement benefits of certain retirees and beneficiates from its defined benefit pension plan and transferred approximately $27.6 million in both benefit obligations and plan assets. As a result, the Company remeasured its defined benefit pension plan and recognized a $8.1 million settlement loss. As disclosed by management, the remeasurement of its defined benefit pension plan was performed using actuarial methodologies and incorporated significant assumptions, including the discount rate, expected long-term rate of return on plan assets, and several assumptions relating to the employee workforce, including mortality rates. We identified the pension remeasurement as a critical audit matter.
The principal considerations for our determination that the pension remeasurement is a critical audit matter are (i) the significant judgment by management in determining the valuation of the pension remeasurement, as well as their consideration of the accounting for the non-recurring nature of the pension remeasurement; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to the accounting for the pension remeasurement, participants transferred, and significant assumptions related to the discount rate, expected long-term rate of return on plan assets, and mortality rate used in determining the valuation of the pension remeasurement; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Our audit procedures related to the pension remeasurement included the following, among others, (i) testing management’s process for determining the valuation of the pension remeasurement; (ii) testing the participants transferred, the settlement loss recognized, and the completeness and accuracy of the underlying data used in the valuation of the pension remeasurement; and (iii) the involvement of professionals with specialized skill and knowledge to assist in (a) evaluating the appropriateness of the actuarial methodology used by management; and (b) evaluating the reasonableness of the discount rate, expected long-term rate of return on plan assets, and mortality rate assumptions.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2021.
Chicago, Illinois
March 27, 2023
FreightCar America, Inc.
Consolidated Balance Sheets
(In thousands, except for share data)
December 31,
December 31,
Assets
Current assets
Cash, cash equivalents and restricted cash equivalents
$
37,912
$
26,240
Accounts receivable, net of allowance for doubtful accounts of $126 and $323 respectively
9,571
9,571
VAT receivable
4,682
31,136
Inventories, net
64,317
56,012
Assets held for sale
3,675
-
Related party asset
3,261
8,680
Prepaid expenses
5,470
5,087
Total current assets
128,888
136,726
Property, plant and equipment, net
23,248
18,236
Railcars available for lease, net
11,324
20,160
Right of use asset operating lease
1,596
16,669
Right of use asset finance lease
33,093
-
Other long-term assets
1,589
8,873
Total assets
$
199,738
$
200,664
Liabilities and Stockholders’ Equity
Current liabilities
Accounts and contractual payables
$
48,449
$
41,185
Related party accounts payable
3,393
8,870
Accrued payroll and other employee costs
4,081
2,912
Reserve for workers' compensation
1,563
Accrued warranty
1,940
2,533
Customer deposits
-
3,300
Deferred income state and local incentives, current
-
1,291
Current portion of long-term debt
40,742
-
Other current liabilities
6,539
7,666
Total current liabilities
105,985
69,320
Long-term debt, net of current portion
51,494
79,484
Warrant liability
31,028
32,514
Accrued pension costs
1,040
Deferred income state and local incentives, long-term
-
1,216
Lease liability operating lease, long-term
1,780
16,617
Lease liability finance lease, long-term
33,245
-
Other long-term liabilities
3,750
3,134
Total liabilities
228,322
202,320
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 December 31, 2022 and December 31, 2021)
-
-
Common stock, $0.01 par value, 50,000,000 shares authorized, 17,223,306 and 15,947,228
shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively
Additional paid-in capital
89,104
83,742
Accumulated other comprehensive income (loss)
1,022
(5,522
)
Accumulated deficit
(118,913
)
(80,066
)
Total stockholders' deficit
(28,584
)
(1,656
)
Total liabilities and stockholders’ deficit
$
199,738
$
200,664
See Notes to Consolidated Financial Statements.
FreightCar America, Inc.
Consolidated Statements of Operations
(In thousands, except for share and per share data)
Year Ended December 31,
Revenues
$
364,754
$
203,050
Cost of sales
338,931
191,592
Gross profit
25,823
11,458
Selling, general and administrative expenses
28,227
27,532
Impairment on leased railcars
4,515
Loss on pension settlement
8,105
-
Restructuring and impairment charges
-
6,530
Operating loss
(15,024
)
(22,762
)
Interest expense
(25,423
)
(13,317
)
Gain (loss) on change in fair market value of Warrant liability
1,486
(14,894
)
Gain on extinguishment of debt
-
10,122
Other income
2,426
Loss before income taxes
(36,535
)
(40,034
)
Income tax provision
2,312
1,413
Net loss
$
(38,847
)
$
(41,447
)
Net loss per common share - basic
$
(1.56
)
$
(2.00
)
Net loss per common share - diluted
$
(1.56
)
$
(2.00
)
Weighted average common shares outstanding - basic
24,838,399
20,766,398
Weighted average common shares outstanding - diluted
24,838,399
20,766,398
See Notes to Consolidated Financial Statements.
FreightCar America, Inc.
Consolidated Statements of Comprehensive Loss
(In thousands)
Year Ended December 31,
Net loss
$
(38,847
)
$
(41,447
)
Other comprehensive income, net of tax:
Loss on pension settlement
8,105
-
Reclassification adjustment for amortization of net loss (pre-tax other income)
(1,561
)
6,241
Comprehensive loss
$
(32,303
)
$
(35,206
)
See Notes to Consolidated Financial Statements.
FreightCar America, Inc.
Consolidated Statements of Stockholders’ Deficit
(In thousands, except for share data)
FreightCar America Stockholders
Accumulated
Additional
Other
Total
Common Stock
Paid In
Treasury Stock
Comprehensive
Retained
Stockholders'
Shares
Amount
Capital
Shares
Amount
Income (Loss)
Deficit
Deficit
Balance, December 31, 2020
15,861,406
$
$
82,064
(327,577
)
$
(1,344
)
$
(11,763
)
$
(38,619
)
$
30,497
Net loss
-
-
-
-
-
-
(41,447
)
(41,447
)
Other comprehensive income
-
-
-
-
-
6,241
-
6,241
Restricted stock awards
213,465
(2
)
-
-
-
-
-
Employee stock settlement
(1,638
)
-
(5
)
(2,215
)
(7
)
-
-
(12
)
Forfeiture of restricted stock awards
(144,026
)
(2
)
(116,795
)
(431
)
-
-
(1
)
Exercise of stock appreciation rights
10,237
-
-
-
-
-
Stock-based compensation recognized
-
-
-
-
-
-
Equity Fees
7,784
446,587
1,782
-
-
2,250
Balance, December 31, 2021
15,947,228
$
$
83,742
-
$
-
$
(5,522
)
$
(80,066
)
$
(1,656
)
Net loss
-
-
-
-
-
-
(38,847
)
(38,847
)
Other comprehensive income
-
-
-
-
-
6,544
-
6,544
Restricted stock awards
386,908
(4
)
-
-
-
-
-
Stock options exercised
5,292
-
-
-
-
-
-
-
Employee stock settlement
(15,158
)
-
(57
)
-
-
-
-
(57
)
Forfeiture of restricted stock awards
(81,394
)
(1
)
(68
)
-
-
-
-
(69
)
Exercise of stock appreciation rights
-
-
-
-
-
-
-
-
Stock-based compensation recognized
-
-
1,501
-
-
-
-
1,501
Equity Fees
980,430
3,990
-
-
-
-
4,000
Balance, December 31, 2022
17,223,306
$
$
89,104
-
$
-
$
1,022
$
(118,913
)
$
(28,584
)
See Notes to Consolidated Financial Statements.
FreightCar America, Inc.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
Cash flows from operating activities
Net loss
$
(38,847
)
$
(41,447
)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Restructuring and impairment charges
-
6,530
Depreciation and amortization
4,135
4,304
Non-cash lease expense on right-of-use assets
2,325
1,483
Recognition of deferred income from state and local incentives
(2,507
)
(2,215
)
(Gain) loss on change in fair market value for Warrant liability
(1,486
)
14,894
Impairment on leased railcars
4,515
Loss on pension settlement
8,105
-
Stock-based compensation recognized
2,106
2,977
Non-cash interest expense
16,563
5,502
Gain on extinguishment of debt
-
(10,122
)
Other non-cash items, net
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable
-
(150
)
VAT receivable
24,946
(24,675
)
Inventories
(8,476
)
(12,369
)
Related party asset, net
(58
)
(624
)
Accounts and contractual payables
8,181
7,878
Lease liability
(3,006
)
(2,106
)
Other assets and liabilities
(5,013
)
(5,944
)
Net cash flows provided by (used in) operating activities
11,503
(55,397
)
Cash flows from investing activities
Maturity of restricted certificates of deposit
-
Purchase of property, plant and equipment
(7,816
)
(2,290
)
Proceeds from sale of property, plant and equipment
-
Net cash flows used in investing activities
(7,816
)
(1,675
)
Cash flows from financing activities
Proceeds from issuance of long-term debt
-
16,000
Deferred financing costs
-
(1,688
)
Borrowings on revolving line of credit
133,652
48,400
Repayments on revolving line of credit
(124,852
)
(33,378
)
Employee stock settlement
(57
)
(12
)
Payment for stock appreciation rights exercised
(20
)
(57
)
Financing lease payments
(738
)
-
Net cash flows provided by financing activities
7,985
29,265
Net increase (decrease) in cash and cash equivalents
11,672
(27,807
)
Cash, cash equivalents and restricted cash equivalents at beginning of period
26,240
54,047
Cash, cash equivalents and restricted cash equivalents at end of period
$
37,912
$
26,240
Supplemental cash flow information
Interest paid
$
8,849
$
6,537
Income tax refunds received, net of payments
$
-
$
Non-cash transactions
Change in unpaid construction in process
$
$
Accrued PIK interest paid through issuance of PIK Note
$
1,467
$
1,278
Issuance of warrants
$
8,560
$
4,891
Issuance of equity fee
$
4,000
$
2,000
See Notes to Consolidated Financial Statements.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2022 and 2021
(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”).
The Company ceased operations at its Roanoke, Virginia manufacturing facility (the “Roanoke Facility”) and vacated the facility in March 2020. In September 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 was magnified by the COVID-19 pandemic. The closure reduced costs and helped align the Company’s manufacturing capacity with the current railcar market. The Company ceased production at the Shoals Facility in February 2021. The closure reduced costs and helped align the Company’s manufacturing capacity with the current railcar market. See Note 8-Restructuring and Impairment Charges.
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 (collectively, the “Company”). 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
The Company considers all unrestricted short-term investments with maturities of three months or less when 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
The Company establishes restricted cash balances and restricted certificates of deposit to collateralize certain standby letters of credit with respect to purchase price payment guarantees and performance guarantees. The restrictions expire upon completing the Company’s related obligation.
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, 2022 and 2021, have fair values that approximate their carrying values.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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
Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis and includes material, labor and manufacturing overhead. The Company’s inventory consists of raw materials, work in progress, and finished goods for individual customer contracts, used railcars acquired upon trade-in and railcar parts retained for sale to external parties.
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:
Description of Assets
Life
Buildings and improvements
15-40 years
Leasehold improvements
6-19 years
Machinery and equipment
3-7 years
Software
3-7 years
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.
For assets to be held and used, the Company groups 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. 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. Recoverability of the carrying value of the asset group is determined 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. An impairment loss for an asset group reduces only the carrying amounts of a long-lived asset or assets of the group being evaluated.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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
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 five years from the time of sale. The Company also provides 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.
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 seven to sixteen years.
Revenue Recognition
The following table disaggregates the Company’s revenues by major source:
Year Ended
December 31,
Railcar sales
$
349,556
$
189,579
Parts sales
11,941
10,228
Revenues from contracts with customers
361,497
199,807
Leasing revenues
3,257
3,243
Total revenues
$
364,754
$
203,050
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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
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 5 to 10 business days of invoicing while payments from parts sales are typically due within 30 to 45 business days of invoicing. The Company has not experienced significant historical credit losses.
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 December 31, 2022 and 2021. 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 in the Consolidated Balance Sheet based on the timing of when the Company expects to recognize the related revenue. Deferred revenue and customer deposits included in customer deposits, other current liabilities and other long-term liabilities in the Company’s Consolidated Balance Sheet as of December 31, 2022 and 2021 were $219 and $4,807, respectively.
Performance Obligations
The Company is electing not to disclose the value of the remaining unsatisfied performance obligation with a duration of one year or less as permitted by the practical expedient in ASU 2014-09, Revenue from Contracts with Customers. The Company had remaining unsatisfied performance obligations as of December 31, 2022 with expected duration of greater than one year of $40,635.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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 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.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the Financial Accounting Standards Board, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
Note 3 - Leases
The Company determines if an arrangement is a lease at inception of a contract. The Company’s lease portfolio includes manufacturing sites, component warehouses and corporate offices. The remaining lease terms on the majority of the Company’s leases are between 0.3 and 17.8 years, some of which include options to extend the lease terms. Leases with initial term of 12 months or less are not recorded on the consolidated balance sheet.
In 2021, substantially all of the Company’s leases were operating leases. In April 2022, the Company and the lessors of the Company’s leased facility in Castaños (the “Castaños Facility”) amended the original lease to incorporate additional square footage into the lease. The modification resulted in a lease classification modification from operating to finance.
Operating and finance lease ROU assets are presented separately in long term assets, the current portion of operating and finance lease liabilities are presented within other current liabilities, and the non-current portion of operating and finance lease liabilities are presented separately within long term liabilities on the consolidated balance sheet.
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. The Company revalued the incremental borrowing rate used in determining the present value of lease payment for the Castaños Facility lease as a result of the lease modification in April 2022. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease ROU asset amortization expense is recognized on a straight-line basis over the lease term, while interest expense on finance lease liabilities is recognized using the interest method.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The components of the lease costs were as follows:
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Operating lease costs:
Fixed
$
1,735
$
3,710
Short-term
Total operating lease costs
$
2,240
$
4,471
Finance lease costs:
Amortization of leased assets
$
1,182
$
-
Interest on lease liabilities
1,355
-
Total finance lease costs
$
2,537
$
-
Total lease cost
$
4,777
$
4,471
Supplemental balance sheet information related to leases were as follows:
December 31, 2022
December 31, 2021
Right of use assets:
Right of use operating lease assets
$
1,596
$
16,669
Right of use finance lease assets
33,093
-
Total
$
34,689
$
16,669
Lease liabilities:
Operating lease liabilities:
Current
$
$
1,955
Long-term
1,780
16,617
Total operating lease liabilities
$
2,677
$
18,572
Finance lease liabilities:
Current
$
-
Long-term
33,245
-
Total finance lease liabilities
$
33,850
$
-
Total
$
36,527
$
18,572
Supplemental cash flow information is as follows:
Year Ended
December 31, 2022
Year Ended
December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
2,630
$
4,315
Operating cash flows from finance leases
1,355
-
Financing cash flows from finance leases
-
Total
$
4,723
$
4,315
Right of use assets obtained in exchange for new lease obligations:
Operating leases
$
-
$
-
Finance leases
20,344
-
Total
$
20,344
$
-
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The aggregate future lease payments for leases as of December 31, 2022 are as follows:
Operating leases
Finance leases
$
$
3,298
3,298
3,354
3,523
3,523
Thereafter
1,085
48,139
Total lease payments
3,117
65,135
Less: interest
(440
)
(31,285
)
Total
$
2,677
$
33,850
Weighted-average remaining lease term (years)
Operating leases
7.9
Finance leases
17.8
Weighted-average discount rate
Operating leases
4.5
%
Finance leases
8.0
%
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, 2022
Level 1
Level 2
Level 3
Total
Liabilities:
Warrant liability
$
-
$
31,028
$
-
$
31,028
Non-recurring Fair Value Measurements
During the Year Ended December 31, 2022
Level 1
Level 2
Level 3
Total
Assets:
Railcars available for lease, net
$
-
$
4,116
$
-
$
4,116
Assets held for sale
$
-
$
3,675
$
-
$
3,675
Recurring Fair Value Measurements
As of December 31, 2021
Level 1
Level 2
Level 3
Total
Liabilities:
Warrant liability
$
-
$
32,514
$
-
$
32,514
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
$
-
$
-
$
6,638
$
6,638
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 ($0.01/share) and number of shares exercisable at December 31, 2022 and 2021, is a Level 2 measurement.
See Note 7 - Leased Railcars for more information regarding the non-recurring fair value measurement considerations during the years ended December 31, 2022 and 2021, for the impairment charges related to our leased small cube covered hopper railcars.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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,
Restricted cash from customer deposit
$
$
Restricted cash to collateralize standby letters of credit
1,133
Restricted cash equivalents to collateralize standby letters of credit
3,542
3,542
Restricted cash equivalents - other
-
Total restricted cash and restricted cash equivalents
$
4,078
$
4,957
Note 6 - Inventories
Inventories, net of reserve for excess and obsolete items, consist of the following:
December 31,
December 31,
Raw materials
46,421
34,885
Work in process
4,527
11,306
Finished railcars
8,783
4,696
Parts inventory
4,586
5,125
Total inventories, net
$
64,317
$
56,012
Inventory on the Company’s consolidated balance sheets includes reserves of $1,672 and $1,621 relating to excess or slow-moving inventory for parts and work in process at December 31, 2022 and 2021, respectively.
Note 7 - Leased Railcars
Railcars available for lease at December 31, 2022 were $11,324 (cost of $14,995 and accumulated depreciation of $3,671) and at December 31, 2021 were $20,160 (cost of $23,717 and accumulated depreciation of $3,557). Depreciation expense on railcars available for lease was $616 and $646 for the years ended December 31, 2022 and 2021, respectively.
Leased railcars subject to lease agreements with external customers have remaining terms of up to two and a half years and are accounted for as operating leases.
Future minimum rental revenues on leases at December 31, 2022 are as follows:
Year ending December 31, 2023
$
1,297
Year ending December 31, 2024
$
Year ending December 31, 2025
$
Year ending December 31, 2026
$
-
Year ending December 31, 2027
$
-
Thereafter
-
$
1,697
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
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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 a market approach, which we believe most accurately reflects a market participant's viewpoint in valuing these railcars. The Company used known selling prices for a portion of the cars, and a weighted average selling price was applied to the remaining cars in the asset group (Level 2 observable inputs). The results of our analysis indicated an estimated fair value of the asset group of approximately $7,791, in comparison to the asset group's carrying amount of $12,306. As a result, we recorded a pre-tax non-cash impairment charge of $4,515 related to our small cube covered hopper railcars into the fourth quarter of 2022. The portion of these assets intended to be sold were reclassified as assets held for sale as of December 31, 2022 and are no longer depreciated. The impairment is reflected in the impairment of leased railcars line of our consolidated statements of operations for the year ended December 31, 2022.
Note 8 - Restructuring and Impairment Charges
In September 2020, the Company announced its plan to permanently close its Shoals Facility in light of the ongoing cyclical industry downturn, which had been magnified by the COVID-19 pandemic. In October 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. Property, plant and equipment with an estimated fair value of $10,148 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 (benefits) related to the plant closure for 2021 were primarily due to relocating some of the facility’s equipment to Castaños.
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, 2022 and 2021, and are detailed below:
Year Ended
December 31,
Impairment and loss on disposal of machinery and equipment
$
-
$
1,591
Employee severance and retention
-
(5
)
Other charges related to facility closure
-
4,944
Total restructuring and impairment costs
$
-
$
6,530
Accrued restructuring and impairment charges primarily related to the Manufacturing segment and are detailed below:
Accrued as of December 31, 2021
Cash
Charges
Non-cash charges
Cash payments
Accrued as of December 31, 2022
Impairment and loss on disposal of machinery and equipment
$
-
$
-
$
-
$
-
$
-
Employee severance and retention
-
-
(163
)
-
Other charges related to facility closure
-
-
-
-
-
Total restructuring and impairment costs
$
$
-
$
-
$
(163
)
$
-
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Accrued as of December 31, 2020
Cash
Charges
Non-cash charges
Cash payments
Accrued as of
December 31, 2021
Impairment and loss on disposal of machinery and equipment
$
-
$
-
$
$
-
$
-
Employee severance and retention
1,596
-
(80
)
(1,353
)
Other charges related to facility closure
6,437
(96
)
(6,688
)
-
Total restructuring and impairment costs
$
1,847
$
6,437
$
$
(8,041
)
$
Note 9 - Property, Plant and Equipment
Property, plant and equipment consists of the following:
December 31,
Buildings and improvements
$
$
Leasehold improvements
4,072
3,954
Machinery and equipment
37,468
33,808
Software
8,744
8,560
Construction in process
4,969
Total cost
55,415
46,885
Less: Accumulated depreciation and amortization
(32,167
)
(28,649
)
Total property, plant and equipment, net
$
23,248
$
18,236
Depreciation expense for the years ended December 31, 2022 and 2021 was $3,519 and $3,658, respectively.
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 five years from the time of sale. The changes in the warranty reserve for the years ended December 31, 2022 and 2021, are as follows:
December 31,
Balance at the beginning of the year
$
2,533
$
5,216
Current year provision
3,462
Reductions for payments, costs of repairs and other
(3,365
)
(1,358
)
Adjustments to prior warranties
(690
)
(1,525
)
Balance at the end of the year
$
1,940
$
2,533
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 11 - State and Local Incentives
During the year ended December 31, 2015, the Company received cash payments of $15,733 for Alabama state and local incentives related to the Company’s capital investment and employment levels at the Shoals Facility. In December 2016, the Company also qualified for an additional $1,410 in incentives at the Shoals Facility. This amount was received in January 2017. Under the incentive
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
agreements, a certain portion of the incentives may be repayable by the Company if targeted levels of employment are not maintained for a period of six years from the date of the incentive. In the year ended December 31, 2022 employment levels dropped below the minimum targeted levels of employment. The incentives paid back did not exceed the deferred liability balance at December 31, 2021.
The changes in deferred income from these incentives for the years ended December 31, 2022 and 2021, are as follows:
December 31,
Balance at the beginning of the year
$
2,507
$
4,722
Recognition of state and local incentives as a reduction of cost of sales
(1,857
)
(2,215
)
State and local incentives paid during the year
(650
)
-
Balance at the end of the year, including current portion
$
-
$
2,507
Note 12 - Debt Financing and Revolving Credit Facilities
Long-term debt consists of the following as of December 31, 2022 and 2021:
December 31,
December 31,
M&T Credit Agreement outstanding
$
6,917
$
7,917
Siena Loan Agreement outstanding
33,825
24,026
Credit Agreement outstanding
58,745
57,278
Total debt
99,487
89,221
Less Credit Agreement discount
(5,262
)
(7,077
)
Less Credit Agreement deferred financing costs
(1,989
)
(2,660
)
Total debt, net of discount and deferred financing costs
92,236
79,484
Less amounts due within one year
(40,742
)
-
Long-term debt, net of current portion
$
51,494
$
79,484
The fair value of long-term debt approximates its carrying value as of December 31, 2022 and 2021.
Credit Agreement
In October 2020, the Company entered into a $40,000 Credit Agreement (as amended from time to time, the “Credit Agreement”) by and among FCA, as guarantor, FreightCar North America, LLC (“Borrower” and together with FCA 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”). The $40,000 term loan under the Credit Agreement closed and was funded on November 24, 2020.
The Company incurred $2,872 in deferred financing costs that are presented as a reduction of the long-term debt balance and amortized to interest expense over the term of the Credit Agreement.
The term loan outstanding under the Credit Agreement bears interest, at Borrower’s option and subject to the provisions of the Credit Agreement, at Base Rate (as defined in the Credit Agreement) or Eurodollar Rate (as defined in the Credit Agreement) plus the Applicable Margin (as defined in the Credit Agreement) for each such interest rate set forth in the Credit Agreement. As of December 31, 2022, the interest rate on the original advance under the Credit Agreement was 17.2%.
In May 2021, the Loan Parties entered into Amendment No. 2 to the Credit Agreement (the “Second Amendment”) with Lender and the Agent, pursuant to which the principal amount of the Credit Agreement was increased by $16,000 to a total of $56,000 (the “Additional Loan”). The Additional Loan closed and was funded on May 17, 2021. The Company incurred $480 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. As of December 31, 2022, the interest rate on the Second Amendment under the Credit Agreement was 17.2%. The Credit Agreement contains customary affirmative and negative covenants and events of default, and is secured by a pledge of all assets of the Loan Parties.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company was to issue to the Lender and/or a Lender affiliate, a warrant (the “2022 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the Company’s outstanding Common Stock on a fully-diluted basis at the time the 2022 Warrant is exercised. The Company believed it was probable that the 2022 Warrant would be issued and recorded an additional Warrant liability of $7,351 during the third quarter of 2021. The 2022 Warrant was issued on April 4, 2022 with an exercise price of $0.01 and a term of ten (10) years. As of December 31, 2022 and 2021, the 2022 Warrant was exercisable for an aggregate of 1,473,726 and zero (0) shares of Common Stock, respectively with a per share exercise price of $0.01.
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 $15,000 by July 31, 2021 and (ii) file a registration statement on Form S-3 registering Company securities by no later than August 31, 2021. The Company has met each of the aforementioned obligations. The Form S-3 registering Company securities was filed with the Securities and Exchange Commission on August 27, 2021 and became effective on September 9, 2021.
In July 2021, the Loan Parties entered into Amendment No. 3 to Credit Agreement (the “Third Amendment”) 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 $25,000 for the account of the Company and for the benefit of the Revolving Loan Lender (as defined below).
In December 2021, the Loan Parties entered into Amendment No. 4 to Credit Agreement (the “Fourth Amendment”) with the Lender and the Agent, pursuant to which the principal amount of the term loan credit facility was increased by $15,000 to a total of $71,000, with such additional $15,000 (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 had the option to draw on the Delayed Draw Loan through January 31, 2023. The Delayed Draw Loan, if funded, would bear the same interest rate as the original term loan.
In January 2023, the Loan Parties entered into Amendment No. 6 to Credit Agreement (the “Sixth Amendment”) to extend the date for the Company to draw on the delayed draw loan of $15,000 from January 31, 2023 to March 3, 2023. See Note 22 - Subsequent Events.
In February 2023, the Loan Parties entered into Amendment No. 7 to Credit Agreement (the “Seventh Amendment”) to extend the date for the Company to draw on the delayed draw loan of $15,000 from March 3, 2023 to April 3, 2023. See Note 22 - Subsequent Events.
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.
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 $500, which shall be due and payable quarterly beginning on August 2, 2021, and every three months thereafter.
Equity Fee
Every three months (the “Measurement Period”), commencing on August 6, 2021, the Company shall pay to the Lender or designee thereof a fee (the “Equity Fee”) payable in shares of Common Stock. The Equity Fee shall be calculated by dividing $1,000 by the volume weighted average price of the Common Stock on the Nasdaq Global Market for the ten (10) trading days ending on the last business day of the applicable Measurement Period. The Company may pay the Equity Fee in cash if certain conditions are met.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The Equity Fee shall no longer be paid once the Company has issued 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, or 1,547,266 shares of Common Stock (the “Maximum Equity”). Through December 31, 2022, the Company has paid Equity Fees totaling 1,388,388 shares of Common Stock.
Cash Fee
The Company shall pay to the Agent, for the account of the Lender or a designee thereof 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 $1,000, 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 Credit Agreement, the Company issued to an affiliate of the Lender (the “Warrantholder”) a warrant (the “2020 Warrant”), pursuant to that certain warrant acquisition agreement, dated as of October 13, 2020, by and between the Company and the Lender, to purchase a number of shares of Common Stock equal to 23% of the outstanding Common Stock on a fully-diluted basis at the time the 2020 Warrant is exercised (after giving effect to such issuance). The 2020 Warrant was issued on November 24, 2020 and is exercisable for a term of ten (10) years from the date of the issuance of the 2020 Warrant. As of December 31, 2022 and 2021, the 2020 Warrant was exercisable for an aggregate of 6,799,139 and 6,098,217 shares, respectively, of Common Stock with a per share exercise price of $0.01. The Company determined that the 2020 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 2020 Warrant in a variable number of shares of Common Stock. The 2020 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 Credit Agreement and included in interest expense.
Pursuant to the Fourth Amendment and a warrant acquisition agreement, dated as of December 30, 2021, the Company issued to the Lender a warrant (the “2021 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the outstanding Common Stock on a fully-diluted basis at the time the 2021 Warrant is exercised. The 2021 Warrant has an exercise price of $0.01 and a term of ten years. As of December 31, 2022 and 2021, the 2021 Warrant was exercisable for an aggregate of 1,473,726 and 1,325,699 shares of Common Stock, respectively with a per share exercise price of $0.01.
The 2020 Warrant, 2021 Warrant, and 2022 Warrant collectively are referred to herein as the “Warrant”. The following schedule shows the change in fair value of the Warrant as of December 31, 2022.
Warrant liability as of December 31, 2021
$
32,514
Change in fair value
(1,486
)
Warrant liability as of December 31, 2022
$
31,028
The change in fair value of the Warrant is reported on a separate line in the consolidated statements of operations. The Term Loan Credit Agreement is presented net of the unamortized discount and unamortized deferred financing costs.
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 Common Stock equal to 3% of the 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
In October 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 “Revolving Loan Parties”), and Siena Lending Group LLC, as lender (“Revolving Loan Lender”). Pursuant to the Siena Loan Agreement, the Revolving Loan Lender provided an asset backed credit facility, in the maximum aggregate principal amount of up to $20,000, (the “Maximum Revolving Facility Amount”) consisting of revolving loans (the “Revolving Loans”).
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The Siena Loan Agreement provided for a revolving credit facility with maximum availability of $20,000, subject to certain borrowing base requirements set forth in the Siena Loan Agreement.
In July 2021, the Revolving Loan Parties and the Revolving Loan Lender 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, including, among other things, an increase of $25,000 to the Maximum Revolving Facility Amount.
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). The Amended and Restated Loan and Security Agreement contains customary affirmative and negative covenants and events of default, and is secured by a pledge of all assets of the Revolving Loan Parties.
In February 2022, the Revolving Loan Parties and 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 $35,000.
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 2% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). Notwithstanding the foregoing, Revolving Loans made in respect of Excess Availability (as defined in the First Amendment to Amended and Restated Loan and Security Agreement) arising from clause (b) of the definition of “Borrowing Base” (as defined in 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 1.5% per annum in excess of the Base Rate (as defined in the Amended and Restated Loan and Security Agreement). As of December 31, 2022, the interest rate on outstanding debt under the Amended and Restated Loan and Security Agreement was 9.00% and under the First Amendment to Amended and Restated Loan and Security Agreement was 9.50%.
As of December 31, 2022, the Company had $33,825 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of zero. As of December 31, 2021, the Company had $24,026 in outstanding debt under the Siena Loan Agreement and remaining borrowing availability of $122. The Company incurred $1,101 in deferred financing costs related to the Siena Loan Agreement during the fourth quarter of 2020 and incurred $1,037 in additional deferred financing costs related to the Amended and Restated Loan and Security Agreement during the third quarter of 2021. 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.
SBA Paycheck Protection Program Loan
In April 2020, the Company received a loan from BMO Harris Bank N.A. in the amount of $10.0 million pursuant to the Paycheck Protection Program (the “PPP Loan”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). In July 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
In April 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”), with a term that ended on April 16, 2021 (the “Term End”). 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 $40,000 for the purpose of financing railcars to be leased to third parties. In connection with the M&T Credit Agreement, (i) FreightCar Leasing LLC, a wholly owned subsidiary of the Company and parent of FreightCar Leasing Borrower (“FreightCar Leasing Guarantor”), entered into a Guaranty Agreement (the “M&T Guaranty Agreement”) and Pledge Agreement (the “M&T Pledge Agreement”) with M&T and (ii) FreightCar Leasing Borrower 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.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The Loans outstanding 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), and 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).
Between August 2020 and April 2021, FreightCar Leasing Borrower received notices from M&T that various Events of Default (as defined in the M&T Credit Agreement) had occurred, including a notice in April 2021 that an Event of Default had occurred due to all amounts outstanding under the M&T Credit Agreement having not been paid by the Term End.
In December 2021 (the “Execution Date”), FreightCar Leasing Borrower, FreightCar Leasing Guarantor (together with FreightCar Leasing Borrower, the “Obligors”), the Company, FreightCar America Railcar Management, LLC (“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 FreightCar Leasing Borrower to M&T pursuant to the M&T Security Agreement (the “Collateral”)) and all the provisions of the M&T Security Agreement.
On December 1, 2023, or sooner if requested by the Lender (the “Turnover Date”), FreightCar Leasing 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, and the Company shall turn over to M&T certain rents in the amount of $715 that it had previously collected as servicing agent for FreightCar Leasing Borrower.
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.
As of December 31, 2022 and December 31, 2021, FreightCar Leasing Borrower had $6,917 and $7,917, respectively, in outstanding debt under the M&T Credit Agreement, which was collateralized by leased railcars with a carrying value of $4,116 and $6,638, respectively. As of December 31, 2022, the interest rate on outstanding debt under the M&T Credit Agreement was 8.50%.
Estimated annual maturities of long-term debt, including the current portion at December 31, 2022 are as follows based on the most recent debt agreements.
$
40,742
-
58,745
-
-
Thereafter
-
$
99,487
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Note 13 - Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) consist of the following:
Pre-Tax
Tax
After-Tax
Year ended December 31, 2022
Pension liability activity:
Loss on pension settlement
$
8,105
$
-
$
8,105
Reclassification adjustment for amortization of net loss (pre-tax other income)
(1,561
)
-
(1,561
)
$
6,544
$
-
$
6,544
Pre-Tax
Tax
After-Tax
Year ended December 31, 2021
Pension liability activity:
Actuarial gain
5,620
-
$
5,620
Reclassification adjustment for amortization of net loss (pre-tax other income)
-
$
$
6,241
$
-
$
6,241
The components of accumulated other comprehensive loss consist of the following:
December 31,
December 31,
Unrecognized pension income (cost), net of tax of $6,282 and $6,282, respectively
$
1,022
$
(5,522
)
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 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 assets are held by an independent trustee 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, 2022 and 2021, are as follows:
Pension Benefits
Change in benefit obligation
Benefit obligation - Beginning of year
$
50,938
$
55,359
Interest cost
Actuarial (gain) loss
(8,985
)
(2,098
)
Benefits paid
(2,730
)
(3,267
)
Annuity purchase
(27,647
)
-
Benefit obligation - End of year
12,443
50,938
Change in plan assets
Plan assets - Beginning of year
50,903
48,314
Return on plan assets
(9,123
)
5,856
Annuity purchase
(27,647
)
-
Benefits paid
(2,730
)
(3,267
)
Plan assets at fair value - End of year
11,403
50,903
Funded status of plans - End of year
$
(1,040
)
$
(35
)
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Pension Benefits
Amounts recognized in the Consolidated Balance Sheets
Current liabilities
$
-
$
-
Noncurrent liabilities
(1,040
)
(35
)
Net amount recognized at December 31
$
(1,040
)
$
(35
)
Amounts recognized in accumulated other comprehensive income (loss) but not yet recognized in earnings at December 31, 2022 and 2021, are as follows:
Pension Benefits
Net actuarial loss
$
5,260
$
11,803
$
5,260
$
11,803
Components of net periodic benefit cost (income) for the years ended December 31, 2022 and 2021, are as follows:
Pension Benefits
Components of net periodic benefit cost
Interest cost
$
$
Expected return on plan assets
(1,650
)
(2,335
)
Amortization of unrecognized net loss (gain)
Total net periodic (income) benefit cost
$
(555
)
$
(770
)
The increase (decrease) in accumulated other comprehensive income (loss) (pre-tax) for the years ended December 31, 2022 and 2021, are as follows:
Pension Benefits
Net actuarial (gain) loss
$
1,789
$
(5,620
)
Amortization of:
Actuarial loss from settlement
(8,105
)
-
Net actuarial loss
(228
)
(621
)
Total recognized in accumulated other comprehensive loss
$
(6,544
)
$
(6,241
)
The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid as of December 31, 2022:
Pension Benefits
$
2028 through 2032
4,196
The Company is not required to make any contributions to its pension plan in 2023 to meet its minimum funding requirements.
The assumptions used to determine end of year benefit obligations are shown in the following table:
Pension Benefits
Discount rates
5.22%
2.84%
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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-2021 with COVID adjustment), which reflects additional data that the Social Security Administration has released since prior assumptions (MP-2020) were developed. The Company used the base mortality table Pri-2012 projected generationally using a modified MP-2021 with Endemic COVID adjustment for purposes of measuring its pension obligations at December 31, 2022.
The 2022 actuarial gain of $8,985 was largely the result of the change in mortality improvement scale MP-2021 with Endemic COVID adjustment to reflect anticipated slow recovery from COVID. The 2021 actuarial gain of $2,098 was largely the result of the change in the yield curve to Pri-2012 with MP-2021. The impact of the mortality improvement scale MP-2021 also created a slight actuarial gain for 2021.
The assumptions used in the measurement of net periodic cost are shown in the following table:
Pension Benefits
Discount rate for benefit obligations
5.22%
2.48%
Expected return on plan assets
3.00%
5.00%
Rate for interest on benefit obligations
5.10%
1.77%
Discount rate for service cost
N/A
N/A
The Company’s pension plan’s weighted average asset allocations at December 31, 2022 and 2021, and target allocations for 2023, by asset category, are as follows:
Plan Assets at December 31,
Target Allocation
Asset Category
Cash and cash equivalents
%
%
0% - 5%
Equity securities
%
%
0%
Fixed income securities
%
%
95%-100%
Real estate
%
%
0%
%
%
100%
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 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.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
The Company’s pension plan assets are invested in one mutual fund for each fund classification. The following table presents the fair value of pension plan assets classified under the appropriate level of the ASC 820 fair value hierarchy (see Note 2, Summary of Significant Accounting Policies for a description of the fair value hierarchy) as of December 31, 2022 and 2021:
Pension Plan Assets
As of December 31, 2022
Level 1
Level 2
Level 3
Total
Mutual funds:
Fixed income funds
$
11,268
$
-
$
-
$
11,268
Large cap funds
-
-
-
-
Small cap funds
-
-
-
-
International funds
-
-
-
-
Real estate funds
-
-
-
-
Cash and equivalents
-
-
Total
$
11,403
$
-
$
-
$
11,403
Pension Plan Assets
As of December 31, 2021
Level 1
Level 2
Level 3
Total
Mutual funds:
Fixed income funds
$
16,645
$
-
$
-
$
16,645
Large cap funds
16,238
-
-
16,238
Small cap funds
4,877
-
-
4,877
International funds
6,607
-
-
6,607
Real estate funds
5,529
-
-
5,529
Cash and equivalents
1,007
-
-
1,007
Total
$
50,903
$
-
$
-
$
50,903
The Company entered into a commitment agreement (the “OneAmerica Agreement”) with OneAmerica Financial Partners, Inc. (“OneAmerica”) during the year ended December 31, 2022. Under the OneAmerica Agreement, the Company purchased a non-participating group annuity contract (the “Annuity Contract”) from OneAmerica and transferred to OneAmerica about 67.7% of its future benefit obligations under the Plan. Upon payment of the premium to OneAmerica and the closing of the OneAmerica Agreement, the applicable pension benefit obligations were irrevocably transferred from the Plan to OneAmerica. By transferring the future benefit obligations and annuity administration to OneAmerica, the Company reduced its gross Plan liabilities by $27.6 million during the year ended December 31, 2022. The purchase of the Annuity Contract was funded by the assets of the Plan. As a result of the OneAmerica Agreement, the Company recognized a non-cash pre-tax pension settlement loss of $8.1 million during the year ended December 31, 2022.
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 $289 for the year ended December 31, 2022.
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
Current Tax Expense/(Benefit)
Federal
$
-
$
(10
)
Foreign
2,285
1,533
State
2,325
1,549
Deferred Tax Expense/(Benefit)
Federal
-
Foreign
(14
)
(136
)
(13
)
(136
)
Total
$
2,312
$
1,413
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(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
Statutory U.S. federal income tax rate
21.0
%
21.0
%
State income taxes, net of federal tax benefit
0.4
%
0.7
%
Valuation allowance
(5.8
)
%
(20.4
)
%
Provision to return
(0.2
)
%
0.0
%
Foreign rate differential
(1.5
)
%
(1.0
)
%
Foreign tax adjustments
(1.1
)
%
0.0
%
Deferred tax adjustments
(17.9
)
%
0.4
%
Nondeductible expenses and other
(1.2
)
%
(4.2
)
%
Effective income tax rate
(6.3
)
%
(3.5
)
%
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, 2022
December 31, 2021
Description
Assets
Liabilities
Assets
Liabilities
Accrued post-retirement and pension benefits
$
$
-
$
$
-
Intangible assets
-
(26
)
-
(22
)
Accrued expenses
2,326
-
1,367
-
Accrued warranty costs
-
-
-
-
Prepaid expenses
-
(1,155
)
-
-
Deferred state and local incentive revenue
-
-
-
Accrued severance
-
-
-
-
Inventory valuation
1,219
-
-
Property, plant and equipment and railcars on operating leases
-
(1,166
)
-
Net operating loss, tax credit, and interest carryforwards
65,218
-
62,536
-
Stock-based compensation expense
1,715
-
1,539
-
Other
(1,448
)
-
Right of use asset
-
(10,902
)
-
(4,780
)
Lease liability
11,376
-
5,175
-
82,585
(14,697
)
72,001
(4,802
)
Valuation Allowance
(67,881
)
-
(67,204
)
-
Deferred tax assets (liabilities)
$
14,704
$
(14,697
)
$
4,797
$
(4,802
)
Increase (decrease) in valuation allowance
$
$
7,591
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 US and China operating losses, we will not more likely than not realize the benefit of the US and China deferred tax assets. The Company has certain pretax state net operating loss carryforwards of $220,406 which will expire between 2023 and 2042, for which a full valuation allowance has been recorded. The Company also has federal net operating loss carryforwards, tax credits, and interest carryforwards of $210,223, $2,016, and $33,392, respectively, which will begin to expire in 2032, for which a full valuation allowance also has been recorded. The Company has Chinese net operating loss carryforwards of $356 which will expire between 2023 and 2027 for which a full valuation allowance also has been recorded.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
As of December 31, 2022, the Company has released a valuation allowance in Mexico to realize its deferred tax assets of $0.1 as a result of significant positive evidence, most notably three years of cumulative income in Mexico and management expectations of continued profitability.
The Company does not have any unrecognized tax benefit that, if recognized, would affect the Company's effective tax rate as of December 31, 2022 and 2021. The Company's income tax provision included $0 of expenses related to interest and penalties for the years ended December 31, 2022 and 2021. The Company records interest and penalties as a component of income tax expense. However, as there are no unrecognized tax benefits for the year ended 2022 and 2021, the Company has zero penalties or interest accrued at December 31, 2022 and 2021, respectively.
The Company and/or its subsidiaries file income tax returns with the U.S. federal government and in various state and foreign jurisdictions. A summary of tax years that remain subject to examination is as follows:
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 “Prior LTIPs”), were terminated and replaced by the Company's new incentive compensation plan, titled “The FreightCar America, Inc. 2022 Long Term Incentive Plan” (the “2022 Plan” or “Incentive Plan”). The 2022 Plan was approved by the Company’s Board of Directors and ratified by the stockholders on May 12, 2022. Awards previously granted under the Prior LTIPs were unaffected by the adoption of the 2022 Plan, and they remain outstanding under the terms pursuant to which they were previously granted. The Incentive Plan provides 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 one to three years of service and have 10-year contractual terms. Share awards generally vest over one to three years. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the Incentive Plans). The Company accounts for forfeitures of stock-based awards as incurred. The 2022 Plan will terminate as to future awards on May 12, 2032. Upon approval of the 2022 Plan, 880,000 shares of common stock were registered and made available for issuance, together with 494,977 shares of common stock that were available under the Prior LTIPs on May 12, 2022. Under the 2022 Plan, 1,374,977 shares of common stock have been reserved for issuance (from either authorized but unissued shares or treasury shares), of which 1,285,806 were available for issuance at December 31, 2022.
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
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
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.
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
1/17/2022
6 years
74.32%
0.00%
1.60%
$
2.63
2/4/2022
6 years
74.27%
0.00%
1.81%
$
2.30
3/21/2022
6 years
74.45%
0.00%
2.33%
$
2.90
4/19/2022
6 years
75.31%
0.00%
2.91%
$
3.87
7/11/2022
6 years
77.95%
0.00%
3.04%
$
2.41
7/18/2022
6 years
77.92%
0.00%
3.04%
$
2.51
8/29/2022
6 years
78.17%
0.00%
3.24%
$
3.10
9/6/2022
6 years
78.19%
0.00%
3.41%
$
2.81
12/1/2022
6 years
78.20%
0.00%
3.65%
$
2.60
A summary of the Company’s time-vested stock options activity and related information at December 31, 2022 and 2021, and changes during the years then ended, is presented below:
December 31,
Weighted-
Weighted-
Average
Average
Exercise
Exercise
Options
Price
Options
Price
Outstanding
(per share)
Outstanding
(per share)
Outstanding at the beginning of the year
733,967
$
5.66
211,361
$
11.68
Granted
513,518
3.95
608,485
4.04
Exercised
(102,850
)
3.98
-
-
Forfeited or expired
(255,821
)
4.76
(85,879
)
9.02
Outstanding at the end of the year
888,814
$
5.12
733,967
$
5.66
Exercisable at the end of the year
227,056
$
8.39
111,516
$
13.86
A summary of the Company’s time vested stock options outstanding as of December 31, 2022 is presented below:
Weighted-
Average
Weighted-
Remaining
Average
Contractual
Exercise
Aggregate
Options
Term
Price
Intrinsic
Outstanding
(in years)
(per share)
Value
Options outstanding
888,814
8.3
$
5.12
$
-
Vested or expected to vest
888,814
8.3
$
5.12
$
-
Options exercisable
227,056
6.5
$
8.39
$
-
The Company issued 5,292 shares of common stock as a result of cashless exercise of 102,850 time-vested stock options during the year ended December 31, 2022. There were no time-vested stock options exercised during 2021. As of December 31, 2022, there was
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
$1,178 of total unrecognized compensation expense related to time-vested stock options, which will be recognized over the average remaining requisite service period of 23 months.
Stock Appreciation Rights
2020 Grants of Stock Appreciation Rights
During 2020, the Company granted 1,164,464 cash settled stock appreciation rights to certain employees. Each stock appreciation right represents the right to receive a payment measured by the increase in the fair market value of one share of the Company’s stock from the date of grant of the stock appreciation right to the date of exercise of the stock appreciation right. The cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Cash settled stock appreciation rights are classified as liabilities. The Company measures the fair value of unvested cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is vested. Once vested the Company immediately recognizes compensation cost for any changes in fair value of cash settled stock appreciation rights until settlement. Fair value of vested cash settled stock appreciation rights represents the fair market value of one share of the Company’s stock on the measurement date less the exercise price per share. Compensation cost for cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.
2021 Grants of Stock Appreciation Rights
During 2021, the Company granted 1,735,500 cash settled stock appreciation rights to certain employees. Each of the 2021 cash settled stock appreciation rights allows the holder to receive, upon exercise, and subject to the vesting restrictions, a distribution in cash equal to the excess of the fair market value of a share of the Company’s stock on the date of exercise over the exercise price. The 2021 cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Vesting of the 2021 cash settled stock appreciation rights is contingent upon the achievement of a thirty-day trailing average fair market value of a share of the Company’s common stock of 133.3% ($3.17) or more of the exercise price per share ($2.38). When vesting of an award of stock-based compensation is dependent upon the attainment of a target stock price, the award is considered to be subject to a market condition.
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 $1.74 was calculated using a Monte Carlo simulation model. During 2021, the market condition for the 2021 cash settled stock appreciation rights was met. Thereafter the Company measures the fair value of the 2021 cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is vested. Once vested, the Company immediately recognizes compensation cost for any changes in fair value of the 2021 cash settled stock appreciation rights until settlement. Fair value of vested 2021 cash settled stock appreciation rights represents the fair market value of one share of the Company’s stock on the measurement date less the exercise price per share. Compensation cost for the 2021 cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered.
The estimated fair value of the cash settled stock appreciation rights as of December 31, 2022 was $3,021. Stock-based compensation for cash settled stock appreciation rights was $632 and $2,145 for the year ended December 31, 2022 and 2021, respectively.
The fair value of cash settled stock appreciation rights as of December 31, 2022 was estimated using the Black-Scholes option valuation model with the following assumptions:
Expected
Risk Free
Expected
Dividend
Interest
Fair Value
Grant Year
Grant Date
Expected Life
Volatility
Yield
Rate
Per Award
1/24/2020
3.6 years
94.35%
0.00%
4.19%
$
2.44
9/14/2020
4.2 years
89.86%
0.00%
4.10%
$
2.38
11/30/2020
4.4 years
87.88%
0.00%
4.07%
$
2.28
1/5/2021
4.3 years
89.36%
0.00%
4.09%
$
2.31
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
A summary of the Company’s cash settled stock appreciation rights activity and related information at December 31, 2022 and 2021 and changes during the year is presented below:
December 31,
Weighted-
Weighted-
Average
Average
Exercise
Exercise
SARS
Price
SARS
Price
Outstanding
(per share)
Outstanding
(per share)
Outstanding at the beginning of the year
2,163,339
$
2.20
853,967
$
1.69
Granted
-
-
1,735,500
2.38
Exercised
(11,592
)
2.16
(42,652
)
1.64
Forfeited or expired
(19,634
)
2.31
(383,476
)
1.92
Outstanding at the end of the year
2,132,113
$
2.20
2,163,339
$
2.20
Exercisable at the end of the year
909,313
$
2.10
192,387
$
1.71
A summary of the Company’s cash settled stock appreciation rights outstanding as of December 31, 2022 is presented below:
Weighted-
Average
Weighted-
Remaining
Average
Contractual
Exercise
Aggregate
SARS
Term
Price
Intrinsic
Outstanding
(in years)
(per share)
Value
SARS outstanding
2,132,113
7.8
$
2.20
$
2,124,866
Vested or expected to vest
2,132,113
7.8
$
2.20
$
2,124,866
SARS exercisable
909,313
7.7
$
2.10
$
997,916
Restricted Shares
A summary of the Company’s nonvested restricted shares as of December 31, 2022 and 2021, and changes during the years then ended is presented below:
December 31,
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
491,239
$
3.50
849,723
$
2.86
Granted
386,908
3.93
213,465
4.23
Vested
(113,886
)
6.16
(311,128
)
2.26
Forfeited
(74,399
)
4.44
(260,821
)
3.49
Nonvested at the end of the year
689,862
$
3.20
491,239
$
3.50
Expected to vest
689,862
$
3.20
491,239
$
3.50
The fair value of stock awards vested during the years ended December 31, 2022 and 2021, was $427 and $1,942, respectively, based on the value at vesting date. As of December 31, 2022, there was $1,065 of unrecognized compensation expense related to nonvested restricted stock awards, which will be recognized over the average remaining requisite service period of 20 months.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Stock-based compensation expense of $2,106 and $2,977 is included within selling, general and administrative expense for the years ended December 31, 2022 and 2021, respectively.
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.
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 no reserve with respect to these matters at December 31, 2022 as they are neither probable nor estimable.
Note 18 - Loss Per Share
The weighted average common shares outstanding are as follows:
Year Ended December 31,
Weighted average common shares outstanding
16,052,920
15,023,853
Issuance of Warrants
8,785,479
5,742,545
Weighted average common shares outstanding - basic
24,838,399
20,766,398
Weighted average common shares outstanding - diluted
24,838,399
20,766,398
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, 2022 and 2021, 1,658,605 and 1,321,396 shares, respectively, were not included in the weighted average common shares outstanding calculation as they were anti-dilutive.
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,
Railcar sales
$
349,556
$
189,579
Parts sales
11,941
10,228
Revenues from contracts with customers
361,497
199,807
Leasing revenues
3,257
3,243
Total revenues
$
364,754
$
203,050
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 20%, 19% and 16%, respectively, of revenues for the year ended December 31, 2022. Sales to the Company’s top three customers accounted for 46%, 12% and 8%, respectively, of revenues for the
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
year ended December 31, 2021. The Company had no sales to customers outside the United States in 2022 and 2021. As of December 31, 2022, 35% of the accounts receivable balance of $9,571 reported on the consolidated balance sheet was receivable from one customer and 29% was receivable from a second customer. As of December 31, 2021, 62% of the accounts receivable balance of $9,571 reported on the consolidated balance sheet was receivable from one customer.
Note 20 - 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, used railcar sales, railcar leasing and major railcar rebuilds. 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 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.
Year Ended
December 31,
Revenues:
Manufacturing
$
352,827
$
192,807
Corporate and Other
11,927
10,243
Consolidated revenues
$
364,754
$
203,050
Operating loss:
Manufacturing (1)
$
14,801
$
(757
)
Corporate and Other (2)
(29,825
)
(22,005
)
Consolidated operating loss
(15,024
)
(22,762
)
Consolidated interest expense
(25,423
)
(13,317
)
Gain (loss) on change in fair market value of Warrant liability
1,486
(14,894
)
Gain on extinguishment of debt
-
10,122
Consolidated other income
2,426
Consolidated loss before income taxes
$
(36,535
)
$
(40,034
)
Depreciation and amortization:
Manufacturing
$
3,491
$
3,648
Corporate and Other
Consolidated depreciation and amortization
$
4,135
$
4,304
Capital expenditures:
Manufacturing
$
7,327
$
1,880
Corporate and Other
Consolidated capital expenditures
$
7,816
$
2,290
(1) There were no restructuring and impairment charges for the year ended December 31, 2022. Results for the year ended December 31, 2021 include restructuring and impairment charges of $6,530.
(2) Results for the year ended December 31, 2022 include a pension settlement loss of $8,105. There were no pension settlement losses in the year ended December 31, 2021.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
December 31,
December 31,
Assets:
Manufacturing
$
149,014
$
154,068
Corporate and Other
50,631
46,417
Total operating assets
199,645
200,485
Consolidated income taxes receivable
Consolidated assets
$
199,738
$
200,664
Geographic Information
Revenues
Long Lived Assets(a)
Year Ended
December 31,
December 31,
December 31,
United States
$
364,740
$
202,978
$
15,018
$
24,967
Mexico
54,243
30,098
Total
$
364,754
$
203,050
$
69,261
$
55,065
(a) Long lived assets include property plant and equipment, net, railcars available for lease, and right-of-use (ROU) assets.
Note 21 - Related Parties
The following persons are owners of Fabricaciones y Servicios de México, S.A. de C.V. (“Fasemex”): Jesus Gil, VP Operations and a director of the Company; and Alejandro Gil and Salvador Gil, siblings of Jesus Gil. Fasemex owns approximately 11.3% of the outstanding shares of Common Stock as of December 31, 2022. Fasemex provides steel fabrication services to the Company. Commencing November 2021, the lessors of the Company’s leased facility in Castaños (the “Castaños Facility”) have been Jesus Gil, Alejandro Gil, and Salvador Gil. Previously, Fasemex was the lessor of the Castaños Facility. The Company paid $28,669 and $89,984 to Fasemex during the years ended December 31, 2022 and 2021, respectively, related to rent payment, security deposit, fabrication services and royalty payments. Distribuciones Industriales JAS S.A. de C.V. (“DI”) is owned by Alejandro Gil and Salvador Gil. The Company paid $2,709 and $1,735 during the years ended December 31, 2022 and 2021, respectively, to DI related to material and safety supplies. Maquinaria y equipo de transporte Jova S.A. de C.V (“METJ”) is owned by Jorge Gil, sibling of Jesus Gil. The Company paid $2,436 and $1,163 during the years ended December 31, 2022 and 2021, respectively, to METJ related to trucking services.
Related party asset on the condensed balance sheet of $3,261 as of December 31, 2022 includes prepaid inventory of $2,014 and other receivables of $1,247 from Fasemex. Related party accounts payable on the condensed balance sheet of $3,393 as of December 31, 2022 includes $2,475 payable to Fasemex, $572 payable to DI, and $346 payable to METJ. Related party asset on the condensed consolidated balance sheet of $8,680 as of December 31, 2021 includes prepaid inventory of $4,134 and other receivables of $4,546 from Fasemex. Related party accounts payable on the condensed consolidated balance sheet of $8,870 as of December 31, 2021 includes $8,291 payable to Fasemex, $291 payable to DI and $288 payable to METJ.
The Warrantholder beneficially owns approximately 41.3% of the outstanding shares of Common Stock (as disclosed by the Warrantholder in its Schedule 13D/A No. 5 filed with the SEC on November 8, 2022). The Company paid $8,652 and $7,533 to the Warrantholder during the years ended December 31, 2022 and 2021, respectively, for term loan interest, of which $7,185 and $6,255 was paid in cash during the years ended December 31, 2022 and 2021, respectively, and $1,467 and $1,278 was payment in kind during the years ended December 31, 2022 and 2021, respectively. Additionally, the Company paid $4,000 and $1,870 in equity fees during the years ended December 31, 2022 and 2021, respectively, to the Warrantholder related to the standby letter of credit described in Note 12 Debt Financing and Revolving Credit Facilities.
FreightCar America, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2022 and 2021
(in thousands, except for share and per share data)
Note 22 - Subsequent Events
On January 30, 2023, FreightCar North America, LLC, FreightCar America, Inc. (the “Company”), certain other subsidiary guarantors of the Company, CO Finance LVS VI LLC and OC III LFE II LP (collectively, the “Loan Parties”) entered into Amendment No. 6 to Credit Agreement (the “Sixth Amendment”), with respect to that certain Credit Agreement dated as of October 13, 2020 by and among the Loan Parties (as amended, restated, supplemented or otherwise modified from time to time, and together with the Amendment, the “Term Loan Credit Agreement). The Sixth Amendment amends the Term Loan Credit Agreement to extend the date for the Company to draw on the delayed draw loan of $15,000 from January 31, 2023 to March 3, 2023.
On February 27, 2023, the Loan Parties entered into Amendment No. 7 to Credit Agreement (the “Seventh Amendment”), with respect to the Term Loan Credit Agreement. The Seventh Amendment amends the Term Loan Credit Agreement to extend the date for the Company to draw on the delayed draw loan of $15,000 from March 3, 2023 to April 3, 2023.
On March 23, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and among the Company and OC III LFE II LP (the “Purchaser”) pursuant to which the Company will issue approximately 85,000 shares of new non-convertible Series C Preferred Stock of the Company, par value $0.01 (the “Preferred Stock”) at an initial stated value of $1,000 per share. The total purchase price and aggregate number of shares will depend on the total debt outstanding under the Term Loan Credit Agreement as of the closing date. Upon closing of the transactions contemplated by the Purchase Agreement (the “Closing”), the Purchaser will receive a detached warrant to purchase up to an estimated 3% shares of Common Stock of the Company outstanding as of the Closing, for an exercise price equal to the average price of the Company’s Common Stock thirty (30) days prior to the date of announcement of the contemplated transaction.
The Company expects to use the proceeds from the issuance of the Preferred Stock to repay in-full, in-cash all of the principal amount of the outstanding Term Loan Credit Agreement, together with all accrued unpaid interest, fees, penalties, and other obligations under the Term Loan Credit Agreement. Any excess proceeds will be used for general corporate purposes. In connection with the Closing, the Purchaser has agreed to extend the maturity date of the Third Amendment Letter of Credit for two (2) years and reduce the Letter of Credit Fee paid by the Company to $375 per quarter.
On March 23, 2023, the Loan Parties, the Purchaser, and the designated disbursing and collateral agent (the “Agent”) entered into Amendment No. 8 to Credit Agreement (the “Eighth Amendment”), with respect to the Term Loan Credit Agreement. The Eighth Amendment amends the Term Loan Credit Agreement to provide the Company the option to pay all interest during the period between signing of the Purchase Agreement and the Closing (the “Pre-Closing Period”) in kind.
On March 23, 2023, the Company, the Purchaser, the Agent, and the designated calculation agent entered into Amendment No. 1 to Amended and Restated Reimbursement Agreement, pursuant to which the parties have agreed the Letter of Credit Fee, Equity Fee or Cash Fee that would otherwise be due and payable for the Pre-Closing Period will accrue and become payable and be paid on the date the Pre-Closing Period terminates.
Item 9A. Controls and Procedures.
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, 2022 (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:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP;
•Provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with appropriate authorization of management and the Board of Directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
As of the end of the Company’s 2022 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 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, 2022.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during the last fiscal quarter of 2022 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.
Purchase Agreement
On March 23, 2023, the “Company” entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and among the Company and OC III LFE II LP (the “Purchaser”), pursuant to which the Purchaser agreed to acquire an estimated aggregate of 85,000 shares of to be created Series C Preferred Stock of the Company, par value $0.01 (the “Preferred Stock”) at an initial stated value of
$1,000 per share. The total purchase price and aggregate number of shares will depend on the total debt outstanding under the Term Loan Credit Agreement as of the closing date. Upon closing of the transactions contemplated by the Purchase Agreement (the “Closing”), (i) the Purchaser will receive a warrant to purchase up to an estimated 3% shares of Common Stock of the Company outstanding as of the Closing, for an exercise price equal to the average price of the Company’s Common Stock thirty (30) days prior to the date of announcement of the contemplated transaction (the “2023 Warrant”), and (ii) the Certificate of Designation (as defined and described below) will be filed with the Delaware Secretary of State and will contain other rights, terms and provisions applicable to the Preferred Stock.
The Purchase Agreement contains customary representations, warranties and covenants. Closing of the transactions contemplated by the Purchase Agreement is subject to a number of conditions, all of which must be satisfied on or prior to May 22, 2023. In connection with the Closing, the Purchaser has agreed to extend the maturity date of the Third Amended Letter of Credit (as defined in the Purchase Agreement) for two (2) years and reduce the Letter of Credit Fee (as defined in the Purchase Agreement) paid by the Company to $375,000 per quarter.
The Company expects to use the proceeds from the issuance of the Preferred Stock to repay in-full, in-cash all of the principal amount of the outstanding term loan debt, together with all accrued unpaid interest, fees, penalties and other obligations under the Company’s Term Loan Credit Agreement (as defined in the Purchase Agreement), as amended, and all related fees and expenses. Any excess proceeds will be used for general corporate purposes.
The issuance of the Preferred Stock pursuant to the Purchase Agreement and the other documents below is exempt from registration provided under Rule 506 of Regulation D promulgated under the Securities Act of 1933 (the “Act”). The offering was made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 10.30 and is incorporated herein by reference.
The Company issued a press release announcing the signing of the Purchase Agreement on March 27, 2023. A copy of the press release is filed herewith as Exhibit 99.1.
Certificate of Designation
The certificate of designation filed as Exhibit A to Exhibit 10.30 of this Annual Report on Form 10-K (the “Certificate of Incorporation”) will be filed with the Delaware Secretary of State at Closing and will contain rights, terms and provisions applicable to the Preferred Stock. The Preferred Stock will rank senior to the Common Stock (as defined in the Purchase Agreement) with respect to the payment of dividends and distribution of assets upon liquidation, dissolution and winding up. Dividends will accrue on the Preferred Stock at a rate of 17.5% per annum (the “Dividend Rate”) on the then existing Stated Value and Accrued Dividends (each as defined in the Certificate of Designation) and will be payable quarterly in cash or in-kind at the Company’s option. 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 Stated Value plus all accrued dividends (the “Redemption Price”). If the Company has not redeemed the Preferred Stock on or prior to the fourth (4th) anniversary of the Closing, the Dividend Rate will increase by 0.5% for every quarter thereafter until the Preferred Stock is redeemed in full. The Purchaser has the right to request the Company redeem the Preferred Stock at any time after sixth (6th) anniversary of the Closing. If the Company does not redeem the Preferred Stock within six (6) months after receipt of a redemption request from the Purchaser, the holders of the Preferred Stock will be entitled to certain limited voting rights as described in the Certificate of Designation.
The Purchaser will be entitled to designate for nomination to the Board one (1) director (the “Preferred Director”) and one (1) non-voting Board observer. The Certificate of Designation contains customary protective provisions requiring the approval of the Purchaser prior to engaging in certain actions. Prior approval of a majority of the Board, which majority must include the Preferred Director, is required for certain other actions outlined in the Certificate of Designation. The Preferred Stock is not convertible.
The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Certificate of Designation, a copy of which is filed as Exhibit A to Exhibit 10.30 and is incorporated herein by reference.
2023 Warrant
The Preferred Stock will be issued with a detached warrant, exercisable for a term of ten (10) years from the date of issuance of the 2023 Warrant. The 2023 Warrant represents the right to purchase up to an estimated 3% shares of Common Stock of the Company outstanding
as of the closing of the issuance of the Preferred Stock, for an exercise price equal to the average price of the Company’s Common Stock thirty (30) days prior to the date of announcement of the contemplated transaction. The 2023 Warrant includes customary anti-dilution protection for stock splits, reverse stock splits, and dividends paid in Common Stock.
The foregoing description of the 2023 Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the form of 2023 Warrant, a copy of which is filed as Exhibit B to Exhibit 10.30 and is incorporated herein by reference.
Amendment No. 8 to the Credit Agreement
On March 23, 2023, the Loan Parties entered into Amendment No. 8 to the Term Loan Credit Agreement (“Amendment No. 8”) with the Purchaser and U.S. Bank National Association, as disbursing agent and collateral agent (the “Agent”). Pursuant to Amendment No. 8, Borrower will have the option of paying all interest during the period between signing of the Purchase Agreement and closing of the Purchase Agreement (the “Pre-Closing Period”) in kind (“PIK Interest”).
The foregoing description of Amendment No. 8 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 8, a copy of which is filed as Exhibit 10.22.8 and is incorporated herein by reference.
Amendment No. 1 to the Amended and Restated Reimbursement Agreement
On March 23, 2023 the Company, the Purchaser, Alter Domus (US) LLC, as calculation agent, and the Agent entered into an amendment to the Amended and Restated Reimbursement Agreement (“Amendment No. 1”), pursuant to which the parties have agreed that the Letter of Credit Fee, Equity Fee or Cash Fee that would otherwise be due and payable for the Pre-Closing Period will accrue and become payable and be paid on the date that the Pre-Closing Period terminates (including the date of the Closing, if applicable).
The foregoing description of Amendment No. 1 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 1, a copy of which is filed as Exhibit 10.25.1 and is incorporated herein by reference.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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, 2022.
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, 2022.
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, 2022.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
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, 2022.
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, 2022.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
Exhibits
(a)Documents filed as part of this report:
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, Grant Thornton LLP, Chicago, Illinois, PCAOB ID 248
Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021.
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021.
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021.
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021.
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.
(b)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.
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
3.1
Certificate of Ownership and Merger of FreightCar America, Inc. into FCA Acquisition Corp., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 7, 2006).
3.2
Third Amended and Restated By-laws of FreightCar America, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report filed on Form 8-K filed with the Commission on September 28, 2007).
4.1
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1*
Letter agreement regarding Terms of Employment dated July 17, 2017, by and between FreightCar America, Inc. and James R. Meyer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2017).
10.2*
Letter agreement regarding Terms of Employment dated November 5, 2020, by and between FreightCar America, Inc. and Michael A. Riordan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 4, 2020).
10.2.1*
Letter agreement regarding Terms of Employment dated March 18, 2022 by and between FreightCar America, Inc. and Michael A. Riordan (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.3*
Letter agreement regarding Terms of Employment dated February 11, 2021 by and between FreightCar America, Inc. and Terence R. Rogers (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).
10.4*
Letter agreement regarding Terms of Employment dated September 11, 2019 by and between FreightCar America, Inc. and William Matthew Tonn (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.5
Form of Letter of Resignation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 19, 2006).
10.6
Form of Letter of Resignation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 22, 2009).
10.7*
Form of Indemnification Agreement between FreightCar America, Inc. and each of its current directors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 24, 2010).
10.8*
FreightCar America, Inc. 2005 Long Term Incentive Plan (Restated to incorporate all Amendments) (incorporated by reference to Appendix I to the Company’s Proxy Statement for the annual meeting of stockholders held on May 17, 2013 filed with the Commission on April 12, 2013).
10.9*
Form of Restricted Share Award Agreement for the Company’s independent directors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 27, 2006).
10.10*
Form of Restricted Share Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 15, 2008).
10.11*
Form of Stock Option Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 15, 2008).
10.12*
Form of Performance Share Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 16, 2015).
10.13*
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).
10.14.*
FreightCar America, Inc. 2018 Long Term Incentive Plan (as amended and restated effective May 14, 2020) (incorporated by reference to Appendix A to the Company’s Proxy Statement for the annual meeting of stockholders held on May 14, 2020 filed with the Commission on March 30, 2020).
10.14.1*
Form of Stock Option Award Agreement pursuant to the FreightCar America, Inc. 2018 Long-Term Incentive Plan (as amended and restated effective May 14, 2020) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 11, 2021).
10.15*
FreightCar America, Inc. 2022 Long Term Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for the annual meeting of stockholders held on May 12, 2022 filed with the Commission on April 1, 2022).
10.15.1*
Amendment No. 1 to FreightCar America, Inc. 2022 Long Term Incentive Plan dated as of March 27, 2023.
10.16
FreightCar America, Inc. Executive Severance Plan (As Amended and Restated Effective December 1, 2016) (and Summary Plan Description) incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016).
10.16.1*
FreightCar America, Inc. Executive Severance Plan (As Amended and Restated January 17, 2022) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.17*
FreightCar America, Inc. Successful Transaction Severance Plan, dated November 20, 2019 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019).
10.18
Investor Rights Agreement, dated October 16, 2020, by and between the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.19
Novation Agreement and Restated Lease Agreement, dated October 16, 2020, by and between Fabricaciones y Servicios de México, S.A. de C.V., as lessor, and FCA-Fasemex, S. de R.L. de C.V., as lessee (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.19.1
First Amendment to Novation Agreement and Restatement of Lease Agreement, dated as of November 5, 2021, by and between Jesus Salvador Gil Benavides, Alejandro Gil Benavides, Salvador Gil Benavides, FCA-Fasemex, S. de R.L. de C.V. and Fabricaciones y Servicios de México, S.A. de C.V. (incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.20
Royalty Agreement, dated October 16, 2020, by and among the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.20.1
Amended Royalty Agreement, dated as of February 8, 2022, by and among the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.21
Credit Agreement, dated as of April 16, 2019, by and between FreightCar America Leasing 1, LLC and M & T Bank (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 filed with the Commission on August 1, 2019).
10.21.1
Forbearance and Settlement Agreement dated as of December 28, 2021, by and among the Company and certain of its subsidiaries and Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.61 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.22**
Term Loan Credit Agreement, dated October 13, 2020, by and among the Company, FreightCar North America, LLC, CO Finance LVS VI LLC and U.S. Bank National Association (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.22.1
Amendment No. 1 to the Term Loan Credit Agreement dated as of January 30, 2021.
10.22.2
Amendment No. 2 to the Term Loan Credit Agreement dated as of May 14, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).
10.22.3
Amendment No. 3 to the Term Loan Credit Agreement dated as of July 30, 2021 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.22.4
Amendment No. 4 to the Term Loan Credit Agreement dated as of December 30, 2021 (incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.22.5
Amendment No. 5 to the Term Loan Credit Agreement dated as of March 1, 2022 (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.22.6
Amendment No. 6 to the Term Loan Credit Agreement dated as of January 30, 2023.
10.22.7
Amendment No. 7 to the Term Loan Credit Agreement dated as of February 27, 2023.
10.22.8
Amendment No. 8 to the Term Loan Credit Agreement, dated March 23, 2023, by and among FreightCar America, Inc., FreightCar North America, LLC, CO Finance LVS VI LLC and U.S. Bank National Association.
10.23**
Warrant Acquisition Agreement, dated October 13, 2020, by and between the Company and CO Finance LCS VI LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.23.1
Form of Warrant issued by the Company to CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.23.2
Amended and Restated Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of March 1, 2022, by and between the Company and OC III LVS XII LP (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.23.3
Amended and Restated Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of March 1, 2022, by and between the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.24
Form of Registration Rights Agreement by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.25
Reimbursement Agreement dated as of July 30, 2021 by and among the Company, FreightCar North America, LLC, CO Finance LVS VI LLC, U.S. Bank National Association and Alter Domus, LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.25.1
Amendment No. 1 to the Reimbursement Agreement, dated March 23, 2023, by and among FreightCar America, Inc., CO Finance LVS VI LLC, Alter Domus (US) LLC, as calculation agent, and U.S. Bank National Association.
10.26
Registration Rights Agreement dated as of December 30, 2021, by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.27
Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of December 30, 2021, by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K filed with the Commission for the fiscal year ended December 31, 2021).
10.28
Warrant Acquisition Agreement, dated as of April 4, 2022, by and among the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.28.1
Warrant issued by the Company to OC III LVS XXVIII LP dated as of April 4, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.29
Registration Rights Agreement dated as of April 4, 2022, by and between the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.30
Securities Purchase Agreement dated as of March 23, 2023 by and between the Company and OC III LFE II LP.
10.31
Amended and Restated Loan and Security Agreement, dated as of July 30, 2021, by and among the Company and certain of its subsidiaries and Siena Lending Group, LLC (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.31.1
First Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 2022, by and among the Company and certain of its subsidiaries and Siena Lending Group, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.31.2
Second Amendment to Amended and Restated Loan and Security Agreement dated as of November 22, 2022, by and Company and certain of its subsidiaries and Siena Lending Group, LLC.
21
Subsidiaries of FreightCar America, Inc.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Press Release of FreightCar America, Inc. dated March 27, 2023.
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
Exhibit 104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Management compensatory arrangement.
** Portions of this document have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
 Filed herewith.
(c)Additional Financial Statement Schedules
None.
Item 16. Form 10-K Summary.
None.
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.
FREIGHTCAR AMERICA, INC.
Date: March 27, 2023
By:
/s/ JAMES R. MEYER
James R. Meyer
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.
Signature
Title
Date
/s/ JAMES R. MEYER
James R. Meyer
President and Chief Executive Officer (Principal Executive Officer) and Director
March 27, 2023
/s/ MICHAEL A. RIORDAN
Michael A. Riordan
Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
March 27, 2023
/s/ JUAN CARLOS FUENTES SIERRA
Juan Carlos Fuentes Sierra
Corporate Controller and Chief Accounting Officer (Principal Accounting Officer)
March 27, 2023
/s/ WILLIAM D. GEHL
William D. Gehl
Chairman of the Board and
Director
March 27, 2023
/s/ ELIZABETH K. ARNOLD
Elizabeth K. Arnold
Director
March 27, 2023
/s/ JESUS SALVADOR GIL BENAVIDES
Jesus Salvador Gil Benavides
Director
March 27, 2023
/s/ MALCOLM F. MOORE
Malcolm F. Moore
Director
March 27, 2023
/s/ RODGER L. BOEHM
Rodger L. Boehm
Director
March 27, 2023
/s/ TRAVIS D. KELLY
Travis D. Kelly
Director
March 27, 2023
/s/ JOSÉ DE NIGRIS FELÁN
José De Nigris Felán
Director
March 27, 2023

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
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, 2022 (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:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP;
•Provide reasonable assurance that receipts and expenditures of the Company are being made only in accordance with appropriate authorization of management and the Board of Directors; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
As of the end of the Company’s 2022 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 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, 2022.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There has been no change in our internal control over financial reporting during the last fiscal quarter of 2022 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.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
Purchase Agreement
On March 23, 2023, the “Company” entered into a Securities Purchase Agreement (the “Purchase Agreement”) by and among the Company and OC III LFE II LP (the “Purchaser”), pursuant to which the Purchaser agreed to acquire an estimated aggregate of 85,000 shares of to be created Series C Preferred Stock of the Company, par value $0.01 (the “Preferred Stock”) at an initial stated value of
$1,000 per share. The total purchase price and aggregate number of shares will depend on the total debt outstanding under the Term Loan Credit Agreement as of the closing date. Upon closing of the transactions contemplated by the Purchase Agreement (the “Closing”), (i) the Purchaser will receive a warrant to purchase up to an estimated 3% shares of Common Stock of the Company outstanding as of the Closing, for an exercise price equal to the average price of the Company’s Common Stock thirty (30) days prior to the date of announcement of the contemplated transaction (the “2023 Warrant”), and (ii) the Certificate of Designation (as defined and described below) will be filed with the Delaware Secretary of State and will contain other rights, terms and provisions applicable to the Preferred Stock.
The Purchase Agreement contains customary representations, warranties and covenants. Closing of the transactions contemplated by the Purchase Agreement is subject to a number of conditions, all of which must be satisfied on or prior to May 22, 2023. In connection with the Closing, the Purchaser has agreed to extend the maturity date of the Third Amended Letter of Credit (as defined in the Purchase Agreement) for two (2) years and reduce the Letter of Credit Fee (as defined in the Purchase Agreement) paid by the Company to $375,000 per quarter.
The Company expects to use the proceeds from the issuance of the Preferred Stock to repay in-full, in-cash all of the principal amount of the outstanding term loan debt, together with all accrued unpaid interest, fees, penalties and other obligations under the Company’s Term Loan Credit Agreement (as defined in the Purchase Agreement), as amended, and all related fees and expenses. Any excess proceeds will be used for general corporate purposes.
The issuance of the Preferred Stock pursuant to the Purchase Agreement and the other documents below is exempt from registration provided under Rule 506 of Regulation D promulgated under the Securities Act of 1933 (the “Act”). The offering was made only to accredited investors as that term is defined in Rule 501(a) of Regulation D under the Act.
The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, a copy of which is filed as Exhibit 10.30 and is incorporated herein by reference.
The Company issued a press release announcing the signing of the Purchase Agreement on March 27, 2023. A copy of the press release is filed herewith as Exhibit 99.1.
Certificate of Designation
The certificate of designation filed as Exhibit A to Exhibit 10.30 of this Annual Report on Form 10-K (the “Certificate of Incorporation”) will be filed with the Delaware Secretary of State at Closing and will contain rights, terms and provisions applicable to the Preferred Stock. The Preferred Stock will rank senior to the Common Stock (as defined in the Purchase Agreement) with respect to the payment of dividends and distribution of assets upon liquidation, dissolution and winding up. Dividends will accrue on the Preferred Stock at a rate of 17.5% per annum (the “Dividend Rate”) on the then existing Stated Value and Accrued Dividends (each as defined in the Certificate of Designation) and will be payable quarterly in cash or in-kind at the Company’s option. 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 Stated Value plus all accrued dividends (the “Redemption Price”). If the Company has not redeemed the Preferred Stock on or prior to the fourth (4th) anniversary of the Closing, the Dividend Rate will increase by 0.5% for every quarter thereafter until the Preferred Stock is redeemed in full. The Purchaser has the right to request the Company redeem the Preferred Stock at any time after sixth (6th) anniversary of the Closing. If the Company does not redeem the Preferred Stock within six (6) months after receipt of a redemption request from the Purchaser, the holders of the Preferred Stock will be entitled to certain limited voting rights as described in the Certificate of Designation.
The Purchaser will be entitled to designate for nomination to the Board one (1) director (the “Preferred Director”) and one (1) non-voting Board observer. The Certificate of Designation contains customary protective provisions requiring the approval of the Purchaser prior to engaging in certain actions. Prior approval of a majority of the Board, which majority must include the Preferred Director, is required for certain other actions outlined in the Certificate of Designation. The Preferred Stock is not convertible.
The foregoing description of the Certificate of Designation does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Certificate of Designation, a copy of which is filed as Exhibit A to Exhibit 10.30 and is incorporated herein by reference.
2023 Warrant
The Preferred Stock will be issued with a detached warrant, exercisable for a term of ten (10) years from the date of issuance of the 2023 Warrant. The 2023 Warrant represents the right to purchase up to an estimated 3% shares of Common Stock of the Company outstanding
as of the closing of the issuance of the Preferred Stock, for an exercise price equal to the average price of the Company’s Common Stock thirty (30) days prior to the date of announcement of the contemplated transaction. The 2023 Warrant includes customary anti-dilution protection for stock splits, reverse stock splits, and dividends paid in Common Stock.
The foregoing description of the 2023 Warrant does not purport to be complete and is qualified in its entirety by reference to the full text of the form of 2023 Warrant, a copy of which is filed as Exhibit B to Exhibit 10.30 and is incorporated herein by reference.
Amendment No. 8 to the Credit Agreement
On March 23, 2023, the Loan Parties entered into Amendment No. 8 to the Term Loan Credit Agreement (“Amendment No. 8”) with the Purchaser and U.S. Bank National Association, as disbursing agent and collateral agent (the “Agent”). Pursuant to Amendment No. 8, Borrower will have the option of paying all interest during the period between signing of the Purchase Agreement and closing of the Purchase Agreement (the “Pre-Closing Period”) in kind (“PIK Interest”).
The foregoing description of Amendment No. 8 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 8, a copy of which is filed as Exhibit 10.22.8 and is incorporated herein by reference.
Amendment No. 1 to the Amended and Restated Reimbursement Agreement
On March 23, 2023 the Company, the Purchaser, Alter Domus (US) LLC, as calculation agent, and the Agent entered into an amendment to the Amended and Restated Reimbursement Agreement (“Amendment No. 1”), pursuant to which the parties have agreed that the Letter of Credit Fee, Equity Fee or Cash Fee that would otherwise be due and payable for the Pre-Closing Period will accrue and become payable and be paid on the date that the Pre-Closing Period terminates (including the date of the Closing, if applicable).
The foregoing description of Amendment No. 1 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment No. 1, a copy of which is filed as Exhibit 10.25.1 and is incorporated herein by reference.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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, 2022.

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ITEM 11. EXECUTIVE COMPENSATION
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, 2022.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
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, 2022.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
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, 2022.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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, 2022.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
Exhibits
(a)Documents filed as part of this report:
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, Grant Thornton LLP, Chicago, Illinois, PCAOB ID 248
Consolidated Balance Sheets as of December 31, 2022 and 2021.
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021.
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021.
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021.
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021.
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.
(b)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.
EXHIBIT INDEX
Exhibit
Number
Exhibit Description
3.1
Certificate of Ownership and Merger of FreightCar America, Inc. into FCA Acquisition Corp., as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on September 7, 2006).
3.2
Third Amended and Restated By-laws of FreightCar America, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report filed on Form 8-K filed with the Commission on September 28, 2007).
4.1
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10.1*
Letter agreement regarding Terms of Employment dated July 17, 2017, by and between FreightCar America, Inc. and James R. Meyer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on July 19, 2017).
10.2*
Letter agreement regarding Terms of Employment dated November 5, 2020, by and between FreightCar America, Inc. and Michael A. Riordan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 4, 2020).
10.2.1*
Letter agreement regarding Terms of Employment dated March 18, 2022 by and between FreightCar America, Inc. and Michael A. Riordan (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.3*
Letter agreement regarding Terms of Employment dated February 11, 2021 by and between FreightCar America, Inc. and Terence R. Rogers (incorporated by reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020).
10.4*
Letter agreement regarding Terms of Employment dated September 11, 2019 by and between FreightCar America, Inc. and William Matthew Tonn (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.5
Form of Letter of Resignation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 19, 2006).
10.6
Form of Letter of Resignation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 22, 2009).
10.7*
Form of Indemnification Agreement between FreightCar America, Inc. and each of its current directors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on March 24, 2010).
10.8*
FreightCar America, Inc. 2005 Long Term Incentive Plan (Restated to incorporate all Amendments) (incorporated by reference to Appendix I to the Company’s Proxy Statement for the annual meeting of stockholders held on May 17, 2013 filed with the Commission on April 12, 2013).
10.9*
Form of Restricted Share Award Agreement for the Company’s independent directors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 27, 2006).
10.10*
Form of Restricted Share Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 15, 2008).
10.11*
Form of Stock Option Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 15, 2008).
10.12*
Form of Performance Share Award Agreement for the Company’s employees (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 16, 2015).
10.13*
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).
10.14.*
FreightCar America, Inc. 2018 Long Term Incentive Plan (as amended and restated effective May 14, 2020) (incorporated by reference to Appendix A to the Company’s Proxy Statement for the annual meeting of stockholders held on May 14, 2020 filed with the Commission on March 30, 2020).
10.14.1*
Form of Stock Option Award Agreement pursuant to the FreightCar America, Inc. 2018 Long-Term Incentive Plan (as amended and restated effective May 14, 2020) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on January 11, 2021).
10.15*
FreightCar America, Inc. 2022 Long Term Incentive Plan (incorporated by reference to Appendix A to the Company's Proxy Statement for the annual meeting of stockholders held on May 12, 2022 filed with the Commission on April 1, 2022).
10.15.1*
Amendment No. 1 to FreightCar America, Inc. 2022 Long Term Incentive Plan dated as of March 27, 2023.
10.16
FreightCar America, Inc. Executive Severance Plan (As Amended and Restated Effective December 1, 2016) (and Summary Plan Description) incorporated by reference to Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016).
10.16.1*
FreightCar America, Inc. Executive Severance Plan (As Amended and Restated January 17, 2022) (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.17*
FreightCar America, Inc. Successful Transaction Severance Plan, dated November 20, 2019 (incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019).
10.18
Investor Rights Agreement, dated October 16, 2020, by and between the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.19
Novation Agreement and Restated Lease Agreement, dated October 16, 2020, by and between Fabricaciones y Servicios de México, S.A. de C.V., as lessor, and FCA-Fasemex, S. de R.L. de C.V., as lessee (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.19.1
First Amendment to Novation Agreement and Restatement of Lease Agreement, dated as of November 5, 2021, by and between Jesus Salvador Gil Benavides, Alejandro Gil Benavides, Salvador Gil Benavides, FCA-Fasemex, S. de R.L. de C.V. and Fabricaciones y Servicios de México, S.A. de C.V. (incorporated by reference to Exhibit 10.62 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.20
Royalty Agreement, dated October 16, 2020, by and among the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.20.1
Amended Royalty Agreement, dated as of February 8, 2022, by and among the Company and Fabricaciones y Servicios de México, S.A. de C.V., Agben de Mexico, S.A. de C.V. and Fasemex, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.21
Credit Agreement, dated as of April 16, 2019, by and between FreightCar America Leasing 1, LLC and M & T Bank (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019 filed with the Commission on August 1, 2019).
10.21.1
Forbearance and Settlement Agreement dated as of December 28, 2021, by and among the Company and certain of its subsidiaries and Manufacturers and Traders Trust Company (incorporated by reference to Exhibit 10.61 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.22**
Term Loan Credit Agreement, dated October 13, 2020, by and among the Company, FreightCar North America, LLC, CO Finance LVS VI LLC and U.S. Bank National Association (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.22.1
Amendment No. 1 to the Term Loan Credit Agreement dated as of January 30, 2021.
10.22.2
Amendment No. 2 to the Term Loan Credit Agreement dated as of May 14, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 16, 2021).
10.22.3
Amendment No. 3 to the Term Loan Credit Agreement dated as of July 30, 2021 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.22.4
Amendment No. 4 to the Term Loan Credit Agreement dated as of December 30, 2021 (incorporated by reference to Exhibit 10.57 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.22.5
Amendment No. 5 to the Term Loan Credit Agreement dated as of March 1, 2022 (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.22.6
Amendment No. 6 to the Term Loan Credit Agreement dated as of January 30, 2023.
10.22.7
Amendment No. 7 to the Term Loan Credit Agreement dated as of February 27, 2023.
10.22.8
Amendment No. 8 to the Term Loan Credit Agreement, dated March 23, 2023, by and among FreightCar America, Inc., FreightCar North America, LLC, CO Finance LVS VI LLC and U.S. Bank National Association.
10.23**
Warrant Acquisition Agreement, dated October 13, 2020, by and between the Company and CO Finance LCS VI LLC (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.23.1
Form of Warrant issued by the Company to CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.23.2
Amended and Restated Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of March 1, 2022, by and between the Company and OC III LVS XII LP (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.23.3
Amended and Restated Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of March 1, 2022, by and between the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.24
Form of Registration Rights Agreement by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the Commission on October 19, 2020).
10.25
Reimbursement Agreement dated as of July 30, 2021 by and among the Company, FreightCar North America, LLC, CO Finance LVS VI LLC, U.S. Bank National Association and Alter Domus, LLC (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.25.1
Amendment No. 1 to the Reimbursement Agreement, dated March 23, 2023, by and among FreightCar America, Inc., CO Finance LVS VI LLC, Alter Domus (US) LLC, as calculation agent, and U.S. Bank National Association.
10.26
Registration Rights Agreement dated as of December 30, 2021, by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.60 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021).
10.27
Warrant to Purchase Common Stock of FreightCar America, Inc. dated as of December 30, 2021, by and between the Company and CO Finance LVS VI LLC (incorporated by reference to Exhibit 10.59 to the Company’s Annual Report on Form 10-K filed with the Commission for the fiscal year ended December 31, 2021).
10.28
Warrant Acquisition Agreement, dated as of April 4, 2022, by and among the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.28.1
Warrant issued by the Company to OC III LVS XXVIII LP dated as of April 4, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.29
Registration Rights Agreement dated as of April 4, 2022, by and between the Company and OC III LVS XXVIII LP (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on August 8, 2022).
10.30
Securities Purchase Agreement dated as of March 23, 2023 by and between the Company and OC III LFE II LP.
10.31
Amended and Restated Loan and Security Agreement, dated as of July 30, 2021, by and among the Company and certain of its subsidiaries and Siena Lending Group, LLC (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed with the Commission on November 15, 2021).
10.31.1
First Amendment to Amended and Restated Loan and Security Agreement dated as of February 23, 2022, by and among the Company and certain of its subsidiaries and Siena Lending Group, LLC (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 10, 2022).
10.31.2
Second Amendment to Amended and Restated Loan and Security Agreement dated as of November 22, 2022, by and Company and certain of its subsidiaries and Siena Lending Group, LLC.
21
Subsidiaries of FreightCar America, Inc.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1
Press Release of FreightCar America, Inc. dated March 27, 2023.
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
Exhibit 104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Management compensatory arrangement.
** Portions of this document have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
 Filed herewith.
(c)Additional Financial Statement Schedules
None.