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): May 1, 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 May 1, 2018, American Railcar Industries, Inc. (“ARI” or the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2018. 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 May 1, 2018 of American Railcar Industries, Inc. announcing financial results for the first quarter of 2018
 
Supplemental Information Presentation for the period ended March 31, 2018





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: May 1, 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=12218917&doc=22
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
May 1, 2018
 
 
  
 
  
 
 
 
 
 
  
 
  
 
 
 
 
 
  
 
  
 

AMERICAN RAILCAR INDUSTRIES, INC.
REPORTS FIRST QUARTER 2018 RESULTS
First Quarter 2018 Highlights
 
Quarterly revenue of $116.2 million
Quarterly net earnings of $13.0 million, or $0.68 per share
Quarterly adjusted EBITDA of $36.9 million, or 31.7% of revenue
Lease fleet of 13,326 railcars as of March 31, 2018 vs. 11,869 railcars as of March 31, 2017, with 195 railcars added during the first quarter
Current liquidity of $300.1 million, including $200.0 million available under revolving credit facility
St. Charles, MO, May 1, 2018 - American Railcar Industries, Inc. (ARI or the Company) (NASDAQ: ARII) today reported its first quarter 2018 financial results. John O'Bryan, President and CEO of ARI, commented, "The North American railcar market remains challenging. While the number of railcars in storage has continued to decrease, an oversupply remains in the marketplace of most railcar types, including covered hoppers and tanks, which continues to impact demand and suppress pricing. On a positive note, inquiry activity increased during the first quarter of 2018, and while customers are carefully making decisions based on economic trends, we are slowly seeing these higher inquiry levels turn into firm orders. As further evidence of this slight uptick, the industry reported quarterly orders of over 10,000 railcars for only the second time since the second quarter of 2015. To align with market conditions, we remain focused on our long-term view and our disciplined approaches to aligning production with industry demand, investing in our lease fleet, and managing costs.
We continue to work closely with our customers to understand and meet their needs. With our diversified lease fleet of over 13,300 railcars and our railcar services network providing a wide array of services over the life of a railcar, we are well-positioned and eager to identify and deliver solutions for the railcar industry.”
First Quarter Revenue Summary
Total consolidated revenues were $116.2 million for the first quarter of 2018, an increase of 1% when compared to $114.7 million for the same period in 2017. This increase was primarily driven by increased revenues in the manufacturing segment and a slight increase in the railcar leasing segment, partially offset by decreased revenues in the railcar services segment.
Manufacturing revenues were $64.1 million for the first quarter of 2018, an increase of 6% compared to $60.7 million in the first quarter of 2017. This increase was primarily driven by increased railcar shipments for direct sale for both hopper and tank railcars, partially offset by lower selling prices due to the mix of types of hopper and tank railcars shipped during the first quarter of 2018 compared to the first quarter of 2017 and more competitive pricing across the North American railcar market.
During the first quarter of 2018, ARI shipped 616 railcars for direct sale and 195 railcars for lease compared to 549 railcars for direct sale and 602 railcars for lease during the same period in 2017. Railcars built for the lease fleet represented 24% of ARI’s railcar shipments during the first quarter of 2018 compared to 52% for the same period in 2017. Due to the prevalence of lower lease rates in today's North American railcar market, the Company is maintaining a disciplined approach to investing in its lease fleet. This approach, coupled with lower demand, led to a lower rate of lease fleet shipments during the first quarter of 2018 compared to the same period of 2017. Because revenues and earnings related to leased railcars are recognized over the life of the lease based on the terms of the contract, 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 first quarter of 2018, on a consolidated basis, exclude $20.5 million of revenues related to railcars built for the Company's lease fleet compared to $60.1 million for the same period in 2017. This decrease in revenues related to railcars built for our lease fleet was due to lower quantities of both tank and hopper railcars shipped for lease, as discussed above. These 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.
Railcar leasing revenues were $34.1 million for the first quarter of 2018, an increase of 1% compared to $33.8 million for the first quarter of 2017. 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 for both new railcars for lease and lease renewals compared to the same period in 2017. ARI had 13,326 railcars in its lease fleet as of March 31, 2018 compared to 11,869 railcars as of March 31, 2017.
Railcar services revenues were $18.0 million for the first quarter of 2018, a decrease of 11% compared to $20.1 million for the same period in 2017. This decrease was primarily due to overall decreased demand and lower repair revenue at the Company's tank railcar manufacturing facility as it is ramping up activity on retrofit projects. These railcar services revenues excluded intercompany revenue for lease fleet reassignment work for the Company's leased railcars that is eliminated in consolidation.
Consolidated earnings from operations were $21.0 million for the first quarter of 2018, a decrease of 4% from $21.9 million for the same period in 2017. Consolidated operating margins decreased to 18.1% for the first quarter of 2018 compared to 19.1% for the same period in 2017. These decreases were primarily driven by lower earnings from operations in the manufacturing and railcar leasing segments.
Manufacturing earnings from operations on a consolidated basis were $3.0 million for the first quarter of 2018 down 1% from the same period in 2017. The decrease in these earnings was primarily due to more competitive pricing and higher costs associated with lower production volumes, both partially offset by an increase in railcar shipments for direct sale. Profit on railcars built for the Company’s lease fleet was $1.4 million and $6.1 million for the first quarter of 2018 and 2017, 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. Profit on railcars built for the Company’s lease fleet decreased due to fewer railcars built for the Company's lease fleet during the first quarter of 2018.
Railcar leasing earnings from operations on a consolidated basis were $20.5 million for the first quarter of 2018 compared to $21.5 million for the same period in 2017. This decrease was primarily due to increased maintenance costs and lower lease rates on certain renewals and reassignments.
Railcar services earnings from operations on a consolidated basis were $1.3 million for the first quarter of 2018 compared to $1.7 million for the same period in 2017. This decrease was primarily due to lower demand as well as an increase in services performed on railcars in the Company's lease fleet, which is eliminated in consolidation.
Selling, general and administrative expenses were $8.6 million for the first quarter of 2018 compared to $8.8 million for the same period in 2017. This decrease was primarily due to decreased bad debt expense and stock based compensation. Additionally, due to the sale of ARL in 2017, sales commissions have decreased. These decreases were all partially offset by increased compensation costs relating to additional staff hired to increase the sales and marketing team and other supporting groups in connection with transitioning lease fleet management in-house.
Net earnings for the first quarter of 2018 were $13.0 million, or $0.68 per share, compared to $10.6 million, or $0.55 per share, in the same period in 2017. This increase was driven largely by lower income tax expense as a result of the Tax Cuts and Jobs Act, which was enacted in December 2017 and decreased the federal tax rate from 35% to 21%, as well as increased earnings from the Company's joint ventures, partially offset by a decrease in earnings from operations as discussed above.
EBITDA, adjusted to exclude share-based compensation expense and other income related to short-term investment activity (Adjusted EBITDA), was $36.9 million for the first quarter of 2018 compared to $36.1 million for the comparable quarter in 2017. This increase resulted primarily from increased earnings from joint ventures during the first quarter of 2018 compared to the same period in 2017. 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 three months of 2018 of $30.4 million. As of March 31, 2018, ARI had working capital of $169.6 million, including $100.1 million of cash and cash equivalents.





As of March 31, 2018, the Company had $539.3 million of debt outstanding, net of unamortized debt issuance costs of $4.6 million. The Company had borrowing availability of $200.0 million under a revolving loan.
The Company paid dividends totaling $7.6 million during the first three months of 2018. On April 27, 2018, 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 June 13, 2018 that will be paid on June 27, 2018.
The Company has not repurchased any shares of its common stock thus far in 2018 under its stock repurchase program. Board authorization for approximately $164.0 million remains available for further stock repurchases.
Backlog
ARI's backlog as of March 31, 2018 was 3,144 railcars with an estimated market value of $279.9 million. Of the total backlog, we currently expect 259 railcars, or 8%, having an estimated market value of $25.3 million, will be placed into the Company's lease fleet.
Conference Call and Webcast
ARI will host a webcast and conference call on Tuesday, May 1, 2018 at 10:00 am (Eastern Time) to discuss the Company’s first quarter 2018 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, 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; the risks associated with ongoing compliance with transportation, environmental, health, safety, and regulatory laws and regulations, which may be subject to change; the impact, costs and expenses of any warranty claims we may be subject to now or in the future; our ability to recruit, retain and train qualified personnel; 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; the impact of policies and priorities of certain governments or other issues that may cause trade and markets conditions that result in fluctuations in the supply and costs of raw materials, including steel and railcar components, and delays in the delivery of such raw materials and components and their impact on demand and margin; 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 manage overhead and variations in production rates; 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; 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; uncertainties regarding the Tax Cuts and Jobs Act of 2017; 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; risks related to the loss of executive officers; 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)
 
 
March 31,
2018
 
December 31,
2017
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
100,089

 
$
100,244

Restricted cash
16,496

 
16,640

Accounts receivable, net
32,816

 
43,804

Accounts receivable, due from related parties
1,199

 
778

Income taxes receivable
19,171

 
19,115

Inventories, net
73,216

 
54,147

Prepaid expenses and other current assets
6,881

 
6,464

Total current assets
249,868

 
241,192

Property, plant and equipment, net
157,455

 
162,535

Railcars on lease, net
1,044,538

 
1,036,414

Income tax receivable
14

 
14

Goodwill
7,169

 
7,169

Investments in and loans to joint ventures
22,417

 
22,571

Other assets
3,199

 
3,531

Total assets
$
1,484,660

 
$
1,473,426

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
30,804

 
$
21,275

Accounts payable, due to related parties
6

 
41

Accrued expenses, including loss contingency of $6,481 and $6,548 at March 31, 2018 and December 31, 2017, respectively
13,904

 
12,787

Accrued compensation
10,088

 
12,874

Short-term debt, including current portion of long-term debt
25,493

 
25,590

Total current liabilities
80,295

 
72,567

Long-term debt, net of unamortized debt issuance costs of $4,593 and $4,647 at March 31, 2018 and December 31, 2017, respectively
513,805

 
520,024

Deferred tax liability
199,102

 
194,084

Pension and post-retirement liabilities
7,858

 
8,099

Other liabilities, including loss contingency of $2,293 and $2,283 at March 31, 2018 and December 31, 2017, respectively
14,506

 
15,118

Total liabilities
815,566

 
809,892

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 50,000,000 shares authorized, 19,083,878 shares outstanding as of both March 31, 2018 and December 31, 2017
213

 
213

Additional paid-in capital
239,609

 
239,609

Retained Earnings
520,478

 
514,453

Accumulated other comprehensive loss
(5,175
)
 
(4,710
)
Treasury Stock
(86,031
)
 
(86,031
)
Total stockholders’ equity
669,094

 
663,534

Total liabilities and stockholders’ equity
$
1,484,660

 
$
1,473,426







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 
 
Three Months Ended
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Manufacturing
$
64,141

 
$
60,726

Railcar leasing (including revenues from affiliates of $412 and $224 for the three months ended March 31, 2018 and 2017, respectively)
34,121

 
33,835

Railcar services (including revenues from affiliates of $2 and $6,147 for the three months ended March 31, 2018 and 2017, respectively)
17,976

 
20,120

Total revenues
116,238

 
114,681

Cost of revenues:
 
 
 
Manufacturing
(58,183
)
 
(54,559
)
Other operating (loss) income
(13
)
 
31

Railcar leasing
(12,993
)
 
(12,059
)
Railcar services
(15,576
)
 
(17,390
)
Total cost of revenues
(86,765
)
 
(83,977
)
Gross profit
29,473

 
30,704

Selling, general and administrative
(8,613
)
 
(8,802
)
Net gains on disposition of leased railcars
181

 
13

Earnings from operations
21,041

 
21,915

Interest income (including income from related parties of $220 and $336 for the three months ended March 31, 2018 and 2017, respectively)
419

 
373

Interest expense
(5,340
)
 
(5,531
)
Other income

 
54

Earnings from joint ventures
1,343

 
550

Earnings before income taxes
17,463

 
17,361

Income tax expense
(4,472
)
 
(6,793
)
Net earnings
$
12,991

 
$
10,568

Net earnings per common share—basic and diluted
$
0.68

 
$
0.55

Weighted average common shares outstanding—basic and diluted
19,084

 
19,084

Cash dividends declared per common share
$
0.40

 
$
0.40







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
SEGMENT DATA
(In thousands, unaudited)

 
Three Months Ended March 31, 2018
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
64,141

 
$
20,775

 
$
84,916

 
$
4,408

Railcar leasing
34,121

 

 
34,121

 
17,423

Railcar services
17,976

 
2,104

 
20,080

 
1,696

Corporate

 

 

 
(3,778
)
Eliminations

 
(22,879
)
 
(22,879
)
 
1,292

Total Consolidated
$
116,238

 
$

 
$
116,238

 
$
21,041

 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
60,726

 
$
60,104

 
$
120,830

 
$
9,151

Railcar leasing
33,835

 

 
33,835

 
18,810

Railcar services
20,120

 
332

 
20,452

 
1,716

Corporate

 

 

 
(4,272
)
Eliminations

 
(60,436
)
 
(60,436
)
 
(3,490
)
Total Consolidated
$
114,681

 
$

 
$
114,681

 
$
21,915

 
 
 
 
 
 
 
 






AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Three Months Ended
 
March 31,
 
2018
 
2017
Operating activities:
 
 
 
Net earnings
$
12,991

 
$
10,568

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
14,931

 
13,873

Amortization of deferred costs
125

 
125

Gain on disposal of property, plant, equipment and leased railcars
(181
)
 
(13
)
Earnings from joint ventures
(1,343
)
 
(550
)
Provision for deferred income taxes
4,790

 
12,780

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
14,670

 
14,310

Accounts receivable, due from related parties
(435
)
 
(1,680
)
Income taxes receivable
(60
)
 
(52
)
Inventories, net
(21,918
)
 
(3,770
)
Prepaid expenses and other current assets
(413
)
 
52

Accounts payable
9,542

 
897

Accounts payable, due to related parties
(35
)
 
311

Accrued expenses and taxes
(1,665
)
 
(5,482
)
Other
(561
)
 
1,050

Net cash provided by operating activities
30,438

 
42,419

Investing activities:
 
 
 
Purchases of property, plant and equipment
(802
)
 
(1,550
)
Grant Proceeds

 
100

Capital expenditures - leased railcars
(18,068
)
 
(55,909
)
Proceeds from the disposal of property, plant, equipment and leased railcars
743

 
73

Proceeds from repayments of loans by joint ventures
1,477

 
1,477

Net cash used in investing activities
(16,650
)
 
(55,809
)
Financing activities:
 
 
 
Repayments of debt
(6,371
)
 
(6,310
)
Payment of common stock dividends
(7,633
)
 
(7,633
)
Net cash used in financing activities
(14,004
)
 
(13,943
)
Effect of exchange rate changes on cash
(83
)
 
4

Net decrease in cash, cash equivalents, and restricted cash
(299
)
 
(27,329
)
Cash, cash equivalents, and restricted cash at beginning of period
116,884

 
195,285

Cash, cash equivalents, and restricted cash at end of period
$
116,585

 
$
167,956

 
 
 
 
Balance Sheet Reconciliation:
 
 
 
Cash and cash equivalents
$
100,089

 
$
151,246

Restricted cash
16,496

 
16,710

Total cash, cash equivalents and restricted cash as presented above
$
116,585

 
$
167,956







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS TO EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
 
 
Three Months Ended 
 March 31,
 
2018
 
2017
Net earnings
$
12,991

 
$
10,568

Income tax expense
4,472

 
6,793

Interest expense
5,340

 
5,531

Interest income
(419
)
 
(373
)
Depreciation
14,931

 
13,873

EBITDA
$
37,315

 
$
36,392

Income related to stock appreciation rights compensation
(412
)
 
(247
)
Other income on short-term investment activity
$

 
(54
)
Adjusted EBITDA
$
36,903

 
$
36,091


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.



ariiex-992_q1x2018
Q1 2018 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: the impact of the Tax Cuts and Jobs Act of 2017 on our business and financial statements, 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, 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, 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 risks associated with our ongoing compliance with transportation, environmental, health, safety, and regulatory laws and regulations, which may be subject to change; the impact, costs and expenses of any warranty claims to which we may be subject now or in the future; our ability to recruit, retain and train qualified personnel; 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; the impact of policies and priorities of certain governments or other issues that may cause trade and market conditions that result in fluctuations in the supply and costs of raw materials, including steel and railcar components, and delays in the delivery of such raw materials and components and their impact on demand and margin; 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 manage overhead and variations in production rates; 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; 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; uncertainties regarding the Tax Cuts and Jobs Act of 2017; 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; risks related to the loss of executive officers; 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; 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


 
ARI Locations Added to strategically placed sales force to cover our customers’ needs 4


 
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 3/31/18 per the Railway Supply Institute, Inc ARCI 2018 – 1st Quarter Reporting Statistics (issued April 2018) 5


 
6 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Mar 2018 Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 389 259 Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 1,551 2,885 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 To ta l R ai lc ar B ac kl og 1,050 6,530 7,060 8,560 11,732 7,081 4,240 550 3,813 1,940 3,144 ARI’s Railcar Backlog


 
7 • 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 Q1 2018 TTM 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


 
8 - 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 Q1-18 TTM 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 as demand dictates 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


 
9 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 Q1-18 TTM 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


 
10 $808.8 $423.4 $273.6 $519.4 $711.7 $750.6 $733.0 $889.3 $639.1 $476.8 $478.4 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM^ 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 $34.9 $37.3 $78.8 $40.0 $4.5 $50.5 $149.5 $181.1 $107.8 $278.9 $188.0 $141.5 $142.3 ($50.0) $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM Net Earnings Adj. EBITDA** **** * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. Consolidated Revenue ($ mil) ^ Net Earnings & Adj. EBITDA ($ mil) Our Financial History ** 2017 and Q1 2018 TTM net earnings exclude 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 B.


 
11 $10.4 $0.0 $0.0 $29.4 $185.9 $162.1 $307.7 $211.6 $90.3 $163.8 $125.9 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM Lease Railcar CAPEX ($ mil) # Operational CAPEX ($ mil) $42.0 $15.0 $6.1 $6.2 $20.0 $22.0 $20.1 $36.6 $23.0 $7.2 $6.5 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM Our Financial History (continued) # Includes effect of leased railcars in process.


 
12 $192.0 $172.7 $260.9 $176.2 $150.5 $145.0 $167.5 $114.7 $109.0 $120.7 $132.4 $116.2 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 ^ 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. $35.0 $33.0 $29.4 $36.2 $22.8 $19.9 $7.7 $22.3 $10.6 $10.9 $8.9 $4.6 $13.0 $72.0 $68.5 $62.6 $75.8 $54.5 $50.4 $31.3 $51.8 $36.1 $37.0 $34.6 $33.8 $36.9 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Net Earnings Adjusted EBITDA * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. Net Earnings & Adj. EBITDA ($ mil) Consolidated Revenue ($ mil) ^ Quarterly Financial Comparison ** Q4-2017 net earnings exclude 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 B. ** *


 
13 $5.0 $10.4 $11.1 $10.1 $4.4 $6.7 $4.8 $7.1 $1.6 $1.8 $1.4 $2.3 $0.8 $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 Q1 2018 $48.1 $84.5 $77.7 $1.3 $20.6 $12.8 $36.0 $20.9 $55.9 $47.9 $28.6 $31.4 $18.1 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 # Includes effect of leased railcars in process. Operational CAPEX ($ mil) Lease Railcar CAPEX ($ mil) # Quarterly Financial Comparison (continued)


 
14 In Thousands, unaudited Exhibit A – Adj. EBITDA Reconciliation


 
Exhibit A – 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. 15


 
16 In Thousands, except per share amounts, unaudited Exhibit B – Impact of 2017 Tax Act Reconciliation


 
Exhibit B –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. 17


 
A Tradition of Industry Leadership 18