FreightCar America(RAIL) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents FreightCar America, Inc.'s unaudited condensed consolidated financial statements for Q2 and H1 2021, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows Condensed Consolidated Balance Sheets Total assets decreased to $170.1 million by June 30, 2021, while total liabilities increased to $179.5 million, resulting in a $9.4 million stockholders' deficit, primarily due to warrant liability growth Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Assets | $170,058 | $182,742 | | Cash, cash equivalents and restricted cash | $20,730 | $54,047 | | Inventories, net | $48,783 | $38,831 | | Total Liabilities | $179,496 | $152,245 | | Total long-term debt (net) | $68,705 | $55,273 | | Warrant liability | $31,406 | $12,730 | | Total Stockholders' (Deficit) Equity | ($9,438) | $30,497 | Condensed Consolidated Statements of Operations Q2 2021 revenues more than doubled to $37.4 million, achieving a $3.6 million gross profit and narrowing net loss to $2.6 million, while H1 2021 saw tripled revenues but a higher net loss of $40.4 million due to warrant liability changes Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2021 (in thousands) | Q2 2020 (in thousands) | YTD 2021 (in thousands) | YTD 2020 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $37,354 | $17,458 | $69,724 | $22,655 | | Gross Profit (Loss) | $3,638 | ($6,144) | $6,228 | ($14,947) | | Operating Loss | ($2,536) | ($12,948) | ($15,747) | ($30,041) | | Net Loss Attributable to FreightCar America | ($2,570) | ($12,791) | ($40,428) | ($29,738) | | Net Loss Per Share (basic & diluted) | ($0.13) | ($0.97) | ($2.01) | ($2.26) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $44.1 million for H1 2021, driven by higher net loss and working capital changes, resulting in a $33.3 million net decrease in cash and cash equivalents Cash Flow Summary for Six Months Ended June 30 (in thousands) | Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($44,109) | ($20,783) | | Net cash used in investing activities | ($818) | ($6,925) | | Net cash provided by financing activities | $11,610 | $9,991 | | Net decrease in cash and cash equivalents | ($33,317) | ($17,717) | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue recognition, debt financing, restructuring, the $10 million PPP loan forgiveness, and a revision of prior period financial statements due to inventory accounting errors - The company has consolidated all its production into its Castaños, Mexico facility as of March 2021, after closing its Shoals, Alabama facility in February 2021 and its Roanoke, Virginia facility in 2020[27][28] Revenue by Source for Six Months Ended June 30 (in thousands) | Revenue Source | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Railcar sales | $63,300 | $15,272 | | Parts sales | $4,496 | $4,510 | | Leasing revenues | $1,890 | $2,872 | | Total revenues | $69,724 | $22,655 | Total Debt Summary (in thousands) | Debt Instrument | June 30, 2021 (in thousands) | December 31, 2020 (in thousands) | | :--- | :--- | :--- | | M&T Credit Agreement | $10,518 | $10,105 | | SBA PPP Loan | $10,000 | $10,000 | | Siena Loan Agreement | $2,613 | $6,874 | | Term Loan Credit Agreement | $56,552 | $40,000 | | Total debt, net of discount/costs | $68,705 | $55,273 | - Subsequent to the quarter end, on July 14, 2021, the company received full forgiveness for its $10.0 million SBA Paycheck Protection Program (PPP) Loan, which will be recognized in Q3 2021[103] - The company revised its Q1 2021 financial statements to correct immaterial errors related to inventory transactions, which increased gross profit by $0.8 million and reduced net loss by $0.5 million for that period[115][117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved financial performance, increased revenues, and gross profit driven by higher railcar deliveries and restructuring, alongside the operational shift to Mexico, growing order backlog, and financing activities Overview The company completed manufacturing consolidation in Castaños, Mexico by March 2021, leading to a significant increase in new orders to 1,433 units and a backlog of 2,200 units valued at $224 million - All production was moved to the Castaños, Mexico facility as of March 2021, following the closure of the Shoals, AL facility in February 2021[122][123] Order and Backlog Summary | Metric | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Backlog (units) | 2,200 | 1,389 | | Estimated Backlog Value | $224 million | $146 million | - New orders for the first six months of 2021 were 1,433 units (800 new, 633 rebuilt), compared to 300 rebuilt units in the same period of 2020, indicating market improvement[124] Results of Operations H1 2021 results improved significantly, with Q2 revenues more than doubling to $37.4 million and achieving a $3.6 million gross profit, while H1 revenues tripled to $69.7 million, though net loss increased due to non-cash warrant liability charges Q2 2021 vs Q2 2020 Performance (in millions) | Metric | Q2 2021 (in millions) | Q2 2020 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Revenues | $37.4 | $17.5 | +$19.9 | | Gross Profit (Loss) | $3.6 | ($6.1) | +$9.7 | | Operating Loss | ($2.5) | ($12.9) | +$10.4 | | Net Loss | ($2.6) | ($12.8) | +$10.2 | | Railcar Deliveries (units) | 313 | 100 | +213 | YTD 2021 vs YTD 2020 Performance (in millions) | Metric | YTD 2021 (in millions) | YTD 2020 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Revenues | $69.7 | $22.7 | +$47.0 | | Gross Profit (Loss) | $6.2 | ($14.9) | +$21.1 | | Operating Loss | ($15.7) | ($30.0) | +$14.3 | | Net Loss | ($40.4) | ($29.7) | -$10.7 | | Railcar Deliveries (units) | 622 | 111 | +511 | - Restructuring and impairment charges for the six months ended June 30, 2021 were $6.5 million, primarily related to relocating equipment from the closed Shoals facility to Castaños[138][139] Liquidity and Capital Resources Primary liquidity sources include cash and credit facilities, with the Term Loan increasing by $16.0 million and the $10.0 million PPP loan forgiven, while net cash used in operating activities was $44.1 million for H1 2021 - The company's $10.0 million PPP Loan was fully forgiven on July 14, 2021, subsequent to the reporting period[148] - On May 14, 2021, the Term Loan Credit Agreement was amended to increase the principal amount by $16.0 million to a total of $56.0 million[162] - Subsequent to quarter end, on July 30, 2021, the Siena Loan Agreement was amended, increasing the maximum revolving facility amount from $20.0 million to $25.0 million[155][156] Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2021 (in millions) | 2020 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($44.1) | ($20.8) | | Net cash used in investing activities | ($0.8) | ($6.9) | | Net cash provided by financing activities | $11.6 | $10.0 | - Capital expenditures for 2021 are anticipated to be in the range of $2 million to $3 million, primarily for the Mexico facility[190] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2021, with no material changes to internal control over financial reporting during Q2 - The Chief Executive Officer and Principal Financial Officer concluded that as of the evaluation date, the company's disclosure controls and procedures were effective[192] - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[193] PART II – OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is provided in Note 12 to the condensed consolidated financial statements - The company refers to Note 12 – Contingencies for information on legal proceedings[196] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[197] Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[198] Mine Safety Disclosures This item is not applicable to the company - Not applicable[199] Other Information The company reported no other information - None[200] Exhibits This section lists the exhibits filed with the Form 10-Q, including an amendment to the Term Loan Credit Agreement, officer certifications required by the Sarbanes-Oxley Act, and Inline XBRL documents - Exhibits filed include Amendment No. 2 to the Term Loan Credit Agreement, CEO and CFO certifications (Sections 302 and 906), and various XBRL files[203] Signatures