Third Quarter 2017 Highlights
American Railcar Industries, Inc. (ARI or the Company)
(NASDAQ:ARII) today reported its third quarter 2017 financial
results. Jeff Hollister, President and CEO of ARI, commented,
"While we continue to adapt to the challenging and competitive
conditions in today's railcar market, we remain committed to
manufacturing quality hopper and tank railcars and to maintaining a
disciplined approach to navigating the competitive environment that
comes along with downturns in the railcar industry. We have built
up a diversified lease fleet of approximately 12,750 railcars to
help provide a steady stream of revenues, cash flows and earnings
to weather the cycles of the new railcar market.
We have spent the past several months
transitioning the management of our leasing business in-house, and
our increased sales force and lease management teams are in place.
These experienced groups are working with our current and
prospective customers to provide a complete suite of railcar
solutions over the life cycle of the railcar to meet customers'
needs through new railcars via direct sale or lease and through
repair services. Our network of railcar services facilities
continues to support both our customers and our growing, internal
lease fleet and can perform retrofit work and larger project work
for tank railcars at our Marmaduke facility. We are confident that
the products and services we offer, along with the strong teams we
have in place at ARI, will continue to help drive our business
forward."
Third Quarter Revenue
Summary
Total consolidated revenues were $120.7 million
for the third quarter of 2017, a decrease of 17% when compared to
$145.0 million for the same period in 2016. This decrease was
due to decreased revenues in the manufacturing segment, partially
offset by increased revenues in the railcar leasing and railcar
services segments.
Manufacturing revenues were $68.4 million for
the third quarter of 2017, a decrease of 27% compared to $93.5
million for the same period in 2016. This decrease was
primarily driven by fewer railcar shipments for direct sale for
both hopper and tank railcars, a higher percentage of railcar
shipments going to our lease fleet, and more competitive pricing
during the third quarter of 2017 compared to the same period in
2016.
During the third quarter of 2017, ARI shipped
618 railcars for direct sale and 338 railcars for lease compared to
855 railcars for direct sale and 322 railcars for lease during the
same period in 2016. Railcars built for the lease fleet
represented 35% of ARI’s railcar shipments during the third quarter
of 2017 compared to 27% for the same period in 2016. This
quarterly rate is closer to our historical average than we
experienced during the first half of 2017, and is consistent with
our strategy to continue to invest in and grow our lease fleet as
demand dictates in certain railcar types. Shipments and orders for
railcars on long-term leases not only help us to maintain a steady
level of production during the manufacturing period, but also
provide a steady stream of future cash flows. Because revenues and
earnings related to leased railcars are recognized over the life of
the lease, our quarterly results may vary depending on the mix of
lease versus direct sale railcars that we ship during a given
period.
Manufacturing revenues for the third quarter of
2017, on a consolidated basis, exclude $33.3 million of revenues
related to railcars built for the Company's lease fleet compared to
$31.3 million for the same period in 2016. Revenues related
to railcars built for the Company's lease fleet increased due to a
slightly higher volume of railcars shipped for lease. 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 $33.4 million for
the third quarter of 2017, an increase of 2% over the $32.8 million
for the comparable 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. ARI had 12,749 railcars in its lease fleet as of
September 30, 2017 compared to 10,961 railcars as of
September 30, 2016.
Railcar services revenues were $18.9 million for
the third quarter of 2017, an increase of 1% compared to $18.6
million for the same period in 2016. The primary reasons for the
increase in revenue were increased demand and additional capacity
from our mobile repair operations and repair work performed at our
tank railcar manufacturing facility, partially offset by decreased
demand for tank railcar qualifications and tank railcar exterior
paint and interior linings at certain shops. Our tank railcar
manufacturing facility provides us the flexibility not only to
produce new railcars, but also to perform repair and retrofit
services in a production line set-up. The Company also saw
increased intercompany repair work, for which the revenue is
eliminated in consolidation, for our lease fleet during 2017 as
certain railcars in ARI's lease fleet were inspected, tested, and
if necessary repaired, pursuant to the FRA's Railworthiness
Directive No. 2016-01 [Revised] (the Revised Directive).
Consolidated earnings from operations were $19.5
million for the third quarter of 2017, an increase of 22% from the
$16.1 million for the same period in 2016. Consolidated operating
margins increased to 16.2% for the third quarter of 2017 compared
to 11.1% for the same period in 2016. These increases were
primarily driven by the impact of the loss contingency reserve
related to the Revised Directive recognized by the manufacturing
segment of $17.0 million during the third quarter of 2016,
partially offset by lower earnings from operations in the
manufacturing and railcar services segment during 2017 and higher
selling, general and administrative costs in 2017 compared to
2016.
Manufacturing earnings from operations on a
consolidated basis were $0.5 million for the third quarter of 2017
compared to a loss of $6.0 million for the same period in 2016. As
discussed above, the increase was primarily due to the prior period
impact of the loss contingency reserve related to the Revised
Directive recognized by the manufacturing segment of $17.0 million.
This increase was partially offset by higher costs associated with
lower production volumes and more competitive pricing for both tank
and hopper railcars. Profit on railcars built for the Company’s
lease fleet was $3.3 million and $3.2 million for the third quarter
of 2017 and 2016, respectively, and is excluded from consolidated
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 $22.0 million for both the third quarter of
2017 and the same period in 2016. The Company had an increase in
the number of railcars in our lease fleet in 2017, but this
increase was offset by increased costs due to maintenance and
services related to lease re-assignments and lower lease rates on
certain renewed leases.
Railcar services earnings from operations on a
consolidated basis were $1.7 million for the third quarter of 2017
compared to $2.8 million for the same period in 2016. This decrease
was primarily due to an unfavorable mix of work, as well as an
increase in services performed on railcars in our lease fleet
related to the Revised Directive, which is eliminated in
consolidation, partially offset by an increase in demand from our
mobile repair operations.
Selling, general and administrative expenses
were $9.3 million for the third quarter of 2017 compared to $6.6
million for the same period in 2016. This $2.7 million
increase was primarily due to increased compensation costs relating
to additional personnel hired in connection with the Company's
ongoing transition of lease fleet management in-house and
increasing our own sales and marketing team, higher legal expenses,
and the impact of a reduction in incentive compensation expenses
during the third quarter of 2016, all partially offset by decreased
consulting expenses.
Net earnings for the third quarter of 2017 were
$8.9 million, or $0.46 per share compared to $7.7 million, or $0.40
per share, in the same period in 2016. This increase was
driven largely by the prior period impact of the loss contingency
related to the Revised Directive, partially offset by lower
earnings from operations as discussed above and lower earnings from
the Company's joint ventures due to decline in industry demand.
EBITDA, adjusted to exclude share-based
compensation expense and other income related to short-term
investment activity (Adjusted EBITDA), was $34.6 million for the
third quarter of 2017 compared to $31.3 million for the comparable
quarter in 2016. The increase resulted primarily from increased
earnings from operations as discussed above, partially offset by
lower earnings from the Company's joint ventures 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.
Year-to-Date Results
Consolidated revenues for the
first nine months of 2017 were $344.4
million compared to $471.6 million for the
comparable period in 2016. The Company
shipped 1,698 direct sale railcars
and 1,485 railcars built for the Company's lease fleet
during the first nine months of 2017 compared
to 2,917 direct sale railcars and 607 railcars
built for the lease fleet during the same period in 2016.
Railcars built for the lease fleet represented 47% of
ARI's railcar shipments in the first nine months
of 2017 compared to 17% for the same period
in 2016.
Consolidated earnings from operations for the
first nine months of 2017 were $63.6
million, a decrease of 31% from $92.8
million for the comparable period in 2016. Consolidated
earnings from operations for the first nine months
of 2017 and 2016 excluded $14.2
million and $7.7 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 less
direct sale railcar shipments in the first nine months of 2017 with
47% of ARI's railcars shipped for lease during that time, combined
with 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.
Operating margins were 18.5% for the
first nine months of 2017 compared
to 19.7% for the same period of 2016.
Net earnings for the first nine months
of 2017 were $30.3 million, or $1.59 per
share compared to $50.4 million, or $2.58 per share,
for the comparable period in 2016, primarily due to decreased
earnings from operations as discussed above, lower earnings from
ARI's joint ventures due to a decline in industry demand, both
partially offset by an increase in other income driven by gains on
sales of investments.
Adjusted EBITDA was $107.7 million for
the first nine months of 2017, a decrease
of $28.5 million from $136.2 million for the
comparable period 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 in the first nine months of 2017 of $91.1
million. As of September 30, 2017, ARI had working
capital of $161.4 million, including $106.2 million of cash and
cash equivalents.
As of September 30, 2017, the Company had
$552.0 million of debt outstanding, net of unamortized debt
issuance costs of $4.7 million, and borrowing availability of
$200.0 million under a revolving loan.
The Company paid dividends totaling $22.9
million during the first nine months of 2017. On October 27,
2017, 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 December 8, 2017 that will be paid on
December 22, 2017.
The Company has not repurchased any shares of its common stock
thus far in 2017 under its stock repurchase program. Board
authorization for approximately $164.0 million remains available
for further stock repurchases.
Backlog
ARI's backlog as of September 30, 2017 was
2,683 railcars with an estimated market value of $248.0
million. Of the total backlog, we currently expect 657
railcars, or 25%, having an estimated market value of $62.9
million, will be placed into the Company's lease fleet.
Conference Call and Webcast
ARI will host a webcast and conference call on
Tuesday, October 31, 2017 at 10:00 am (Eastern Time) to
discuss the Company’s third 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: our plans to continue to
transition the management of our lease fleet from ARL to in-house
and terminate our contractual agreements with ARL, various
estimates we have made in preparing our financial statements,
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, revenues, profit margin, capacity, financial condition,
and results of operations, trends related to shipments for direct
sale versus lease, our backlog and any implication that our backlog
may be indicative of our future revenues, our strategic objectives
and long-term strategies, our results of operations, financial
condition and the sufficiency of our capital resources, our capital
expenditure plans, short- and long-term liquidity needs, ability to
service our current debt obligations and future financing plans,
our Stock Repurchase Program, anticipated benefits regarding the
growth of our leasing business, the mix of railcars in our lease
fleet and our lease fleet financings, anticipated production
schedules for our products and the anticipated production schedules
of our joint ventures, 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; risks relating to our compliance with
the FRA directive released September 30, 2016 and subsequently
revised and superseded on November 18, 2016 (the Revised Directive)
and the settlement agreement related thereto, any developments
related to the Revised Directive and the settlement agreement
related thereto and any costs or loss of revenue related thereto;
risks relating to the ongoing transition of the management of our
railcar leasing business from ARL to in-house management following
completion of the sale of ARL; fluctuations in commodity prices,
including oil and gas; the impact, costs and expenses of any
warranty claims we may be subject to now or in the future; the
risks associated with ongoing compliance with transportation,
environmental, health, safety, and regulatory laws and regulations,
which may be subject to change; 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; our ability to recruit, retain and
train qualified personnel; our ability to manage overhead and
variations in production rates; the impact of any economic
downturn, adverse market conditions or restricted credit markets;
our reliance upon a small number of customers that represent a
large percentage of our revenues and backlog; fluctuations in the
costs of raw materials, including steel and railcar components, and
delays in the delivery of such raw materials and components;
fluctuations in the supply of components and raw materials we use
in railcar manufacturing; 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 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;
the risks related to our and our subsidiaries' indebtedness and
compliance with covenants contained in our and our subsidiaries'
financing arrangements 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) |
|
|
|
|
|
September 30, 2017 |
|
December 31, 2016 |
|
(unaudited) |
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
106,176 |
|
|
$ |
178,571 |
|
Restricted cash |
16,541 |
|
|
16,714 |
|
Short-term investments—available for sale securities |
— |
|
|
8,958 |
|
Accounts
receivable, net |
34,091 |
|
|
39,727 |
|
Accounts
receivable, due from related parties |
1,263 |
|
|
4,790 |
|
Inventories, net |
72,675 |
|
|
75,028 |
|
Prepaid
expenses and other current assets |
9,019 |
|
|
8,623 |
|
Total
current assets |
239,765 |
|
|
332,411 |
|
Property, plant and
equipment, net |
165,919 |
|
|
177,051 |
|
Railcars on lease,
net |
1,014,238 |
|
|
908,010 |
|
Income Tax
Receivable |
13,525 |
|
|
234 |
|
Goodwill |
7,169 |
|
|
7,169 |
|
Investments in and
loans to joint ventures |
23,417 |
|
|
26,332 |
|
Other assets |
3,725 |
|
|
5,043 |
|
Total
assets |
$ |
1,467,758 |
|
|
$ |
1,456,250 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
25,408 |
|
|
$ |
29,314 |
|
Accounts
payable, due to related parties |
18 |
|
|
3,252 |
|
Accrued
expenses, including loss contingency of $7,359 and $10,127 at
September 30, 2017 and December 31, 2016, respectively |
15,480 |
|
|
15,411 |
|
Accrued
income taxes payable |
— |
|
|
7,660 |
|
Accrued
compensation |
11,807 |
|
|
11,628 |
|
Short-term debt, including current portion of long-term debt |
25,649 |
|
|
25,588 |
|
Total
current liabilities |
78,362 |
|
|
92,853 |
|
Long-term debt, net of
unamortized debt issuance costs of $4,701 and $4,863 at September
30, 2017 and December 31, 2016, respectively |
526,395 |
|
|
545,392 |
|
Deferred tax
liability |
287,788 |
|
|
252,943 |
|
Pension and
post-retirement liabilities |
8,652 |
|
|
8,648 |
|
Other liabilities,
including loss contingency of $1,936 and $2,161 at September 30,
2017 and December 31, 2016, respectively |
7,688 |
|
|
6,144 |
|
Total
liabilities |
908,885 |
|
|
905,980 |
|
Stockholders’
equity: |
|
|
|
Common stock, $0.01 par
value, 50,000,000 shares authorized, 19,083,878 shares outstanding
as of both September 30, 2017 and December 31, 2016 |
213 |
|
|
213 |
|
Additional paid-in
capital |
239,609 |
|
|
239,609 |
|
Retained Earnings |
410,235 |
|
|
402,810 |
|
Accumulated other
comprehensive loss |
(5,153 |
) |
|
(6,331 |
) |
Treasury Stock |
(86,031 |
) |
|
(86,031 |
) |
Total
stockholders’ equity |
558,873 |
|
|
550,270 |
|
Total
liabilities and stockholders’ equity |
$ |
1,467,758 |
|
|
$ |
1,456,250 |
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except per share amounts,
unaudited) |
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues: |
|
|
|
|
|
|
|
Manufacturing
(including revenues from affiliates of $188 and $325 for the three
and nine months ended September 30, 2017, respectively, and $40 and
$816 for the three and nine months ended September 30, 2016,
respectively) |
$ |
68,442 |
|
|
$ |
93,546 |
|
|
$ |
184,255 |
|
|
$ |
314,886 |
|
Railcar leasing
(including revenues from affiliates of $231 and $678 for the three
and nine months ended September 30, 2017, respectively, and $28 for
both the three and nine months ended September 30, 2016) |
33,440 |
|
|
32,798 |
|
|
100,992 |
|
|
98,775 |
|
Railcar services
(including revenues from affiliates of $1,156 and $11,729 for
the three and nine months ended September 30, 2017, respectively,
and $5,933 and $21,176 for the three and nine months ended
September 30, 2016, respectively) |
18,864 |
|
|
18,618 |
|
|
59,200 |
|
|
57,965 |
|
Total
revenues |
120,746 |
|
|
144,962 |
|
|
344,447 |
|
|
471,626 |
|
Cost of
revenues: |
|
|
|
|
|
|
|
Manufacturing |
(64,235 |
) |
|
(79,671 |
) |
|
(169,915 |
) |
|
(263,389 |
) |
Other
operating (loss) income |
(924 |
) |
|
(16,973 |
) |
|
140 |
|
|
(16,973 |
) |
Railcar leasing |
(10,856 |
) |
|
(10,577 |
) |
|
(34,532 |
) |
|
(31,108 |
) |
Railcar services |
(16,023 |
) |
|
(15,131 |
) |
|
(49,559 |
) |
|
(45,788 |
) |
Total
cost of revenues |
(92,038 |
) |
|
(122,352 |
) |
|
(253,866 |
) |
|
(357,258 |
) |
Gross
profit |
28,708 |
|
|
22,610 |
|
|
90,581 |
|
|
114,368 |
|
Selling, general and
administrative |
(9,263 |
) |
|
(6,583 |
) |
|
(27,084 |
) |
|
(21,837 |
) |
Net gains on
disposition of leased railcars |
102 |
|
|
58 |
|
|
115 |
|
|
225 |
|
Earnings from operations |
19,547 |
|
|
16,085 |
|
|
63,612 |
|
|
92,756 |
|
Interest income
(including income from related parties of $280 and $922 for the
three and nine months ended September 30, 2017, respectively, and
$404 and $1,288 for the three and nine months ended September 30,
2016) |
405 |
|
|
429 |
|
|
1,146 |
|
|
1,360 |
|
Interest expense |
(5,441 |
) |
|
(5,632 |
) |
|
(16,460 |
) |
|
(17,216 |
) |
Other income |
393 |
|
|
57 |
|
|
2,314 |
|
|
58 |
|
Earnings from joint
ventures |
232 |
|
|
1,614 |
|
|
1,578 |
|
|
4,558 |
|
Earnings
before income taxes |
15,136 |
|
|
12,553 |
|
|
52,190 |
|
|
81,516 |
|
Income tax expense |
(6,278 |
) |
|
(4,864 |
) |
|
(21,865 |
) |
|
(31,139 |
) |
Net earnings |
$ |
8,858 |
|
|
$ |
7,689 |
|
|
$ |
30,325 |
|
|
$ |
50,377 |
|
Net earnings per common
share—basic and diluted |
$ |
0.46 |
|
|
$ |
0.40 |
|
|
$ |
1.59 |
|
|
$ |
2.58 |
|
Weighted average common
shares outstanding—basic and diluted |
19,084 |
|
|
19,397 |
|
|
19,084 |
|
|
19,524 |
|
Cash dividends declared
per common share |
$ |
0.40 |
|
|
$ |
0.40 |
|
|
$ |
1.20 |
|
|
$ |
1.20 |
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
SEGMENT DATA |
(In thousands, unaudited) |
|
|
Three Months Ended September 30,
2017 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss)from Operations |
|
(in thousands) |
Manufacturing (1) |
$ |
68,442 |
|
|
$ |
33,625 |
|
|
$ |
102,067 |
|
|
$ |
3,733 |
|
Railcar leasing |
33,440 |
|
|
— |
|
|
33,440 |
|
|
19,029 |
|
Railcar services |
18,864 |
|
|
976 |
|
|
19,840 |
|
|
1,941 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(4,603 |
) |
Eliminations |
— |
|
|
(34,601 |
) |
|
(34,601 |
) |
|
(553 |
) |
Total Consolidated |
$ |
120,746 |
|
|
$ |
— |
|
|
$ |
120,746 |
|
|
$ |
19,547 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
2016 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss)from Operations |
|
(in thousands) |
Manufacturing (1) |
$ |
93,546 |
|
|
$ |
31,283 |
|
|
$ |
124,829 |
|
|
$ |
(2,773 |
) |
Railcar leasing |
32,798 |
|
|
— |
|
|
32,798 |
|
|
19,320 |
|
Railcar services |
18,618 |
|
|
167 |
|
|
18,785 |
|
|
2,797 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(2,649 |
) |
Eliminations |
— |
|
|
(31,450 |
) |
|
(31,450 |
) |
|
(610 |
) |
Total Consolidated |
$ |
144,962 |
|
|
$ |
— |
|
|
$ |
144,962 |
|
|
$ |
16,085 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
2017 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss)from Operations |
|
(in thousands) |
Manufacturing (1) |
$ |
184,255 |
|
|
$ |
149,171 |
|
|
$ |
333,426 |
|
|
$ |
20,183 |
|
Railcar leasing |
100,992 |
|
|
— |
|
|
100,992 |
|
|
56,529 |
|
Railcar services |
59,200 |
|
|
3,191 |
|
|
62,391 |
|
|
6,986 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(13,828 |
) |
Eliminations |
— |
|
|
(152,362 |
) |
|
(152,362 |
) |
|
(6,258 |
) |
Total Consolidated |
$ |
344,447 |
|
|
$ |
— |
|
|
$ |
344,447 |
|
|
$ |
63,612 |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
2016 |
|
Revenues |
|
|
|
External |
|
Intersegment |
|
Total |
|
Earnings (Loss)from Operations |
|
(in thousands) |
Manufacturing (1) |
$ |
314,886 |
|
|
$ |
64,180 |
|
|
$ |
379,066 |
|
|
$ |
35,451 |
|
Railcar leasing |
98,775 |
|
|
— |
|
|
98,775 |
|
|
59,232 |
|
Railcar services |
57,965 |
|
|
1,735 |
|
|
59,700 |
|
|
9,364 |
|
Corporate |
— |
|
|
— |
|
|
— |
|
|
(11,598 |
) |
Eliminations |
— |
|
|
(65,915 |
) |
|
(65,915 |
) |
|
307 |
|
Total Consolidated |
$ |
471,626 |
|
|
$ |
— |
|
|
$ |
471,626 |
|
|
$ |
92,756 |
|
(1)— |
The earnings (loss)
from operations for the manufacturing segment include the impact of
the loss contingency reserve related to the FRA Revised Directive,
which is recognized by the manufacturing segment. The impact of the
loss contingency reserve was $(0.9) million and 0.1 million for the
three and nine months ended September 30, 2017, respectively, and
$(17.0) million for both the three and nine months ended September
30, 2016. |
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(In thousands, unaudited) |
|
|
Nine Months Ended |
|
September 30, |
|
2017 |
|
2016 |
Operating
activities: |
|
|
|
Net
earnings |
$ |
30,325 |
|
|
$ |
50,377 |
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities: |
|
|
|
Depreciation |
42,746 |
|
|
38,729 |
|
Amortization of deferred costs |
377 |
|
|
379 |
|
Gain on
disposal of property, plant, equipment and leased railcars |
(113 |
) |
|
(16 |
) |
Earnings
from joint ventures |
(1,578 |
) |
|
(4,558 |
) |
Provision
for deferred income taxes |
34,862 |
|
|
19,342 |
|
Items
related to investing activities: |
|
|
|
Realized
gain on short-term investments - available for sale securities |
(2,216 |
) |
|
— |
|
Dividends
received from short-term investments |
— |
|
|
(50 |
) |
Changes
in operating assets and liabilities: |
|
|
|
Accounts
receivable, net |
5,741 |
|
|
4,414 |
|
Accounts
receivable, due from related parties |
3,542 |
|
|
3,520 |
|
Income
taxes receivable |
(14,194 |
) |
|
1,055 |
|
Inventories, net |
2,444 |
|
|
12,248 |
|
Prepaid
expenses and other current assets |
519 |
|
|
(1,327 |
) |
Accounts
payable |
(3,933 |
) |
|
1,208 |
|
Accounts
payable, due to related parties |
(3,233 |
) |
|
(2,582 |
) |
Accrued
expenses and taxes |
(7,432 |
) |
|
23,572 |
|
Other |
3,239 |
|
|
2,389 |
|
Net cash provided by
operating activities |
91,096 |
|
|
148,700 |
|
Investing
activities: |
|
|
|
Purchases
of property, plant and equipment |
(4,812 |
) |
|
(16,021 |
) |
Grant
Proceeds |
— |
|
|
75 |
|
Capital
expenditures - leased railcars |
(132,388 |
) |
|
(69,387 |
) |
Proceeds
from the disposal of property, plant, equipment and leased
railcars |
417 |
|
|
879 |
|
Purchase
of short-term investments - available for sale securities |
— |
|
|
(8,750 |
) |
Proceeds
from sale of short-term investments - available for sale
securities |
10,535 |
|
|
— |
|
Proceeds
from repayments of loans by joint ventures |
4,430 |
|
|
4,430 |
|
Net cash used in
investing activities |
(121,818 |
) |
|
(88,774 |
) |
Financing
activities: |
|
|
|
Repayments of debt |
(19,101 |
) |
|
(119,288 |
) |
Change in
restricted cash related to long-term debt |
173 |
|
|
159 |
|
Stock
repurchases |
— |
|
|
(17,402 |
) |
Payment
of common stock dividends |
(22,901 |
) |
|
(23,373 |
) |
Debt
issuance costs |
— |
|
|
(13 |
) |
Net cash used in
financing activities |
(41,829 |
) |
|
(159,917 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
156 |
|
|
(24 |
) |
Decrease in cash and
cash equivalents |
(72,395 |
) |
|
(100,015 |
) |
Cash and cash
equivalents at beginning of period |
178,571 |
|
|
298,064 |
|
Cash and cash
equivalents at end of period |
$ |
106,176 |
|
|
$ |
198,049 |
|
AMERICAN RAILCAR INDUSTRIES, INC. AND
SUBSIDIARIES |
RECONCILIATION OF NET EARNINGS TO EBITDA AND
ADJUSTED EBITDA |
(In thousands, unaudited) |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September
30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net earnings |
$ |
8,858 |
|
|
$ |
7,689 |
|
|
$ |
30,325 |
|
|
$ |
50,377 |
|
Income tax expense |
6,278 |
|
|
4,864 |
|
|
21,865 |
|
|
31,139 |
|
Interest expense |
5,441 |
|
|
5,632 |
|
|
16,460 |
|
|
17,216 |
|
Interest income |
(405 |
) |
|
(429 |
) |
|
(1,146 |
) |
|
(1,360 |
) |
Depreciation |
14,572 |
|
|
13,113 |
|
|
42,746 |
|
|
38,729 |
|
EBITDA |
$ |
34,744 |
|
|
$ |
30,869 |
|
|
$ |
110,250 |
|
|
$ |
136,101 |
|
Expense (Income)
related to stock appreciation rights compensation |
246 |
|
|
395 |
|
|
(226 |
) |
|
108 |
|
Other Income on
short-term investment activity |
$ |
(393 |
) |
|
— |
|
|
$ |
(2,314 |
) |
|
— |
|
Adjusted EBITDA |
$ |
34,597 |
|
|
$ |
31,264 |
|
|
$ |
107,710 |
|
|
$ |
136,209 |
|
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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