Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2018
 
 
 AMERICAN RAILCAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
 
 
North Dakota
 
000-51728
 
43-1481791
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)
 
100 Clark Street
 
 
St. Charles, Missouri
 
63301
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (636) 940-6000
N/A
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2):
q
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
q
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
q
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
q
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 






Item 2.02 Results of Operations and Financial Condition.
On February 23, 2018, American Railcar Industries, Inc. (“ARI” or the “Company”) issued a press release announcing its financial results for the fourth quarter ended December 31, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference. In conjunction with the press release, ARI has posted a supplemental information presentation to its website (americanrailcar.com) and a copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein in its entirety by reference.
Limitation on Incorporation by Reference. The information furnished in this Item 2.02, including the press release attached hereto as Exhibit 99.1 and the presentation attached hereto as Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release and presentation attached as Exhibits 99.1 and 99.2 hereto, the press release and presentation contain forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary notes in the press release and presentation, respectively, regarding these forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
 
 
 
Exhibit Number
  
Description
 
 
  
Press release dated February 23, 2018 of American Railcar Industries, Inc.
 
Supplemental Information Presentation for the period ended December 31, 2017





SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. 
Date: February 23, 2018
 
 
American Railcar Industries, Inc.
 
 
 
 
 
By:
/s/ Luke M. Williams
 
 
Name:
Luke M. Williams
 
 
Title:
Senior Vice President, Chief Financial Officer and Treasurer



Exhibit


   
Exhibit 99.1
 
PRESS RELEASE
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12078456&doc=23
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
2/23/2018
 
 
  
 
 
 
 
 
 
 
  
 
 
 

AMERICAN RAILCAR INDUSTRIES, INC.
REPORTS RESULTS FOR 2017
2017 Highlights

Revenue of $476.8 million
Net earnings of $142.2 million or $7.45 per share, including $107.3 million, or $5.62 per share, tax benefit related to one-time adjustment driven by new tax law
Adjusted EBITDA of $141.5 million, or 29.7% of revenue
Lease fleet reaches 13,138 vs. prior year of 11,268
Current liquidity of $300.2 million, including $200.0 million available under revolving credit facility

St. Charles, MO, February 23, 2018 – 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.



ariearningscallslidesfin
Q4 2017 Supplemental Information Investor Contact: 636.940.6000 Website: americanrailcar.com American Railcar Industries, Inc. Exhibit 99.2


 
Forward Looking Disclaimer Safe Harbor Statement This presentation contains statements relating to our expected financial performance, objectives, long-term strategies and/or future business prospects, events and plans that are forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this presentation. 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, the impact of the Tax Cuts and Jobs Act of 2017 on our business and financial statements, our plans to address the Federal Railroad Administration (FRA) directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive) and the settlement we entered into related thereto, 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, 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, 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, customers and commodities 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 backlog, 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. Potential risks and uncertainties that could adversely affect our business and prospects include, among other things: 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 to which we may be subject now or in the future; risks relating to our compliance with the Federal Railroad Administration (FRA) directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive)Directive and the settlement related thereto, any developments related to the Directive and the settlement agreement related thereto or other regulatory actions and any costs or loss of revenue related thereto; uncertainties regarding the Tax Cuts and Jobs Act of 2017; 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 risks associated with our 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; risks relating to the ongoing transition of the management of our railcar leasing business from ARL to in-house management following completion of the ARL Sale; the impact, costs and expenses of any warranty claims to which we may be subject now or in the future; risks related to the loss changeover of day-to-day management upon the transition of executive officers; fluctuations in commodity prices, including oil and gas; the risks associated with our 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; 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 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 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 that 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 to which we may be subject 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 further support the growth of our lease fleet; 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; 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 our filings with the Securities and Exchange Commission. We expressly disclaim any duty to provide updates to any forward-looking statements made in this presentation, whether as a result of new information, future events or otherwise. 2


 
ARI – Successful and Diversified Business Model Complete life cycle solutions for the railcar industry. Railcars Components Manufacturing Railcar Repair Services Railcar Leasing 3


 
Strategic Developments • Integration of strong sales force and fleet management group • Transitioning lease fleet management gives us the opportunity to streamline processes and realize synergies with the rest of our organization • Our team is focused on listening to our customers, finding solutions, and delivering high quality service to meet their needs • Product offering includes comprehensive solutions in manufacturing, leasing and railcar services • Business model strives to optimize production plan to match market conditions and order backlog 4


 
ARI Locations Added to strategically placed sales force to cover our customers’ needs 5


 
ARI Key Railcar Markets - Two Largest Product Segments in the Railcar Industry* TANK RAILCARS • Product offerings include general service, pressurized, coiled, lined and insulated carbon steel or stainless steel railcars that are capable of transporting: • Chemicals • Ethanol • Food Products • Natural Gas Liquids • Crude Oil HOPPER RAILCARS • Product offerings include general service and specialty carbon steel or stainless steel railcars that are capable of transporting: • Plastic Pellets • Food Products • Grain • Sand • Specialty Chemical Products • Cement * Based upon backlog as of 12/31/17 per the Railway Supply Institute, Inc ARCI 2017 – 4th Quarter Reporting Statistics (issued January 2018) 6


 
7 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 389 Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 1,551 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 T otal Ra il c ar Ba c k lo g 1,050 6,530 7,060 8,560 11,732 7,081 4,240 550 3,813 1,940 ARI’s Railcar Backlog


 
8 • Flexible and labor efficient manufacturing facilities able to respond to customer delivery demands • Strategic locations near customers and major rail lines • Vertical integration from joint ventures and component manufacturing helps us to be cost competitive • Experienced team striving for excellence (safety, quality, service) • Numerous product offerings/designs that can be manufactured for direct sale or lease -10% -5% 0% 5% 10% 15% 20% 25% 30% $- $200 $400 $600 $800 $1,000 $1,200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue Operating Margin % ^ (millions) ^: Manufacturing segment revenues and operating margin % presented above include an estimate of revenue and profit, respectively, for railcars built for our lease fleet. Such revenues and profit are based on an estimated fair market value of the leased railcars as if they had been sold to a third party, less the cost to manufacture for operating margin %. Estimated revenues related to railcars built for our lease fleet are eliminated in consolidation. Broad manufacturing base allows ARI to be competitive and provide quality railcars and components Manufacturing Segment Manufacturing core competency allows ARI to be competitive and provide low cost, quality railcars and components


 
9 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 $- $20 $40 $60 $80 $100 $120 $140 $160 2012 2013 2014 2015 2016 2017 Revenue Lease Fleet(millions) • Disciplined lease strategy balancing mix of customers, commodities, acceptable market rates, and staggered lease terms • Relatively young lease fleet with low maintenance expense • Began in-house management of the railcar leasing business as a result of the ARL sale on June 1, 2017 • Added to our existing sales force and established lease fleet management group • Further integration of ARI’s business model • Further fleet growth expected to come from existing liquidity and future railcar leveraged financing(s) • Unencumbered leased railcars available to borrow against Diversifying and supplementing our business with revenue streams generated over the life of the railcar Railcar Leasing Segment


 
10 0% 5% 10% 15% 20% 25% $- $10 $20 $30 $40 $50 $60 $70 $80 $90 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Revenue Operating Margin % (millions) Supporting both ARI’s lease fleet and customers' railcar needs, while gaining valuable industry insight Railcar Services Segment Supporting both ARI’s lease fleet and customers' railcar needs, while gaining valuable industry insight TRADITIONAL REPAIR • Railcar qualifications and inspections • Light/heavy railcar repairs • Exterior and interior coatings • Cleaning • Valve replacement and testing • Wheel and axle replacement • Additional offerings for mini-shops and mobile on-site customer repairs TANK RAILCAR RETROFITTING • Tank railcar manufacturing facility offers retrofit capabilities along with traditional repair services


 
11 $808.8 $423.4 $273.6 $519.4 $711.7 $750.6 $733.0 $889.3 $639.1 $476.8 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease. $31.4 $15.5 ($27.0) $4.3 $63.8 $86.9 $99.5 $133.5 $72.7 $142.2 $78.8 $40.0 $4.5 $50.5 $149.5 $181.1 $209.0 $278.9 $188.0 $141.5 ($50.0) $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net Earnings Adj. EBITDA** ** * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit B. Consolidated Revenue ($ mil) ^ Net Earnings & Adj. EBITDA ($ mil) Our Financial History ** 2017 net earnings included a $107.3 million tax benefit related to a one-time adjustment driven by the Tax Cuts and Jobs Act of 2017. Please see reconciliation of the impact of the tax adjustments due to the Tax Cuts and Jobs Act of 2017 on net earnings and earnings per share on Exhibit A.


 
12 $10.4 $0.0 $0.0 $29.4 $185.9 $162.1 $307.7 $211.6 $90.3 $163.8 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Lease Railcar CAPEX ($ mil) # Operational CAPEX ($ mil) $42.0 $15.0 $6.1 $6.2 $20.0 $22.0 $20.1 $36.6 $23.0 $7.1 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Our Financial History (continued) # Includes effect of leased railcars in process.


 
13 $263.8 $192.0 $172.7 $260.9 $176.2 $150.5 $145.0 $167.5 $114.7 $109.0 $120.7 $132.4 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 ^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease. $72.0 $68.5 $62.6 $75.8 $54.5 $50.4 $31.3 $51.8 $36.1 $37.0 $34.6 $33.8 $35.0 $33.0 $29.4 $36.2 $22.8 $19.9 $7.7 $22.3 $10.6 $10.9 $8.9 $111.9 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 $120.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Adjusted EBITDA * Net Earnings * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit B. Net Earnings & Adj. EBITDA ($ mil) Consolidated Revenue ($ mil) ^ Quarterly Financial Comparison ** Q4-2017 net earnings included a $107.3 million tax benefit related to a one-time adjustment driven by the Tax Cuts and Jobs Act of 2017. Please see reconciliation of the impact of the tax adjustments due to the Tax Cuts and Jobs Act of 2017 on net earnings and earnings per share on Exhibit A. **


 
14 $5.0 $10.4 $11.1 $10.1 $4.4 $6.7 $4.8 $7.1 $1.6 $1.8 $1.4 $2.3 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 $48.1 $84.5 $77.7 $1.3 $20.6 $12.8 $36.0 $20.9 $55.9 $47.9 $28.6 $31.4 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 # Includes effect of leased railcars in process. Operational CAPEX ($ mil) Lease Railcar CAPEX ($ mil) # Quarterly Financial Comparison (continued)


 
15 In Thousands, except per share amounts, unaudited Exhibit A – Impact of 2017 Tax Act Reconciliation 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 ( on-GAAP) $ 0.24 $ 1.16 $ 1.83 $ 3.74 Three Months Ended December 31, Twelve Months Ended December 31, (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.


 
Exhibit A – Impact of 2017 Tax Act Reconciliation 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. 16


 
17 In Thousands, unaudited Exhibit B – Adj. EBITDA Reconciliation Annual Reconciliation 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Net earnings (loss) $ 31,382 $ 15,458 $ (27,006) $ 4,336 $ 63,823 $ 86,896 $ 99,533 $133,453 $ 72,663 $142,177 Income tax expense (benefit) 18,403 6,568 -14,795 3,866 42,022 52,440 65,074 77,291 41,537 (75,960) Interest expense 20,299 20,909 21,275 20,291 17,765 7,337 7,622 21,801 22,803 21,854 Loss on debt extinguishment - - - - 2,267 392 1,896 2,126 - - Interest income (7,835) (6,613) (3,519) (3,654) (3,003) (2,716) (2,517) (2,164) (1,785) (1,621) Depreciation 20,148 23,405 23,597 22,167 23,850 27,712 34,212 45,729 52,216 57,526 EBITDA $ 82,397 $ 59,727 $ (448) $ 47,006 $146,724 $172,061 $205,820 $278,236 $187,434 $143,976 Loss on sale of investment in India joint venture - - - - - 5,917 - - - - Expense related to stock based compensation 62 1,174 5,358 3,537 4,668 5,129 3,192 646 751 (158) Other income on short-term investment activity (3,657) (20,858) (379) - (1,863) (2,008) - - (80) (2,314) Adjusted EBITDA $ 78,802 $ 40,043 $ 4,531 $ 50,543 $149,529 $181,099 $209,012 $278,882 $188,105 $141,504 Quarterly Reconciliation Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Net earnings $ 34,976 $ 32,969 $ 29,357 $ 36,151 $ 22,792 $ 19,896 $ 7,689 $ 22,286 $ 10,568 $ 10,899 $ 8,858 $111,852 Income tax expense 20,541 19,297 16,729 20,724 13,963 12,312 4,864 10,398 6,793 8,794 6,278 (97,825) Interest expense 4,738 5,694 5,645 5,724 5,906 5,678 5,632 5,587 5,531 5,488 5,441 5,394 Loss on debt extinguishment 2,126 - - - - - - - - - - - Interest income (563) (550) (542) (509) (478) (453) (429) (425) (373) (368) (405) (475) Depreciation 10,061 10,910 12,214 12,544 12,655 12,961 13,113 13,487 13,873 14,301 14,572 14,780 EBITDA $ 71,879 $ 68,320 $ 63,403 $ 74,634 $ 54,838 $ 50,394 $ 30,869 $ 51,333 $ 36,392 $ 39,114 $ 34,744 $ 33,726 Expense (Income) related to stock appreciation rights 107 184 (762) 1,117 (311) 24 395 643 (247) (225) 246 68 Other income on short-term investment activity - - - - - - - (180) (54) (1,867) (393) - Adjusted EBITDA $ 71,986 $ 68,504 $ 62,641 $ 75,751 $ 54,527 $ 50,418 $ 31,264 $ 51,796 $ 36,091 $ 37,022 $ 34,597 $ 33,794


 
Exhibit B – Adj. EBITDA Reconciliation 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 (loss), cash flows provided by operating activities or other statements 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. 18


 
A Tradition of Industry Leadership 19