FreightCar America Inc. (RAIL) announced that it has reached a preliminary settlement agreement with the United Steel Workers International Union and other plaintiffs in connection with the pending litigation relating to certain disputed retiree medical coverage and life insurance benefits.
As per the terms of the preliminary settlement agreement, FreightCar America will make a one-time cash payment of $32.75 million in exchange for full and final resolution of the matter. The preliminary settlement is subject to the execution of definitive documentation and court approval.
All parties have agreed to use their best efforts to obtain a fairness hearing within 90 days of filing the motion for preliminary approval and to secure final approval of the settlement terms, which final approval is anticipated to be granted by the court by early 2016.
Upon payment of the settlement amount, the Company expects to realize an after-tax gain of approximately $11 million, based on associated recorded liabilities of approximately $67 million at June 30, 2015.
The current pre-tax expense associated with these postretirement benefits is approximately $3.3 million annually, which will be eliminated upon payment of the settlement amount.
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