FreightCar America, Inc. Completes Key Steps in Previously Announced Manufacturing Repositioning
October 12 2020 - 8:00AM
FreightCar America, Inc. (NASDAQ: RAIL) (“FreightCar America” or
the “Company”) announced today that it has made significant
progress in its manufacturing repositioning and business
transformation strategy.
Highlights:
-
Successfully finalized early termination of the lease at Cherokee,
Alabama (“Shoals”) manufacturing facility effective February 28,
2021
-
Completed Association of American Railroads (“AAR”) certification
audits for new joint venture facility in Castaños, Mexico
(“Castaños”) and now awaiting approval to start shipping
railcars
-
Castaños completed its first car in early September and continues
to ready itself for full production in 2021
-
Obtained new asset-backed credit facility to facilitate the
business and repositioning process going forward
“We are pleased to announce substantial progress
in our recently announced plan to reposition FreightCar America to
be a much stronger player in the railcar industry,” said Jim Meyer,
President and Chief Executive Officer. “First, we have reached an
agreement with the Shoals facility owner and landlord, the
Retirement Systems of Alabama (“RSA”), to exit our lease as of the
end of February 2021. We will exchange infrastructure-related
equipment at the facility in consideration for the early
termination of the lease. This agreement is consistent with our
previous announcement and go forward planning. We will retain all
tooling and other assets specific to manufacturing railcars, all of
which will transfer to Castaños. Our agreement with the RSA solves
the fundamental cost and capacity mismatch with Shoals and keeps us
on track to reduce our fixed costs by approximately $20 million per
year and to reduce our production breakeven to less than 2,000 cars
per year when Castaños becomes fully operational.”
Meyer added, “We are also providing updates on
two other important steps related to our manufacturing
repositioning. First, we secured new asset-based financing from
Siena Lending Group. This financing replaced our former ABL
facility with BMO Harris Bank N.A, and now provides us greater
flexibility and the ability to complete the acquisition of the
remaining 50% of our JV partnership. Second, the AAR audits were
recently completed in Castaños and we are now awaiting final
certification and approval to start shipping finished
product.”
Meyer continued, “We are taking aggressive and
proactive actions to reposition the business for enhanced long-term
success. Castaños is not only the newest purpose-built railcar
manufacturing facility in North America, but also has the
flexibility to scale as market demand returns. When combined with
our new and very experienced workforce at building railcars, we
expect to achieve our goal of becoming the lowest cost, highest
quality producer of railcars in the industry. We have more hard
work to do before we realize these goals, but believe strongly in
the strategy and the ability of our team to execute it.”
Shoals Facility Lease
Termination
FreightCar America completed an amendment to its
Shoals manufacturing facility lease with the RSA. The amendment
accelerates the expiration date of the lease from December 31, 2026
to February 28, 2021, which aligns with FreightCar America’s
decision to close the Shoals facility by the end of the first
quarter of 2021. In addition, the RSA has agreed to waive the base
rent payable under the original lease for the months of October
2020 through February 2021. As consideration for the early
termination and rent waiver, the Company agreed to sell and
transfer certain basic infrastructure at the facility to the RSA.
Under the amendment, FreightCar America has the ability to store
railcars and other rolling stock from the end of the term through
June 30, 2021 for no additional rent or other costs.
Meyer concluded, “Lastly, I’d like to recognize and commend the
continuing strong efforts by our Shoals manufacturing team for
their ongoing hard work and professionalism.”
Castaños, Mexico Certification
Process
In September, AAR representatives visited
Castaños as a part of the certification process for the new plant.
The AAR is the world’s leading railroad policy, research,
standard-setting and technology organization that focuses on safety
and productivity. The AAR representatives conducted two
customary audits and, subject to the final documentation from the
AAR, the Company expects to begin shipping railcars by the end of
the year.
New
Asset-Based Credit Facility
FreightCar America recently obtained a new
asset-backed credit facility (the “Credit Facility”) with a maximum
aggregate principal amount of up to $20 million, subject to a
borrowing base, with Siena Lending Group as lender. The Credit
Facility was used to finance certain letter of credit obligations
and will provide improved working capital flexibility for the
Company. This new facility replaced the Company’s prior $50 million
revolving credit facility with BMO Harris Bank N.A., which
substantially limited the company’s ability to invest in its
expanding Mexico operations. The agreement has a term of three
years and carries an interest rate equivalent to the Base Rate plus
3.0% per annum, but not less than 6.25%.
About FreightCar America
FreightCar America, Inc. manufactures a wide
range of railroad freight cars, supplies rail car parts and leases
freight cars through its FreightCar America Leasing Company
subsidiaries. FreightCar America designs and builds high-quality
rail cars, including bulk commodity cars, covered hopper cars,
intermodal and non-intermodal flat cars, mill gondola cars, coil
steel cars, boxcars, coal cars and also specializes in the
conversion of rail cars for repurposed use. It is headquartered in
Chicago, Illinois and has facilities in the following locations:
Cherokee, Alabama; Castaños, Mexico; Johnstown, Pennsylvania; and
Shanghai, People’s Republic of China. More information about
FreightCar America is available on its website at
www.freightcaramerica.com.
INVESTOR & MEDIA CONTACT |
Joe Caminiti or Elizabeth Steckel |
TELEPHONE |
312-445-2870 |
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