Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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 also provide railcar rebody and repair services, railcar conversion services that repurpose idled rail assets back into revenue service, and supply railcar parts. We have been manufacturing railcars since 1901.

The Company's operations consist of two operating and reportable segments, Manufacturing and Aftermarket. The Company identifies reportable segments based on differences in products and services. The Company's Manufacturing segment includes new railcar manufacturing, used railcar sales, and major conversions and rebodies. The Company's Aftermarket segment includes the selling of forged, cast and fabricated railcar parts, replacement components and other supplies for all railcar types, and provides aftermarket services including safety training, railcar inspections, and preventative maintenance.

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 steel products, minerals, cement, motor vehicles, forest products, agricultural commodities and coal. 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 railcar conversions and rebodies. Our Aftermarket segment revenues are generated primarily from sales of railcar replacement parts and other supplies for all railcar types.

The variable purchase patterns of our customers and the timing of completion, delivery and customer acceptance may cause our revenues and income from operations to vary substantially each quarter, which will result in significant fluctuations in our quarterly results. Further, recent changes to United States and foreign trade policies, including the imposition of new tariffs, have created increased geopolitical and macroeconomic uncertainty. Future changes in governmental and economic policies could impact our cost

structure, demand for our products and results of operation. We continue to actively monitor new global trade policies and remain focused on strategic initiatives to drive operational efficiencies.

Total net railcar orders received for the year ended December 31, 2025 were 3,254 railcars, consisting of 2,454 new railcars and 800 converted and rebodied railcars, compared to orders for 4,245 units in the year ended December 31, 2024, consisting of 2,850 new railcars and 1,395 converted and rebodied railcars. Total backlog of unfilled orders decreased from 2,797 railcars as of December 31, 2024 to 1,926 railcars as of December 31, 2025. The estimated sales value of the backlog was $137 million and $267 million, respectively, as of December 31, 2025 and 2024.

RESULTS OF OPERATIONS

Year Ended December 31, 2025 compared to Year Ended December 31, 2024

Revenues

Our consolidated revenues for the year ended December 31, 2025 were $501.0 million compared to $559.4 million for the year ended December 31, 2024. Manufacturing segment revenues for the year ended December 31, 2025 were $473.9 million compared to $541.2 million for the year ended December 31, 2024. The decrease in Manufacturing segment revenues for 2025 compared to 2024

reflects a decrease in the number of railcars delivered from 4,362 railcars in 2024 to 4,125 railcars in 2025. Aftermarket segment revenues for the year ended December 31, 2025 were $27.1 million compared to $18.2 million for the year ended December 31, 2024, reflecting increased volume of component sales during the year ended December 31, 2025.

Gross Profit

Our consolidated gross profit for the year ended December 31, 2025 was $73.2 million compared to $67.0 million for the year ended December 31, 2024. Consolidated gross margin was 14.6% for the year ended December 31, 2025 compared to 12.0% for the year ended December 31, 2024. Manufacturing segment gross profit for the year ended December 31, 2025 was $63.8 million compared to $58.4 million for the year ended December 31, 2024. The $6.2 million increase in consolidated gross profit and $5.4 million increase in Manufacturing segment gross profit is primarily due to favorable product mix in the cars delivered during the period. Aftermarket segment gross profit for the year ended December 31, 2025 was $9.4 million compared to $8.6 million for the year ended December 31, 2024. The $0.8 million increase in Aftermarket segment gross profit is primarily due to favorable volume.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses for the year ended December 31, 2025 were $39.3 million compared to $32.9 million for the year ended December 31, 2024. Consolidated selling, general and administrative expenses for the year ended December 31, 2025 included increases of $5.5 million in professional services expenses and $0.5 million in stock-based compensation expenses. Consolidated selling, general and administrative expenses were 7.8% and 5.9% of revenue for the years ended December 31, 2025 and December 31, 2024, respectively. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2025 were $1.6 million compared to $2.0 million for the year ended December 31, 2024. Manufacturing segment selling, general and administrative expenses for the year ended December 31, 2025 were 0.3% of revenue compared to 0.4% of revenue for the year ended December 31, 2024. Aftermarket segment selling, general and administrative expenses for the year ended December 31, 2025 were $2.2 million compared to $1.5 million for the year ended December 31, 2024. Corporate selling, general and administrative expenses were $35.5 million for the year ended December 31, 2025 compared to $29.5 million for the year ended December 31, 2024. Corporate selling, general and administrative expenses for the year ended December 31, 2025 were primarily driven by the aforementioned increases in professional services expenses and stock-based compensation.

Litigation Settlement

During the year ended December 31, 2025, we did not record any litigation settlements. During the year ended December 31, 2024, we recorded a pre-tax litigation settlement gain of $3.2 million related to a dispute with a former lessee of our railcars.

Operating Income

Our consolidated operating income for the year ended December 31, 2025 was $33.9 million compared to consolidated operating income of $37.3 million for the year ended December 31, 2024 driven primarily by the previously mentioned favorable product mix and no litigation settlement gains recognized in 2025, offset by the previously mentioned increase in selling, general and administrative expenses.

Operating income for the Manufacturing segment was $62.2 million for the year ended December 31, 2025 compared to operating income of $59.6 million for the year ended December 31, 2024, reflecting the favorable product mix during the year ended December 31, 2025. Operating income for the Aftermarket segment was $7.2 million for each of the years ended December 31, 2025 and 2024.

Corporate operating loss was $35.5 million for the year ended December 31, 2025 compared to $29.5 million for the year ended December 31, 2024, reflecting the increases in professional services expenses, stock-based compensation, and professional services expenses during the year ended December 31, 2025.

Interest Expense

Interest expense was $17.6 million for the year ended December 31, 2025 compared to $6.9 million for the year ended December 31, 2024. The increase is driven by the Term Loan agreement entered on December 31, 2024 (the "Term Loan"). See Note 11 - Debt Financing and Credit Facilities.

Loss on Change in Fair Market Value of Warrant Liability

Loss on change in fair market value of warrant liability was $32.2 million for the year ended December 31, 2025 compared to $99.5 million for the year ended December 31, 2024. The change in fair market value of warrant liability is driven by the fluctuation of the stock price used to remeasure the liability at the end of each period.

Other Income (Expense)

Other income was $5.0 million for the year ended December 31, 2025, compared to other expense of $1.0 million for the year ended December 31, 2024. The increase in other income is primarily driven by the $3.3 million Employee Retention Credit received during the year ended December 31, 2025 and the $2.1 million bargain purchase gain associated with the Carly Railcar Components, LLC ("CRC") acquisition.

Income Taxes

Our income tax benefit was $49.0 million for the year ended December 31, 2025 compared to income tax provision of $5.8 million for the year ended December 31, 2024. The income tax benefit is primarily attributable to the release of a majority of a valuation allowance U.S. on federal deferred tax assets. Our effective tax rate for the year ended December 31, 2025 was 450.46% compared to (8.34)% for the year ended December 31, 2024.

Net Income (Loss)

As a result of the changes discussed above, consolidated net income was $38.1 million for the year ended December 31, 2025 compared to net loss of $75.8 million for the year ended December 31, 2024. For the year ended December 31, 2025, basic and diluted net income per share were $1.16 and $1.09, respectively, compared to basic and diluted net loss per share of $3.12 and $3.12, respectively, for the year ended December 31, 2024.

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.

On December 31, 2024, the Company entered into a term loan agreement by and among the Company, FreightCar North America, LLC and certain subsidiaries of FreightCar North America, LLC, the lenders from time to time party thereto, and Blue Torch Finance LLC, as collateral agent and administrative agent in the principal amount of $115.0 million (the "Term Loan") with a maturity date of December 31, 2028. The Term Loan contains both affirmative and negative covenants, as well as financial covenants, including covenants related to liquidity levels, assessed at any time, and quarterly leverage ratios commencing with the first quarter ended March 31, 2025. The Company is in compliance with such covenants as of December 31, 2025. Proceeds from the Term Loan were used to redeem in full the Preferred Stock (as defined in Note 13 - Mezzanine Equity). The Company incurred $6.5 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 Term Loan.

The Term Loan bears interest at the Term Secured Overnight Refinancing Rate ("Term SOFR"), with a floor of 3.00% per annum, plus an applicable margin of 6.00% per annum or at a base rate, as selected by the Company as the borrower. Base rate loans, with respect to the Term Loan, bear interest at the highest of (a) 4.00% per annum, (b) the federal funds rate plus 0.50%, (c) the prime rate or (d) the Term SOFR rate plus 1.00% per annum plus an applicable margin of 5.00%. The Term Loan bears interest at 10.30% as of December 31, 2025.

On February 12, 2025 (the "ABL Effective Date"), the Company entered into a new revolving credit facility by and among the Company, FreightCar North America, LLC, certain subsidiaries of FreightCar North America, LLC, the lenders from time to time party thereto, and Bank of America, N.A., as agent for the lenders in the form of an asset backed credit facility, in the maximum aggregate principal amount of $35.0 million (the "ABL"), subject to borrowing base requirements and consisting of revolving loans and a sub-facility for letters of credit. The ABL has a term ending on February 12, 2030, provided that if the aggregate outstanding principal amount and related obligations under the Term Loan have not been repaid in full or prior to October 1, 2028, or refinanced with a new maturity date no earlier than May 13, 2030, the term will end on October 2, 2028.

Extensions of credit under the ABL are subject to availability under a borrowing base comprised of various percentages of the value of eligible inventory and accounts receivable, which also serves as collateral for borrowings under the ABL. Borrowing availability was $11.0 million as of the ABL Effective Date. The ABL contains both affirmative and negative covenants, as well as certain financial covenants that are triggered if the availability drops below a certain level. These financial covenants remain in effect as long as the

availability stays below that certain level. The Company is in compliance with such covenants as of December 31, 2025. Revolving loans outstanding bear interest at the Term SOFR rate plus an applicable margin ranging from 1.50% to 2.00% per annum or at a base rate plus an applicable margin ranging from 0.50% to 1.00% per annum, as selected by the Company as the borrower. Base rate loans, with respect to the ABL, bear interest at the highest of (a) the prime rate, (b) the federal funds rate plus 0.50% or (c) Term SOFR rate plus 1.00%, provided that the base rate may not be less than 1.00%. As of December 31, 2025, the ABL bears interest at 5.5% and the Company had borrowing availability of $25 million, of which $0.5 million was reserved for the movement in mark to market valuation of our foreign currency derivatives and $0.2 million was reserved to collateralize standby letters of credit for an office lease security deposit. The Company incurred $0.9 million in deferred financing costs that are presented as an asset and amortized to interest expense over the term of the ABL.

Warrant

The Company issued warrants to OC III LFE II LP ("OC III LFE") and various affiliates of OC III LFE (collectively, the "Warrantholder") in 2020, 2021, 2022, and 2023. For further information about our outstanding warrants, see Note 12 - Warrants.

Additional Liquidity Factors

Our restricted cash, restricted cash equivalents and restricted certificates of deposit balances were $0.5 million and $3.9 million as of December 31, 2025 and 2024, respectively. Restricted deposits of $0.3 million as of each of December 31, 2025 and 2024 relate to a customer deposit for purchase of railcars. There were no restricted deposits as of December 31, 2025 and $0.2 million of restricted deposits as of December 31, 2024 that were used to collateralize standby letters of credit with respect to certain performance guarantees. The standby letters of credit outstanding as of December 31, 2025 are a requirement as long as the performance guarantees are in place. Restricted deposits of $0.2 million and $0.1 million as of December 31, 2025 and 2024, respectively, are used to collateralize the corporate card program. There were no restricted deposits as of December 31, 2025 and $3.3 million of restricted deposits as of December 31, 2024 that were used to collateralize foreign currency derivative contracts.

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 credit facilities, any other indebtedness and the availability of additional financing if needed. We may also require additional capital in the future to fund working capital for various reasons, such as future railcar demand; payments for contractual obligations; organic growth opportunities, including new plant and equipment and development of railcars; joint ventures; international expansion; and acquisitions, and these capital requirements could be substantial.

Based upon our operating performance and capital requirements, we may, from time to time, be required to raise additional funds through additional offerings of our equity or debt and through long-term borrowings. There can be no assurance that long-term debt, if needed, will be available on terms attractive to us, or at all. Furthermore, any additional equity financing may be dilutive to stockholders and debt financing, if available, may involve restrictive covenants. Our failure to raise capital if and when needed could have a material adverse effect on our results of operations and financial condition.

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, 2025, our benefit obligation under our defined benefit pension plan was $10.3 million, which exceeded the fair value of plan assets by $1.3 million. A contribution of $7 thousand was made to our defined benefit pension plan during 2025. As of December 31, 2025, the Company expects to make contributions of approximately $0.7 million to its pension plan in 2026 to meet its minimum funding requirements. 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, investing, and financing activities for the years ended December 31, 2025 and 2024:

Operating Activities. Our net cash provided by operating activities reflects net income (loss) adjusted for non-cash charges and changes in operating assets and liabilities. Cash flows from operating activities are affected by several factors, including fluctuations in business volume, contract terms for billings and collections, the timing of collections on our contract receivables, processing of payroll and associated taxes, payments to our suppliers and other operating activities. As some of our customers accept delivery of new railcars in train-set quantities, variations in our sales lead to significant fluctuations in our operating profits and cash from operating activities.

Our net cash provided by operating activities for the year ended December 31, 2025 was $34.8 million compared to $44.9 million for the year ended December 31, 2024. Our net cash provided by operating activities for the year ended December 31, 2025 reflects changes in working capital, including an increase in accounts and contractual payables of $10.8 million. The increase in accounts payable relates to purchases of raw materials on hand as of December 31, 2025 to be used in the production and delivery of railcars in 2025 and 2026. Our net cash provided by operating activities for the year ended December 31, 2024 reflects changes in working capital, including a decrease in inventory of $54.9 million, offset by a decrease in accounts payable of $38.3 million and increase in accounts receivable of $6.1 million, all of which correlate directly with the increase in deliveries in 2024.

Investing Activities. Net cash used in investing activities for the year ended December 31, 2025 was $9.1 million and included cash paid in connection with our acquisition of CRC, a leading distributor of railcar components, net of cash received of $6.3 million and capital expenditures of $3.4 million related to the enhancement of machinery and equipment on current production lines of the Manufacturing Facility. Net cash used in investing activities for the year ended December 31, 2024 was $5.0 million primarily as a result of capital expenditures related to the enhancement of machinery and equipment on the current production lines.

Financing Activities.Net cash used in financing activities for the year ended December 31, 2025 was $5.8 million, which included repayments on term loan of $2.9 million, deferred financing costs of $1.3 million, principal payments on the finance lease of $1.2 million, and employee stock settlements of $0.5 million. Net cash used in financing activities for the year ended December 31, 2024 was $36.0 million and included proceeds from issuance of the Term Loan of $115.0 million, offset by deferred financing costs of $6.1 million, redemption of preferred shares of $85.4 million, dividends paid of $27.9 million, net repayments on revolving line of credit of $29.4 million, and principal payments on the finance lease of $2.1 million.

Capital Expenditures

Our capital expenditures were $3.4 million for the year ended December 31, 2025 and primarily related to the enhancement of machinery and equipment on current production lines at the Manufacturing Facility. Our capital expenditures were $5.0 million for the year ended December 31, 2024, a decrease year over year primarily due to the deferral of certain projects to 2026. We anticipate capital expenditures during 2026 to be approximately $7.0 million to $10.0 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 long-lived assets and right-of-use assets 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.

Pensions and Post-Retirement 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 and compensation expense. The most significant assumptions used in determining our net periodic benefit costs are the discount rate used on our pension and post-retirement welfare obligations and expected return on pension plan assets.

In 2025, we assumed that the expected long-term rate of return on pension plan assets would be 3.00%. As permitted under ASC 715, Compensation - Retirement Benefits, the assumed long-term rate of return on assets is applied to the fair value of assets. 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, 2025:

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. As of December 31, 2025, we determined this rate on our pension plan to be 5.46%, a decrease of 0.21% from the 5.67% rate used as of December 31, 2024. A change of one hundred basis points in the discount rates used during the year ended December 31, 2025 would have the following effect:

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 United States 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 as of December 31, 2025.

For each of the years ended December 31, 2025 and 2024, we recognized consolidated pre-tax pension benefit cost of $0.4 million, respectively. We may be required to make a contribution to our pension plan in 2026 to meet minimum funding requirements. 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 any required 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, the length of the carryforward period, and tax planning strategies. 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.

During the year ended December 31, 2025, we released the majority of the valuation allowance in the United States on federal and state deferred tax assets. As of December 31, 2025, we had deferred tax assets of $78.2 million for which there was a valuation allowance of $13.7 million and we had total deferred tax liabilities of $11.5 million.

Product Warranties

Warranty terms are based on the negotiated railcar sales contracts. 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. Manufacturing segment performance obligations are typically completed and revenue is recognized for the sale of new and converted or rebodied 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. Aftermarket 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 proceeds 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 report to identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. However, forward-looking statements inherently involve potential risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These potential risks and uncertainties relate to, among other things, the cyclical nature of our business; adverse economic and market conditions, including inflation; material disruption in the movement of rail traffic for deliveries; fluctuating costs of raw materials, including steel and aluminum; delays in the delivery of raw materials; our ability to maintain relationships with our suppliers of railcar components; our reliance upon a small number of customers that represent a large percentage of our sales; the variable purchase patterns of our customers and the timing of completion; delivery and customer acceptance of orders; the highly competitive nature of our industry; the risk of lack of acceptance of our new railcar offerings; potential unexpected changes in laws, rules, and regulatory requirements, including tariffs and trade barriers (including recent United States tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries); and other competitive factors. The factors listed above are not exhaustive. Other sections of this Annual Report on 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.