2017 Highlights
American Railcar Industries, Inc. (ARI or the Company)
(NASDAQ:ARII) today reported its fourth quarter and full year 2017
financial results. John O'Bryan, President and CEO of ARI,
commented,
"Our results for the fourth quarter and full year of 2017
reflect the continued downturn in the North American railcar market
cycle. Due to oversupply in the marketplace, demand for both tank
and hopper railcars remains focused on smaller orders of more
specialized railcars. During 2017, pricing has been very
competitive and customers have been cautious about placing new
orders. At this point in the market cycle, we are focused on a
disciplined approach to aligning our production with industry
demand.
Our diversified and growing lease fleet, which has increased to
over 13,100 railcars as of December 31, 2017, continues to provide
cash flows while utilization remains strong. Our railcar services
segment continued to provide consistent earnings and performed
maintenance services on our lease fleet, through our expanded
network including repair and retrofit services at our Marmaduke,
Arkansas manufacturing facility.
In 2017, we developed ARI’s sales and lease management team to
support our customers and provide opportunities for future
growth. Late in the fourth quarter of 2017, railcar inquiry
levels increased, and our sales team has been actively meeting with
customers to understand their needs and offer innovative solutions
for their fleet strategies. We are well positioned to optimize
ARI's production plan to meet customers' requirements."
Fourth Quarter Revenue Summary
Total consolidated revenues were $132.4 million
for the fourth quarter of 2017, a decrease of 21% when compared to
$167.5 million for the same period in 2016. This decrease was
primarily due to decreased revenues in the manufacturing and
railcar services segments, partially offset by increased revenues
in the railcar leasing segment.
Manufacturing revenues were $80.3 million for
the fourth quarter of 2017, a decrease of 30% compared to $114.9
million for the same period in 2016. This decrease was
primarily driven by the impact of fewer railcar shipments for
direct sale for both hopper and tank railcars with a higher mix of
hopper railcars sold, a higher percentage of railcar shipments
going to the Company's lease fleet, and more competitive pricing
during the fourth quarter of 2017 compared to the same period in
2016.
During the fourth quarter of 2017, ARI shipped
720 direct sale railcars and shipped 389 railcars for the Company's
lease fleet, compared to 1,005 direct sale railcars and 307
railcars for the lease fleet during the same period in 2016.
Railcars for the lease fleet represented 35% of ARI’s railcar
shipments during the fourth quarter of 2017 compared to 23% for the
same period in 2016. Shipments and orders for railcars on
long-term leases not only help maintain a steady level of
production during the manufacturing period, but also help provide
future cash flows while the lease fleet continues to maintain a
strong utilization rate. Because revenues and earnings related to
leased railcars are recognized over the life of the lease, the
Company's quarterly and annual results may vary depending on the
mix of lease versus direct sale railcars that the Company ships
during a given period.
Manufacturing revenues for the fourth quarter of
2017, on a consolidated basis, exclude $37.0 million of revenues
related to railcars built for the Company's lease fleet compared to
$30.8 million for the same period in 2016. Revenues related to
railcars built for the Company's lease fleet increased due to a
higher volume of railcars built for lease, partially offset by
lower average selling prices. Such revenues are based on an
estimated fair market value of the leased railcars as if they had
been sold to a third party and are not recognized in consolidated
revenues as railcar sales. Rather, lease revenues are recognized in
accordance with the terms of the contract over the life of the
lease.
Railcar leasing revenues were $34.1 million for
the fourth quarter of 2017, an increase of 2% compared to $33.5
million for the same period in 2016. The primary reason for the
increase in revenue was an increase in the number of railcars on
lease, partially offset by a decline in weighted average lease
rates compared to the same period in 2016. ARI had 13,138 railcars
in its lease fleet at the end of 2017 compared to 11,268 railcars
in its lease fleet at the end of 2016.
Railcar services revenues for the fourth quarter
of 2017 were $18.0 million, a decrease of 6% compared to $19.1
million of revenues for the same period in 2016. This decrease was
primarily due to performing more intercompany work related to the
FRA's Revised Directive, for which the revenue is eliminated in
consolidation, partially offset by increased demand, additional
capacity from ARI's mobile repair operations and additional repair
volume due to added capacity for railcar services at the Company's
Marmaduke tank railcar production facility.
Consolidated earnings from operations were $17.1
million for the fourth quarter of 2017, a decrease of 54% over
$37.4 million for the same period in 2016. Consolidated operating
margins decreased to 12.9% for the fourth quarter of 2017 compared
to 22.3% for the same period in 2016. These decreases were
primarily driven by lower earnings from operations in the Company's
manufacturing segment.
The manufacturing segment experienced a loss
from operations on a consolidated basis of $1.3 million for the
fourth quarter of 2017, compared to earnings from operations of
$19.5 million for the same period in 2016. This decrease was due to
fewer overall railcar shipments for direct sale, as discussed
above, more competitive pricing on both hopper and tank railcars,
increased warranty costs of approximately $5 million, and higher
costs associated with the lower production rates at the Company's
railcar facilities. As the Company adjusts its production schedules
and output of new railcars, it continues to monitor and control
overhead spending and employee levels. Estimated profit on railcars
built for the Company’s lease fleet was $2.1 million and $1.8
million for the fourth quarter of 2017 and 2016, respectively, and
is excluded from manufacturing earnings from operations.
Profit on railcars built for the Company's lease fleet is based on
an estimated fair market value of revenues as if the railcars had
been sold to a third party, less the cost to manufacture.
Railcar leasing earnings from operations on a
consolidated basis were $21.5 million for the fourth quarter of
2017 compared to $22.5 million for the same period in 2016.
This decrease was primarily driven by increased costs due to
maintenance and services related to lease re-assignments, lower
rates on certain lease renewals and increased rent abatement
related to railcars being shopped in conjunction with the FRA's
Revised Directive, all partially offset by an increase in the
number of railcars in the Company's lease fleet in 2017.
Railcar services earnings from operations on a
consolidated basis were $1.7 million for the fourth quarter of 2017
compared to $2.1 million for the same period in 2016. This
decrease was primarily due to performing more intercompany services
related to the FRA's Revised Directive, for which the revenue is
eliminated in consolidation, partially offset by increased demand
and additional capacity from ARI's mobile repair operations and
additional repair volume due to added capacity for railcar services
at the Company's Marmaduke tank railcar production facility.
Selling, general and administrative expenses
were $9.8 million for the fourth quarter of 2017 compared to $10.5
million for the same period in 2016. This $0.7 million decrease was
primarily due to decreases in incentive and stock-based
compensation expense, both partially offset by increased bad debt
expense and increased compensation costs relating to additional
personnel hired in connection with increasing our sales and
marketing team and other supporting groups relating to
transitioning lease fleet management in-house. Certain expenses
related to the management of the Company's lease fleet, including
the management fee paid to American Railcar Leasing, LLC (ARL),
were recorded within cost of sales prior to the sale of ARL to an
unaffiliated third party (the ARL Sale), which was consummated on
June 1, 2017. Subsequent to the ARL Sale, as personnel and other
related expenses have been brought in-house, the Company's selling,
general and administrative expenses supporting our leasing business
have increased, but our fleet management expenses in total have
decreased due to cost savings related to railcar management
fees.
Net earnings for the fourth quarter of 2017 were
$111.9 million, or $5.86 per share, compared to $22.3 million, or
$1.16 per share, in the same period of 2016. This increase was
driven primarily by the impact of the new Tax Cuts and Jobs Act of
2017 (the "2017 Tax Act"), partially offset by decreased
consolidated earnings from operations. A reconciliation of
our net earnings and earnings per share excluding adjustments
related to the 2017 Tax Act (both non-GAAP financial measures) is
set forth in the supplemental disclosure attached to this press
release.
On December 22, 2017, the 2017 Tax Act was
signed into law. The 2017 Tax Act reduces the federal corporate tax
rate from a maximum of 35% to a flat 21% rate, modifies policies,
credits, and deductions and has international tax consequences. The
rate reduction is effective January 1, 2018. As a result, the
Company was required to revalue its deferred tax assets and
liabilities to account for the future impact of lower corporate tax
rates and other provisions of the 2017 Tax Act. During the fourth
quarter of 2017, the Company recorded a one-time income tax benefit
of $107.3 million, or $5.62 per share, related to the 2017 Tax Act.
The fourth quarter 2017 income tax benefit related to the 2017 Tax
Act may require further adjustments in 2018 due to anticipated
additional guidance from the U.S. Department of the Treasury,
changes in the Company’s assumptions, completion of 2017 tax
returns, and further information and interpretations that become
available.
EBITDA, adjusted to exclude share-based
compensation and other income related to short-term investment
activity (Adjusted EBITDA), was $33.8 million for the fourth
quarter of 2017 compared to $51.8 million for the comparable
quarter of 2016. The decrease was primarily driven by decreased
earnings from operations as discussed above. A reconciliation
of the Company’s net earnings to EBITDA and Adjusted EBITDA (both
non-GAAP financial measures) is set forth in the supplemental
disclosure attached to this press release.
Full Year 2017 Results
Consolidated revenues for 2017 were $476.8
million compared to $639.1 million in 2016. The Company
shipped 2,418 railcars for direct sale and 1,874 railcars for lease
in 2017 compared to 3,922 railcars for direct sale and 914 railcars
for lease in 2016. Railcars built for the lease fleet represented
44% of ARI's railcar shipments in 2017 compared to 19% in 2016.
Consolidated earnings from operations for 2017
were $80.7 million, a decrease of 38% from $130.1 million in 2016.
Consolidated earnings from operations for 2017 and 2016 excluded
$16.3 million and $9.5 million, respectively, of profit on railcars
built for the lease fleet that is eliminated in consolidation. The
decrease in consolidated earnings from operations was primarily
driven by lower earnings from operations in the Company's
manufacturing segment, as the Company had fewer direct sale railcar
shipments during 2017, combined with increased warranty costs and
higher costs associated with lower production volumes and more
competitive pricing during 2017. This was combined with lower
earnings from operations in the railcar leasing and railcar
services segments and higher selling, general and administrative
costs.
Consolidated operating margins were 16.9% in
2017 compared to 20.4% in 2016. These decreases were
primarily due to fewer overall direct sale shipments, with a higher
mix of hopper railcars in 2017, which generally have lower margins
than tank railcars, combined with increased warranty costs, more
competitive pricing on both hopper and tank railcars, and higher
costs associated with the lower production rates at the Company's
railcar facilities. Operating margins in 2016 were negatively
impacted by the $12.3 million loss contingency recognized related
to the FRA's Revised Directive.
Our total selling, general and administrative
expenses increased by 14.1% in 2017 compared to 2016. This $4.5
million increase was primarily due to increased compensation costs
relating to additional personnel hired in connection with
increasing our sales and marketing team and other supporting groups
relating to transitioning lease fleet management in-house, higher
legal expenses, and higher bad debt expense, partially offset by
decreased stock-based compensation expense and decreased consulting
expenses. Prior to the ARL Sale, certain expenses related to the
management of the Company's lease fleet, including the management
fee paid to ARL, were recorded within cost of sales. Subsequent to
the ARL Sale, as personnel and other related expenses have been
brought in-house, the Company's selling, general and administrative
expenses related to our leasing business have increased, but our
fleet management expenses in total have decreased due to cost
savings related to railcar management fees.
Net earnings in 2017 were $142.2 million, or $7.45 per share,
compared to $72.7 million, or $3.74 per share in 2016. This
increase was driven primarily by the impact of the 2017 Tax Act,
resulting in a tax benefit of $107.3 million, as discussed above,
and an increase in other income primarily driven by gains realized
on the sale of short-term investments, both partially offset by
decreased earnings from operations as discussed above and lower
earnings from ARI's joint ventures due to a decline in industry
demand and the idling of the Ohio Castings joint venture in early
2017. A reconciliation of our net earnings and earnings per share
excluding adjustments related to the 2017 Tax Act (both non-GAAP
financial measures) is set forth in the supplemental disclosure
attached to this press release.
Adjusted EBITDA was $141.5 million in 2017, a
decrease of $46.5 million from $188.0 million in 2016.
The decrease resulted primarily from decreased earnings from
operations as discussed above. A reconciliation of the Company’s
net earnings to EBITDA and Adjusted EBITDA (both non-GAAP financial
measures) is set forth in the supplemental disclosure attached to
this press release.
Cash Flow and Liquidity
The Company’s earnings have contributed to cash
flow from operations of $131.5 million in 2017. As of
December 31, 2017, ARI had working capital of $168.6 million,
including $100.2 million of cash and cash equivalents.
As of December 31, 2017, the Company had
$545.6 million of debt outstanding, net of unamortized debt
issuance costs of $4.6 million, and borrowing availability of
$200.0 million under a revolving loan.
The Company paid dividends totaling $30.5 million during
2017. At the board meeting in February, the Company’s board
of directors declared a cash dividend of $0.40 per share of common
stock of the Company to shareholders of record as of March 16,
2018 that will be paid on March 23, 2018.
The Company did not repurchase any shares of its common stock in
2017 under its stock repurchase program. Board authorization
for approximately $164.0 million remains available for further
share repurchases.
Backlog
ARI’s backlog as of December 31, 2017 was
1,940 railcars, with an estimated market value of $172.6 million.
Of the total backlog, we currently expect 389 railcars, or 20%,
having an estimated market value of $39.8 million, will be placed
into the Company's lease fleet. Subsequent to December 31, 2017,
the Company received orders for approximately 2,000 railcars,
primarily for direct sale for both tank and hopper railcars, which
significantly increased the backlog from December 31, 2017.
While inquiry levels have moderately improved recently, we expect
2018 industry shipments to be in line with 2017, consistent with
industry forecasts. These orders received in early 2018 were for
customers' delivery needs both in 2018 and 2019.
Conference Call and Webcast
ARI will host a webcast and conference call on
Friday, February 23, 2018 at 10:00 am (Eastern Time) to
discuss the Company’s fourth quarter 2017 financial results. In
conjunction with this press release, ARI has posted a supplemental
information presentation to its website. To participate in the
webcast, please log-on to ARI’s investor relations page through the
ARI website at americanrailcar.com. To participate in the
conference call, please dial 877-745-9389. Participants are asked
to log-on to the ARI website or dial in to the conference call
approximately 10 to 15 minutes prior to the start time. An audio
replay of the call will also be available on the Company’s website
promptly following the earnings call.
About ARI
ARI is a prominent North American designer and
manufacturer of hopper and tank railcars. ARI provides its railcar
customers with integrated solutions through a comprehensive set of
high quality products and related services. ARI manufactures and
sells railcars, custom designed railcar parts, and other industrial
products. ARI and its subsidiaries also lease railcars manufactured
by the Company to certain markets, and ARI has begun managing these
lease railcars in-house. In addition, ARI and its subsidiaries
provide railcar repair services through its various repair
facilities, including mini-shops and mobile units, offering a range
of services from full to light repair. More information about
American Railcar Industries, Inc. is available on its website
at americanrailcar.com or call the Investor Relations
Department, 636.940.6000.
Forward Looking Statement
Disclaimer
This press release contains statements relating
to the Company's expected financial performance, objectives,
long-term strategies and/or future business prospects, events and
plans that are forward-looking statements. Forward-looking
statements represent the Company’s estimates and assumptions only
as of the date of this press release. Such statements include,
without limitation, statements regarding: various estimates we have
made in preparing our financial statements, the impact of the 2017
Tax Act on our business and financial statements, our plans to
continue to transition the management of our lease fleet from ARL
to in-house and terminate our contractual agreements with ARL,
expected future trends relating to our industry, products and
markets, anticipated customer demand for our products and services,
trends relating to our shipments, leasing business, railcar
services and revenues, trends related to shipments for direct sale
versus lease, our strategic objectives and long-term strategies,
our results of operations, financial condition and the sufficiency
of our capital resources, the mix of railcars in our lease fleet
and our lease fleet financings, anticipated production schedules
for our products, our backlog, our plans regarding future dividends
and the anticipated performance and capital requirements of our
joint ventures. These forward-looking statements are subject to
known and unknown risks and uncertainties that could cause actual
results to differ materially from those anticipated. Investors
should not place undue reliance on forward-looking statements,
which speak only as of the date they are made and are not
guarantees of future performance. The payment of future
dividends, if any, and the amount thereof, will be at the
discretion of ARI’s board of directors and will depend upon the
Company’s operating results, strategic plans, capital requirements,
financial condition, provisions of its borrowing arrangements,
applicable law and other factors the Company’s board of directors
considers relevant. Other potential risks and uncertainties
that could adversely affect our business and prospects include
without limitation: our prospects in light of the cyclical nature
of our business; the health of and prospects for the overall
railcar industry; the risk of being unable to market or remarket
railcars for sale or lease at favorable prices or on favorable
terms or at all; the highly competitive nature of the
manufacturing, railcar leasing and railcar services industries; the
impact, costs and expenses of any warranty claims we may be subject
to now or in the future; risks relating to our compliance with the
Revised Directive and the settlement agreement related thereto, and
any developments related to the Revised Directive and the
settlement agreement related thereto; risks associated with ongoing
compliance with environmental, health, safety, and regulatory laws
and regulations, which may be subject to change; risks relating to
any other legal or regulatory developments; our ability to recruit,
retain and train qualified personnel; fluctuations in the costs of
raw materials, including steel and railcar components, and delays
in the delivery of such raw materials and components; the variable
purchase patterns of our railcar customers and the timing of
completion, customer acceptance and shipment of orders, as well as
the mix of railcars for lease versus direct sale; risks related to
the changeover of day-to-day management upon the transition of
executive officers; our ability to manage overhead and variations
in production rates; the impact of any economic downturn, adverse
market conditions or restricted credit markets; risks relating to
the ongoing transition of the management of our railcar leasing
business from ARL to in-house following completion of the sale of
American Railcar Leasing, LLC to an unaffiliated third party; our
reliance upon a small number of customers that represent a large
percentage of our revenues and backlog; fluctuations in commodity
prices, including oil and gas; fluctuations in the supply of
components and raw materials we use in railcar manufacturing;
uncertainties regarding the 2017 Tax Act; the ongoing risks related
to our relationship with Mr. Carl Icahn, our principal beneficial
stockholder through Icahn Enterprises L.P. (IELP), and certain of
his affiliates; the impact, costs and expenses of any litigation we
may be subject to now or in the future; the risks associated with
our current joint ventures and anticipated capital needs of, and
production capabilities at our joint ventures; the sufficiency of
our liquidity and capital resources, including long-term capital
needs to support the growth of our lease fleet; the risks related
to our and our subsidiaries' indebtedness and compliance with
covenants contained in our and our subsidiaries' financing
arrangements; the impact of repurchases pursuant to our Stock
Repurchase Program on our current liquidity and the ownership
percentage of our principal beneficial stockholder through IELP,
Mr. Carl Icahn; the conversion of our railcar backlog into revenues
equal to our reported estimated backlog value; the risks and impact
associated with any potential joint ventures, acquisitions,
strategic opportunities, dispositions or new business endeavors;
the integration with other systems and ongoing management of our
new enterprise resource planning system and the additional risk
factors described in ARI’s filings with the Securities and Exchange
Commission. The Company expressly disclaims any duty to provide
updates to any forward-looking statements made in this press
release, whether as a result of new information, future events or
otherwise.
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands, except share and per share amounts) |
|
|
December 31, 2017 |
|
December 31, 2016 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
100,244 |
|
|
$ |
178,571 |
|
Restricted cash |
16,640 |
|
|
16,714 |
|
Short-term investments—available for sale securities |
— |
|
|
8,958 |
|
Accounts
receivable, net |
43,804 |
|
|
39,727 |
|
Accounts
receivable, due from related parties |
778 |
|
|
4,790 |
|
Income
taxes receivable |
19,115 |
|
|
2,010 |
|
Inventories, net |
54,147 |
|
|
75,028 |
|
Prepaid
expenses and other current assets |
6,464 |
|
|
6,613 |
|
Total current assets |
241,192 |
|
|
332,411 |
|
Property, plant and
equipment, net |
162,535 |
|
|
177,051 |
|
Railcars on leases,
net |
1,036,414 |
|
|
908,010 |
|
Income tax
receivable |
14 |
|
|
233 |
|
Goodwill |
7,169 |
|
|
7,169 |
|
Investment in and loans
to joint ventures |
22,571 |
|
|
26,332 |
|
Other assets |
3,531 |
|
|
5,044 |
|
Total assets |
$ |
1,473,426 |
|
|
$ |
1,456,250 |
|
Liabilities and
Stockholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
21,275 |
|
|
29,314 |
|
Accounts
payable, due to related parties |
41 |
|
|
3,252 |
|
Accrued
expenses and taxes, including loss contingency of $6,548 and
$10,127 at December 31, 2017 and 2016, respectively |
12,787 |
|
|
15,411 |
|
Accrued
income taxes payable |
— |
|
|
7,660 |
|
Accrued
compensation |
12,874 |
|
|
11,628 |
|
Short-term debt, including current portion of long-term debt |
25,590 |
|
|
25,588 |
|
Total current liabilities |
72,567 |
|
|
92,853 |
|
Long-term debt, net of
unamortized debt issuance costs of $4,647 and $4,863 as of December
31, 2017 and 2016, respectively |
520,024 |
|
|
545,392 |
|
Deferred tax liability,
net |
194,084 |
|
|
252,943 |
|
Pension and
post-retirement liabilities |
8,099 |
|
|
8,648 |
|
Other liabilities,
including loss contingency of $2,283 and $2,161 at December 31,
2017 and 2016, respectively |
15,118 |
|
|
6,144 |
|
Total liabilities |
809,892 |
|
|
905,980 |
|
Stockholders'
equity: |
|
|
|
Common stock, $0.01 par
value, 50,000,000 shares authorized, 19,083,878 shares outstanding
at both December 31, 2017 and 2016. |
213 |
|
|
213 |
|
Additional paid-in
capital |
239,609 |
|
|
239,609 |
|
Retained earnings |
514,453 |
|
|
402,810 |
|
Accumulated other
comprehensive loss |
(4,710 |
) |
|
(6,331 |
) |
Treasury stock |
(86,031 |
) |
|
(86,031 |
) |
Total stockholders’ equity |
663,534 |
|
|
550,270 |
|
Total liabilities and stockholders’ equity |
$ |
1,473,426 |
|
|
$ |
1,456,250 |
|
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share amounts,
unaudited) |
|
|
|
Three Months Ended December
31, |
|
Twelve Months Ended December
31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues: |
|
|
|
|
|
|
|
|
Manufacturing
(including revenues from affiliates of $14 and $339 for the three
and twelve months ended December 31, 2017, respectively, and $21
and $837 for the same periods in 2016) |
|
$ |
80,302 |
|
|
$ |
114,888 |
|
|
$ |
264,557 |
|
|
$ |
429,774 |
|
Railcar Leasing
(including revenues from affiliates of $344 and $1,022 for the
three and twelve months ended December 31, 2017, respectively, and
$222 and $272 for the same periods in 2016) |
|
34,138 |
|
|
33,470 |
|
|
135,130 |
|
|
132,245 |
|
Railcar services
(including revenues from affiliates of $251 and $11,980 for the
three and twelve months ended December 31, 2017, respectively, and
$5,605 and $26,781 for the same periods in 2016) |
|
17,956 |
|
|
19,149 |
|
|
77,156 |
|
|
77,114 |
|
Total
revenues |
|
132,396 |
|
|
167,507 |
|
|
476,843 |
|
|
639,133 |
|
Cost of
revenues: |
|
|
|
|
|
|
|
|
Manufacturing |
|
(78,059 |
) |
|
(97,366 |
) |
|
(247,974 |
) |
|
(360,755 |
) |
Other
operating (loss) gain |
|
(557 |
) |
|
4,685 |
|
|
(417 |
) |
|
(12,288 |
) |
Railcar leasing |
|
(11,728 |
) |
|
(10,624 |
) |
|
(46,260 |
) |
|
(41,732 |
) |
Railcar services |
|
(15,144 |
) |
|
(16,390 |
) |
|
(64,703 |
) |
|
(62,178 |
) |
Total
cost of revenues |
|
(105,488 |
) |
|
(119,695 |
) |
|
(359,354 |
) |
|
(476,953 |
) |
Gross profit |
|
26,908 |
|
|
47,812 |
|
|
117,489 |
|
|
162,180 |
|
Selling, general and
administrative |
|
(9,808 |
) |
|
(10,506 |
) |
|
(36,892 |
) |
|
(32,343 |
) |
Net gains on
disposition of leased railcars |
|
— |
|
|
47 |
|
|
115 |
|
|
272 |
|
Earnings from operations |
|
17,100 |
|
|
37,353 |
|
|
80,712 |
|
|
130,109 |
|
Interest income
(including income from related parties of $251 and $1,174 for the
three and twelve months ended December 31, 2017, respectively, and
$375 and $1,663 for the same periods in 2016) |
|
475 |
|
|
425 |
|
|
1,621 |
|
|
1,785 |
|
Interest expense |
|
(5,394 |
) |
|
(5,587 |
) |
|
(21,854 |
) |
|
(22,803 |
) |
Other income |
|
1,196 |
|
|
127 |
|
|
3,510 |
|
|
185 |
|
Earnings from joint
ventures |
|
650 |
|
|
366 |
|
|
2,228 |
|
|
4,924 |
|
Earnings
before income taxes |
|
14,027 |
|
|
32,684 |
|
|
66,217 |
|
|
114,200 |
|
Income tax benefit
(expense) |
|
97,825 |
|
|
(10,398 |
) |
|
75,960 |
|
|
(41,537 |
) |
Net earnings |
|
$ |
111,852 |
|
|
$ |
22,286 |
|
|
$ |
142,177 |
|
|
$ |
72,663 |
|
Net earnings per common
share—basic and diluted |
|
$ |
5.86 |
|
|
$ |
1.16 |
|
|
$ |
7.45 |
|
|
$ |
3.74 |
|
Weighted average common
shares outstanding—basic and diluted |
|
19,084 |
|
|
19,186 |
|
|
19,084 |
|
|
19,439 |
|
Cash dividends declared
per common share |
|
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
1.60 |
|
|
$ |
1.60 |
|
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
SEGMENT DATA |
(In thousands, unaudited) |
|
|
Three Months Ended December 31,
2017 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss) from Operations |
|
(in thousands) |
Manufacturing |
$ |
80,302 |
|
|
$ |
36,967 |
|
|
$ |
117,269 |
|
|
$ |
851 |
|
Railcar leasing |
34,138 |
|
|
— |
|
|
34,138 |
|
|
18,456 |
|
Railcar services |
17,956 |
|
|
2,462 |
|
|
20,418 |
|
|
2,476 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(4,821 |
) |
Eliminations |
— |
|
|
(39,429 |
) |
|
(39,429 |
) |
|
137 |
|
Total Consolidated |
$ |
132,396 |
|
|
$ |
— |
|
|
$ |
132,396 |
|
|
$ |
17,099 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31,
2016 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss) from Operations |
|
(in thousands) |
Manufacturing |
$ |
114,888 |
|
|
$ |
30,978 |
|
|
$ |
145,866 |
|
|
$ |
21,285 |
|
Railcar leasing |
33,470 |
|
|
— |
|
|
33,470 |
|
|
19,852 |
|
Railcar services |
19,149 |
|
|
72 |
|
|
19,221 |
|
|
2,057 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(6,651 |
) |
Eliminations |
|
|
(31,050 |
) |
|
(31,050 |
) |
|
810 |
|
Total Consolidated |
$ |
167,507 |
|
|
$ |
— |
|
|
$ |
167,507 |
|
|
$ |
37,353 |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
2017 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss) from Operations |
|
(in thousands) |
Manufacturing |
$ |
264,557 |
|
|
$ |
186,138 |
|
|
$ |
450,695 |
|
|
$ |
21,034 |
|
Railcar leasing |
135,130 |
|
|
— |
|
|
135,130 |
|
|
74,985 |
|
Railcar services |
77,156 |
|
|
5,653 |
|
|
82,809 |
|
|
9,462 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(18,648 |
) |
Eliminations |
— |
|
|
(191,791 |
) |
|
(191,791 |
) |
|
(6,121 |
) |
Total Consolidated |
$ |
476,843 |
|
|
$ |
— |
|
|
$ |
476,843 |
|
|
$ |
80,712 |
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31,
2016 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss) from Operations |
|
(in thousands) |
Manufacturing |
$ |
429,774 |
|
|
$ |
95,159 |
|
|
$ |
524,933 |
|
|
$ |
56,736 |
|
Railcar leasing |
132,245 |
|
|
— |
|
|
132,245 |
|
|
79,084 |
|
Railcar services |
77,114 |
|
|
1,807 |
|
|
78,921 |
|
|
11,421 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(18,249 |
) |
Eliminations |
|
|
(96,966 |
) |
|
(96,966 |
) |
|
1,117 |
|
Total Consolidated |
$ |
639,133 |
|
|
$ |
— |
|
|
$ |
639,133 |
|
|
$ |
130,109 |
|
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands, unaudited) |
|
|
For the Years Ended December 31, |
|
2017 |
|
2016 |
Operating
activities: |
|
|
|
Net
earnings |
$ |
142,177 |
|
|
$ |
72,663 |
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities: |
|
|
|
Depreciation |
57,526 |
|
|
52,216 |
|
Amortization of deferred costs |
504 |
|
|
506 |
|
Gain on
disposal of property, plant, equipment and leased railcars |
(115 |
) |
|
(63 |
) |
Earnings
from joint ventures |
(2,228 |
) |
|
(4,924 |
) |
(Benefit)
provision for deferred income taxes |
(59,019 |
) |
|
30,139 |
|
Item
related to investing activities: |
|
|
|
Dividends received from short-term investments |
(97 |
) |
|
(107 |
) |
Realized gains on short-term investments—available for
sale securities |
(2,216 |
) |
|
(73 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Accounts receivable, net |
(3,977 |
) |
|
(10,290 |
) |
Accounts receivable, due from affiliates |
4,010 |
|
|
4,629 |
|
Income taxes receivable |
(16,876 |
) |
|
1,244 |
|
Inventories, net |
20,964 |
|
|
21,974 |
|
Prepaid expenses and other current assets |
150 |
|
|
(2,553 |
) |
Accounts payable |
(8,062 |
) |
|
(6,760 |
) |
Accounts payable, due to related parties |
(3,210 |
) |
|
(1,225 |
) |
Accrued expenses and taxes |
(9,055 |
) |
|
16,887 |
|
Other |
11,070 |
|
|
6,240 |
|
Net cash provided by
operating activities |
131,546 |
|
|
180,503 |
|
Investing
activities: |
|
|
|
Purchases
of property, plant and equipment |
(7,058 |
) |
|
(23,068 |
) |
Grant
proceeds |
— |
|
|
75 |
|
Capital
expenditures—leased railcars |
(163,785 |
) |
|
(90,332 |
) |
Proceeds
from the disposal of property, plant, equipment and leased
railcars |
417 |
|
|
926 |
|
Purchase
of short-term investments—available for sale securities |
— |
|
|
(8,750 |
) |
Proceeds
from the sale of short-term investments—available for sale
securities |
10,535 |
|
|
504 |
|
Proceeds
from repayments of loans from joint ventures |
5,907 |
|
|
5,907 |
|
Net cash used in
investing activities |
(153,984 |
) |
|
(114,738 |
) |
Financing
activities: |
|
|
|
Repayments of short-term and long-term debt |
(25,588 |
) |
|
(125,783 |
) |
Change in
interest reserve related to long-term debt |
74 |
|
|
204 |
|
Stock
repurchases |
— |
|
|
(28,608 |
) |
Payment
of common stock dividends |
(30,534 |
) |
|
(31,006 |
) |
Debt
issuance costs |
— |
|
|
(13 |
) |
Net cash used in
financing activities |
(56,048 |
) |
|
(185,206 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
159 |
|
|
(52 |
) |
Decrease in cash and
cash equivalents |
(78,327 |
) |
|
(119,493 |
) |
Cash and cash
equivalents at beginning of year |
178,571 |
|
|
298,064 |
|
Cash and cash
equivalents at end of year |
$ |
100,244 |
|
|
$ |
178,571 |
|
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF IMPACT OF TAX ADJUSTMENTS ON
NET EARNINGS AND EARNINGS PER SHARE |
(In thousands, except per share amounts,
unaudited) |
|
|
Three Months Ended December
31, |
|
Twelve Months Ended December
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net earnings
(GAAP) |
$ |
111,852 |
|
|
$ |
22,286 |
|
|
$ |
142,177 |
|
|
$ |
72,663 |
|
Tax adjustments |
|
|
|
|
|
|
|
Impact of
the Tax Cuts and Jobs Act enacted in 2017 (1) |
(107,272 |
) |
|
— |
|
|
(107,272 |
) |
|
— |
|
Net earnings, excluding
tax adjustments (non-GAAP) |
$ |
4,580 |
|
|
$ |
22,286 |
|
|
$ |
34,905 |
|
|
$ |
72,663 |
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding - basic and diluted |
19,084 |
|
|
19,186 |
|
|
19,084 |
|
|
$ |
19,439 |
|
|
|
|
|
|
|
|
|
Basic and diluted
earnings per share (GAAP) |
$ |
5.86 |
|
|
$ |
1.16 |
|
|
$ |
7.45 |
|
|
$ |
3.74 |
|
Basic and diluted
earnings per share, excluding tax adjustments (non-GAAP) |
$ |
0.24 |
|
|
$ |
1.16 |
|
|
$ |
1.83 |
|
|
$ |
3.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts shown represent the estimated impact of corporate
income tax changes enacted by the Tax Cuts and Jobs Act ("2017 Tax
Act"), signed into law on December 22, 2017. The ultimate impact of
the 2017 Tax Act may differ from these estimates, due to, among
other things, changes in interpretations and assumptions made by
the Company and additional guidance that may be issued by the U.S.
Department of the Treasury.
Net earnings excluding tax adjustments
represents net earnings before a one-time adjustment related to the
impact of the new Tax Cuts and Jobs Act of 2017 (the "2017 Tax
Act"). The Company believes that net earnings excluding tax
adjustments is a useful measure to investors in evaluating ARI’s
operating performance compared to prior quarters as the impact of
the 2017 Tax Act is not expected to be repeated. The calculation of
net earnings excluding tax adjustments excludes the income tax
benefit recognized by the Company related to its revaluation of
deferred tax assets and liabilities to account for the future
impact of lower corporate tax rates and other provisions of the
2017 Tax Act. Net earnings excluding tax adjustments is not a
financial measure presented in accordance with U.S. generally
accepted accounting principles (U.S. GAAP). Accordingly, when
analyzing the Company’s operating performance, investors should not
consider net earnings excluding tax adjustments in isolation or as
a substitute for net earnings, cash flows provided by operating
activities or other statement of operations or cash flow data
prepared in accordance with U.S. GAAP. The calculation of net
earnings excluding tax adjustments is not necessarily comparable to
that of other similarly titled measures reported by other
companies.
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF NET EARNINGS TO EBITDA AND
ADJUSTED EBITDA |
(In thousands, unaudited) |
|
|
Three Months Ended December
31, |
|
Twelve Months Ended December
31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net earnings |
$ |
111,852 |
|
|
$ |
22,286 |
|
|
$ |
142,177 |
|
|
$ |
72,663 |
|
Income tax (benefit)
expense |
(97,825 |
) |
|
10,398 |
|
|
(75,960 |
) |
|
41,537 |
|
Interest expense |
5,394 |
|
|
5,587 |
|
|
21,854 |
|
|
22,803 |
|
Interest income |
(475 |
) |
|
(425 |
) |
|
(1,621 |
) |
|
(1,785 |
) |
Depreciation |
14,780 |
|
|
13,487 |
|
|
57,526 |
|
|
52,216 |
|
EBITDA |
$ |
33,726 |
|
|
$ |
51,333 |
|
|
$ |
143,976 |
|
|
$ |
187,434 |
|
Expense (income)
related to stock appreciation rights compensation |
68 |
|
|
643 |
|
|
(158 |
) |
|
751 |
|
Other income on
short-term investment activity |
— |
|
|
(180 |
) |
|
(2,314 |
) |
|
(180 |
) |
Adjusted EBITDA |
$ |
33,794 |
|
|
$ |
51,796 |
|
|
$ |
141,504 |
|
|
$ |
188,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA represents net earnings before income tax
expense, interest expense (income), and depreciation of property,
plant and equipment. The Company believes EBITDA is useful to
investors in evaluating ARI’s operating performance compared to
that of other companies in the same industry. In addition, ARI’s
management uses EBITDA to evaluate operating performance. The
calculation of EBITDA eliminates the effects of financing, income
taxes and the accounting effects of capital spending. These items
may vary for different companies for reasons unrelated to the
overall operating performance of a company’s business. EBITDA is
not a financial measure presented in accordance with U.S. generally
accepted accounting principles (U.S. GAAP). Accordingly, when
analyzing the Company’s operating performance, investors should not
consider EBITDA in isolation or as a substitute for net earnings,
cash flows provided by operating activities or other statement of
operations or cash flow data prepared in accordance with U.S. GAAP.
The calculation of EBITDA is not necessarily comparable to that of
other similarly titled measures reported by other companies.
Adjusted EBITDA represents EBITDA before
share-based compensation expense (income) related to stock
appreciation rights (SARs) and other income related to our
short-term investments. Management believes that Adjusted EBITDA is
useful to investors in evaluating the Company’s operating
performance, and therefore uses Adjusted EBITDA for that purpose.
The Company’s SARs, which settle in cash, are revalued each period
based primarily upon changes in ARI’s stock price. Management
believes that eliminating the expense (income) associated with
share-based compensation and income associated with short-term
investments allows management and ARI’s investors to understand
better the operating results independent of financial changes
caused by the fluctuating price and value of the Company’s common
stock and short-term investments. Adjusted EBITDA is not a
financial measure presented in accordance with U.S. GAAP.
Accordingly, when analyzing operating performance, investors should
not consider Adjusted EBITDA in isolation or as a substitute for
net earnings, cash flows provided by operating activities or other
statements of operations or cash flow data prepared in accordance
with U.S. GAAP. The Company’s calculation of Adjusted EBITDA is not
necessarily comparable to that of other similarly titled measures
reported by other companies.
AMERICAN RAILCAR INDUSTRIES, INC.100 Clark
Street, St. Charles, Missouri
63301americanrailcar.com636.940.6000
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