FreightCar America(RAIL) - 2022 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of financial condition, and internal control disclosures Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for FreightCar America, Inc. as of September 30, 2022, and for the three and nine-month periods then ended. It includes the balance sheets, statements of operations, comprehensive income, stockholders' deficit, and cash flows, along with detailed notes explaining the accounting policies and financial details Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' deficit as of September 30, 2022, and December 31, 2021 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $193,051 | $200,664 | | Total Current Assets | $131,921 | $136,726 | | Cash, cash equivalents and restricted cash | $18,371 | $26,240 | | Inventories, net | $84,218 | $56,012 | | Total Liabilities | $211,899 | $202,320 | | Total Current Liabilities | $64,289 | $69,320 | | Long-term debt, net | $91,597 | $79,484 | | Warrant liability | $35,772 | $32,514 | | Total Stockholders' Deficit | ($18,848) | ($1,656) | - Total assets decreased slightly to $193.1 million from $200.7 million at year-end 2021, primarily due to a decrease in cash and VAT receivables, offset by a significant increase in inventories[10] - Total liabilities increased to $211.9 million, driven by higher long-term debt and an increased warrant liability, leading to a larger total stockholders' deficit of $18.8 million[10] Condensed Consolidated Statements of Operations This section details the company's revenues, gross profit, operating loss, and net income (loss) for the three and nine-month periods ended September 30, 2022 and 2021 Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $85,743 | $58,307 | $235,765 | $128,031 | | Gross Profit | $4,554 | $1,538 | $21,201 | $4,851 | | Operating Loss | ($10,663) | ($4,163) | ($8,782) | ($22,825) | | Net Income (Loss) | ($17,806) | $731 | ($29,114) | ($42,612) | | Net Income (Loss) per Share - basic | ($0.69) | $0.03 | ($1.19) | ($2.11) | - Revenues for Q3 2022 increased by 47% YoY to $85.7 million, and for the nine months ended Sep 30, 2022, revenues increased by 84% YoY to $235.8 million[13] - The company reported a significant net loss of $17.8 million in Q3 2022, a sharp contrast to the $0.7 million net income in Q3 2021, primarily driven by an $8.1 million loss on pension settlement and higher interest expenses[13] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,585) | ($56,958) | | Net cash used in investing activities | ($3,380) | ($1,368) | | Net cash provided by financing activities | $9,096 | $31,765 | | Net decrease in cash | ($7,869) | ($26,561) | | Cash at end of period | $18,371 | $27,486 | - Cash used in operating activities significantly decreased to $13.6 million for the first nine months of 2022 from $57.0 million in the prior year period, mainly due to improved working capital management, including a large decrease in VAT receivable[25][162] - Financing activities provided $9.1 million in cash, primarily from net borrowings on the revolving line of credit, a decrease from the $31.8 million provided in the same period of 2021 which included proceeds from long-term debt issuance[25][164] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the accounting policies, significant transactions, and financial details supporting the condensed consolidated financial statements Revenue by Source (in thousands) | Revenue Source | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Railcar sales | $82,017 | $55,043 | $224,089 | $118,343 | | Parts sales | $2,927 | $2,456 | $9,231 | $6,990 | | Leasing revenues | $799 | $808 | $2,445 | $2,698 | | Total revenues | $85,743 | $58,307 | $235,765 | $128,031 | - The company operates in one reportable segment, Manufacturing, which includes new railcar manufacturing, leasing, conversions, and rebuilds. The Parts segment is combined with corporate activities[35] - Total debt, net of discounts and deferred costs, increased to $91.6 million as of September 30, 2022, from $79.5 million at December 31, 2021[45] - In Q3 2022, the company recognized a non-cash pre-tax pension settlement loss of $8.1 million after transferring a portion of its pension benefit obligations to OneAmerica through the purchase of a group annuity contract[89] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the third quarter and first nine months of 2022 compared to the same periods in 2021. The analysis covers revenue growth driven by increased railcar deliveries, gross profit improvements, operating losses impacted by a pension settlement, and the company's liquidity position, including details on its various debt facilities and cash flow activities - The company received new orders for 2,240 railcars in the first nine months of 2022, an increase from 1,633 units in the same period of 2021, reflecting an improvement in the railcar equipment market[104] - Total backlog increased to 2,529 units with an estimated sales value of $276 million as of September 30, 2022, up from 2,323 units valued at $240 million at the end of 2021[104] Results of Operations This section analyzes the company's revenue, gross profit, and net income (loss) performance for the third quarter and first nine months of 2022 compared to the prior year periods Q3 2022 vs Q3 2021 Performance (in millions) | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $85.7 | $58.3 | +$27.4 | | Gross Profit | $4.6 | $1.5 | +$3.1 | | Operating Loss | ($10.7) | ($4.2) | +$6.5 (worse) | | Net Income (Loss) | ($17.8) | $0.7 | -$18.5 | - The increase in Q3 2022 revenue was driven by higher railcar deliveries, totaling 783 units (483 new, 300 rebuilt) compared to 505 new units in Q3 2021[105] - The increased operating loss in Q3 2022 was primarily due to an $8.1 million pension settlement loss, which offset the gains from higher gross profit[110] Nine Months 2022 vs Nine Months 2021 Performance (in millions) | Metric | 9M 2022 | 9M 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $235.8 | $128.0 | +$107.8 | | Gross Profit | $21.2 | $4.9 | +$16.3 | | Operating Loss | ($8.8) | ($22.8) | +$14.0 (better) | | Net Loss | ($29.1) | ($42.6) | +$13.5 (better) | - For the first nine months of 2022, the operating loss improved significantly to $8.8 million from $22.8 million in the prior year, driven by higher gross profit and the absence of restructuring charges that were present in 2021[118] Liquidity and Capital Resources This section details the company's cash position, credit facilities, debt obligations, and capital expenditure plans, assessing its ability to meet short-term and long-term financial obligations - The company's primary liquidity sources are cash on hand and its credit facilities, including a term loan Credit Agreement, the Siena Loan and Security Agreement (revolving credit), and the M&T Credit Agreement[121] - As of September 30, 2022, the company had $33.9 million in outstanding debt under the Siena revolving credit facility, with remaining borrowing availability of $0.2 million[72][148] - The company believes its cash balances will be sufficient to meet expected liquidity needs for at least the next twelve months, based on current operations and backlog[158] - Capital expenditures for 2022 are anticipated to be between $7 million and $8 million, primarily for the expansion of the Castaños, Mexico facility[165] Item 4. Controls and Procedures Management evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2022. No material changes were made to the internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period, September 30, 2022[167] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[168] PART II – OTHER INFORMATION This section includes disclosures on legal proceedings, sales of equity securities, defaults, mine safety, and a list of exhibits filed with the report Item 1. Legal Proceedings The company is involved in various warranty claims and other legal proceedings in the normal course of business. Management does not expect potential losses beyond accrued provisions to be material - The company is involved in various warranty, repair claims, and other legal proceedings arising from the normal course of business[91][171] - Management believes that any potential losses from these proceedings, beyond what is already accrued, are not expected to be material to the company's financial condition or results[91] Other Items (2, 3, 4, 5, 6) This section covers other required disclosures. The company reports no unregistered sales of equity securities, no defaults upon senior securities, no mine safety disclosures, and no other material information to report for the period. A list of exhibits filed with the report is also provided - There were no unregistered sales of equity securities, defaults upon senior securities, or other material information to report under Items 2, 3, and 5[172][173][175] - Item 4, Mine Safety Disclosures, is not applicable to the company[174] - Item 6 lists the exhibits filed with the Form 10-Q, including Sarbanes-Oxley certifications and XBRL data files[176][177]