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): July 30, 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 1.01 Entry into a Material Definitive Agreement.
On July 30, 2018 (the "Effective Date"), American Railcar Industries, Inc. (“ARI” or the “Company”) entered into a long-term supply agreement (the “Agreement”) with GATX Corporation (“GATX”), pursuant to which the Company will supply and GATX will purchase 7,650 newly built railcars, comprised of a combination of tank and covered hopper railcars over a period of five years through 2023. The agreement also provides GATX the option to purchase up to 4,400 additional railcars through 2023, subject to certain restrictions over the term of the agreement. Railcar pricing will be on an agreed upon or cost-plus basis, subject to certain specified adjustments and surcharges.
Unless earlier terminated, the Agreement will expire on the later of December 31, 2023 or the date on which the last of the railcars are delivered to GATX. Subject to its terms and conditions, the Agreement may be terminated after written notice (a) by either party in the event the other party (i) fails to cure its non-performance of a material obligation, (ii) fails to pay any amount due and payable, (iii) files a petition in bankruptcy, is unable to pay debts, provides notice of a pending insolvency or suspension of operations, or makes a general assignment for the benefit of creditors, or (iv) is unable to perform its obligations for more than 240 days as a result of an occurrence of a force majeure event, or (b) by GATX, upon the occurrence of material non-performance with respect to the delivery or quality of railcars.
The Agreement will be filed as an Exhibit to ARI's Quarterly Report on Form 10-Q for the quarter ending September 30, 2018, and portions of the Agreement will be omitted pursuant to a request for confidential treatment. The foregoing summary of the Agreement is qualified in its entirety by reference to all of the terms of the Agreement.
Item 2.02 Results of Operations and Financial Condition.
On August 1, 2018, ARI issued a press release announcing its financial results for the second quarter ended June 30, 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.
Item 7.01. Regulation FD.
On August 1, 2018, the Company issued a press release announcing the entry into the Agreement described in Item 1.01 above. A copy of the press release is filed as Exhibit 99.3 hereto and is incorporated herein in its entirety by reference.
Limitation on Incorporation by Reference. The information furnished in Item 2.02, including the press release attached hereto as Exhibit 99.1 and the presentation attached hereto as Exhibit 99.2, as well as the information furnished in Item 7.01, including the press release attached hereto as Exhibit 99.3, 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 releases attached as Exhibits 99.1 and 99.3 hereto, and the presentation attached as Exhibit 99.2 hereto, the press releases 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 releases and presentation, respectively, regarding these forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
 
 
 
Exhibit Number
  
Description
 
 
  
Press release dated August 1, 2018, of American Railcar Industries, Inc. announcing financial results for the second quarter of 2018
 
Supplemental Information Presentation for the period ended June 30, 2018
 
Press release dated August 1, 2018, of American Railcar Industries, Inc. announcing multi-year supply agreement between ARI and GATX





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: August 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=12381540&doc=24
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
August 1, 2018
 
 
  
 
  
 
 
 
 
 
  
 
  
 
 
 
 
 
  
 
  
 

AMERICAN RAILCAR INDUSTRIES, INC.
REPORTS SECOND QUARTER 2018 RESULTS
Second Quarter 2018 Highlights
 
Quarterly revenue of $146.5 million
Quarterly net earnings of $9.2 million, or $0.48 per share
Quarterly adjusted EBITDA of $37.5 million, or 25.6% of revenue
Lease fleet of 13,341 railcars as of June 30, 2018 vs. 12,414 railcars as of June 30, 2017, with 19 railcars added during the second quarter
Current liquidity of $303.8 million, including $200.0 million available under revolving credit facility
St. Charles, MO, August 1, 2018 - American Railcar Industries, Inc. (ARI or the Company) (NASDAQ: ARII) today reported its second quarter 2018 financial results. John O'Bryan, President and CEO of ARI, commented, "The North American railcar market has shown signs of recovery, including carload growth driven by a wide array of commodity types and a decline in railcars in storage over the first half of 2018. Our inquiry activity has remained strong during the second quarter of 2018, and the industry reported quarterly orders of over 23,000 railcars, its highest point since the fourth quarter of 2014.
"However, an oversupply remains in the marketplace of most railcar types, including covered hoppers and tanks, which continues to drive a competitive pricing environment. We continue to align our production with market conditions and industry demand to meet customers' short term and long term needs. We are committed to our vision of aligning people, processes and tools to deliver world class results in safety, quality and service. We remain disciplined in investing in railcars for lease by strategically partnering with our customers. With ARI's diversified lease fleet of over 13,300 railcars and our railcar services network, we are well-positioned to identify and deliver solutions for the railcar industry.”
Second Quarter Revenue Summary
Total consolidated revenues were $146.5 million for the second quarter of 2018, an increase of 34% when compared to $109.0 million for the same period in 2017. This increase was primarily driven by increased revenues in the manufacturing segment and slight increases in the railcar leasing and railcar services segments.
Manufacturing revenues were $89.4 million for the second quarter of 2018, an increase of 62% compared to $55.1 million in the second 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 second quarter of 2018 compared to the second quarter of 2017 and more competitive pricing across the North American railcar market.
During the second quarter of 2018, ARI shipped 914 railcars for direct sale and 19 railcars for lease compared to 531 railcars for direct sale and 545 railcars for lease during the same period in 2017. Railcars built for the lease fleet represented 2% of ARI’s railcar shipments during the second quarter of 2018 compared to 51% for the same period in 2017. Due to the prevalence of lower lease rates in today's North American railcar market, the Company continues to maintain a disciplined approach to investing in its lease fleet. This approach, coupled with lower demand and the timing of customers placing orders for railcars for direct sale, led to a lower rate of shipments of railcars for lease during the second 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 second quarter of 2018, on a consolidated basis, exclude $1.9 million of revenues related to railcars built for the Company's lease fleet compared to $54.6 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 $34.8 million for the second quarter of 2018, an increase of 3% compared to $33.7 million for the same period 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 new railcars for lease, leased railcars being reassigned to other customers, and lease renewals compared to the same period in 2017. ARI had 13,341 railcars in its lease fleet as of June 30, 2018 compared to 12,414 railcars as of June 30, 2017.
Railcar services revenues were $22.3 million for the second quarter of 2018, an increase of 10% compared to $20.2 million for the same period in 2017. This increase was primarily due to revenue generated from retrofit projects, partially offset by lower demand for traditional repair services.
Consolidated earnings from operations were $17.4 million for the second quarter of 2018, a decrease of 22% from $22.2 million for the same period in 2017. Consolidated operating margins decreased to 11.8% for the second quarter of 2018 compared to 20.3% for the same period in 2017. These decreases were primarily driven by slightly lower earnings from operations in each of the operating segments and a $3.6 million impairment loss recorded on certain of the Company's leased railcars.
Manufacturing earnings from operations on a consolidated basis were $2.2 million for the second quarter of 2018 compared to $2.5 million for 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 $0.1 million and $4.8 million for the second 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 second quarter of 2018.
Railcar leasing earnings from operations on a consolidated basis were $17.1 million for the second quarter of 2018 compared to $21.6 million for the same period in 2017. This decrease was primarily due to a $3.6 million impairment loss recorded on certain of the Company's leased railcars, as well as increased maintenance costs and lower lease rates on certain renewals and reassignments. Without the impact of this impairment loss, railcar leasing earnings from operations on a consolidated basis would have been $20.7 million.
Railcar services earnings from operations on a consolidated basis were $2.6 million for the second quarter of 2018 compared to $3.0 million for the same period in 2017. This decrease was primarily due to an unfavorable mix of work and costs incurred as we ramp up retrofit projects.
Selling, general and administrative expenses were $9.7 million for the second quarter of 2018 compared to $9.0 million for the same period in 2017. These increases were primarily due to increased compensation costs relating to additional personnel hired to increase our sales and marketing team and other supporting groups in connection with transitioning our lease fleet management in-house and higher share-based compensation expense, driven by fluctuations in our stock price, partially offset by decreased legal expenses.
Net earnings for the second quarter of 2018 were $9.2 million, or $0.48 per share, compared to $10.9 million, or $0.57 per share, in the same period in 2017. This decrease was driven largely by an impairment loss recorded on certain of the Company's leased railcars, which had a negative impact of $0.13 per share, and a decrease in earnings from operations, as discussed above, partially offset 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 income tax rate from 35% to 21%.
EBITDA, adjusted to exclude share-based compensation expense, other income related to short-term investment activity, and the impact of impairment losses recorded on certain of the Company's leased railcars (Adjusted EBITDA), was $37.5 million for the second quarter of 2018 compared to $37.0 million for the same period in 2017. The increase was primarily the result of an increase of railcar shipments for direct sale partially offset by lower earnings from operations. A reconciliation of the Company’s net earnings to EBITDA and Adjusted EBITDA (both non-GAAP financial measures) is set forth in the supplemental disclosure attached to this press release.
Year-to-Date Results





Consolidated revenues for the first six months of 2018 were $262.8 million compared to $223.7 million for the comparable period in 2017. The Company shipped 1,530 direct sale railcars and 214 railcars built for the Company's lease fleet during the first six months of 2018 compared to 1,080 direct sale railcars and 1,147 railcars built for the lease fleet during the same period in 2017. Railcars built for the lease fleet represented 12% of ARI's railcar shipments in the first six months of 2018 compared to 52% for the same period in 2017.
Consolidated earnings from operations for the first six months of 2018 were $38.4 million, a decrease of 13% from $44.1 million for the comparable period in 2017. Consolidated earnings from operations for the first six months of 2018 and 2017 excluded $1.5 million and $10.9 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 slightly lower earnings from operations in each of the Company's operating segments, including the $3.6 million impact of an impairment loss to the leasing segment, representing an impairment loss recorded on certain of the Company's leased railcars, and increased selling, general, and administrative expenses.
Operating margins were 14.6% for the first six months of 2018 compared to 19.7% for the same period of 2017. This decrease was primarily due to more competitive pricing for hopper and tank railcars, increased costs as a result of operating at lower production levels, and the $3.6 million impact of an impairment loss recorded on certain of the Company's leased railcars.
Net earnings for the first six months of 2018 were $22.2 million, or $1.16 per share compared to $21.5 million, or $1.12 per share, for the comparable period in 2017. This increase was primarily driven 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 income tax rate from 35% to 21%, partially offset by lower earnings from operations and the impact of an impairment loss recorded on certain of the Company's leased railcars, which reduced earnings per share by $0.13.

Adjusted EBITDA was $74.4 million for the first six months of 2018, an increase of $1.2 million from $73.1 million for the comparable period in 2017. The increase was primarily the result of increased railcar shipments for direct sale partially offset by lower earnings from operations. 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 six months of 2018 of $51.4 million. As of June 30, 2018, ARI had working capital of $182.1 million, including $103.8 million of cash and cash equivalents.
As of June 30, 2018, the Company had $533.0 million of debt outstanding, net of unamortized debt issuance costs of $4.5 million. The Company had borrowing availability of $200.0 million under a revolving loan.
The Company paid dividends totaling $15.3 million during the first six months of 2018. On July 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 September 7, 2018 that will be paid on September 21, 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 June 30, 2018 was 3,387 railcars with an estimated market value of $335.8 million. Of the total backlog, we currently expect 1,041 railcars, or 30.7%, having an estimated market value of $121.9 million, will be placed into the Company's lease fleet.
Conference Call and Webcast
ARI will host a webcast and conference call on Wednesday, August 1, 2018 at 10:00 am (Eastern Time) to discuss the Company’s second 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 vision, strategic objectives and long-term strategies, our results of operations, financial condition and the sufficiency of our capital resources, our capital expenditure plans and their anticipated benefits, 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 ability to meet our vision, strategic objectives and long-term strategies; 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 or impairment losses 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 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; 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; the risks associated with our current joint ventures and anticipated capital needs of, and production capabilities at our joint ventures; uncertainties regarding the Tax Cuts and Jobs Act of 2017 or other changes in our tax provisions or positions; 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 relating to the transition of the management of our railcar leasing business from ARL to in-house management following completion of the sale of ARL; risks related to the loss of executive officers; 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)
 
 
June 30,
2018
 
December 31,
2017
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
103,765

 
$
100,244

Restricted cash
16,606

 
16,640

Accounts receivable, net
38,249

 
43,804

Accounts receivable, due from related parties
370

 
778

Income taxes receivable
18,151

 
19,115

Inventories, net
77,972

 
54,147

Prepaid expenses and other current assets
6,283

 
6,464

Total current assets
261,396

 
241,192

Property, plant and equipment, net
155,487

 
162,535

Railcars on lease, net
1,034,331

 
1,036,414

Income tax receivable


 


Goodwill
7,169

 
7,169

Investments in and loans to joint ventures
21,454

 
22,571

Other assets
970

 
3,545

Total assets
$
1,480,807

 
$
1,473,426

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
27,536

 
$
21,275

Accounts payable, due to related parties

 
41

Accrued expenses, including loss contingency of $6,407 and $6,548 at June 30, 2018 and December 31, 2017, respectively
14,738

 
12,787

Accrued compensation
11,617

 
12,874

Short-term debt, including current portion of long-term debt
25,388

 
25,590

Total current liabilities
79,279

 
72,567

Long-term debt, net of unamortized debt issuance costs of $4,539 and $4,647 at June 30, 2018 and December 31, 2017, respectively
507,574

 
520,024

Deferred tax liability
201,682

 
194,084

Pension and post-retirement liabilities
7,811

 
8,099

Other liabilities, including loss contingency of $2,237 and $2,283 at June 30, 2018 and December 31, 2017, respectively
14,164

 
15,118

Total liabilities
810,510

 
809,892

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 50,000,000 shares authorized, 19,083,878 shares outstanding as of both June 30, 2018 and December 31, 2017
213

 
213

Additional paid-in capital
239,609

 
239,609

Retained Earnings
522,037

 
514,453

Accumulated other comprehensive loss
(5,531
)
 
(4,710
)
Treasury Stock
(86,031
)
 
(86,031
)
Total stockholders’ equity
670,297

 
663,534

Total liabilities and stockholders’ equity
$
1,480,807

 
$
1,473,426







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Manufacturing (including revenues from affiliates of zero for both the three and six months ended June 30, 2018 and $137 for both of the same periods in 2017)
$
89,440

 
$
55,087

 
$
153,581

 
$
115,813

Railcar leasing (including revenues from affiliates of $404 and $816 for the three and six months ended June 30, 2018, respectively, and $223 and $447 for the same periods in 2017)
34,804

 
33,717

 
68,925

 
67,552

Railcar services (including revenues from affiliates of $15 and $17 for the three and six months ended June 30, 2018, respectively, and $4,425 and $10,572 for the same periods in 2017)
22,284

 
20,216

 
40,260

 
40,336

Total revenues
146,528

 
109,020

 
262,766

 
223,701

Cost of revenues:
 
 
 
 
 
 
 
Manufacturing
(84,207
)
 
(51,121
)
 
(142,390
)
 
(105,680
)
Other operating (loss) income
57

 
1,033

 
44

 
1,064

Railcar leasing
(13,387
)
 
(11,617
)
 
(26,380
)
 
(23,676
)
Railcar services
(18,429
)
 
(16,146
)
 
(34,005
)
 
(33,536
)
Total cost of revenues
(115,966
)
 
(77,851
)
 
(202,731
)
 
(161,828
)
Gross profit
30,562

 
31,169

 
60,035

 
61,873

Selling, general and administrative
(9,743
)
 
(9,019
)
 
(18,356
)
 
(17,821
)
Net gains on disposition of leased railcars
96

 

 
277

 
13

Loss on asset impairment
(3,554
)
 

 
(3,554
)
 

Earnings from operations
17,361

 
22,150

 
38,402

 
44,065

Interest income (including income from related parties of $192 and $412 for the three and six months ended June 30, 2018, respectively, and $306 and $642 for the same periods in 2017)
496

 
368

 
915

 
741

Interest expense
(5,296
)
 
(5,488
)
 
(10,636
)
 
(11,019
)
Other income
1

 
1,867

 
1

 
1,921

Earnings from joint ventures
535

 
796

 
1,878

 
1,346

Earnings before income taxes
13,097

 
19,693

 
30,560

 
37,054

Income tax expense
(3,905
)
 
(8,794
)
 
(8,377
)
 
(15,587
)
Net earnings
$
9,192

 
$
10,899

 
$
22,183

 
$
21,467

Net earnings per common share—basic and diluted
$
0.48

 
$
0.57

 
$
1.16

 
$
1.12

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

 
19,084

 
19,084

 
19,084

Cash dividends declared per common share
$
0.40

 
$
0.40

 
$
0.80

 
$
0.80







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

 
Three Months Ended June 30, 2018
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
89,440

 
$
2,279

 
$
91,719

 
$
2,269

Railcar leasing (1)
34,804

 

 
34,804

 
13,991

Railcar services
22,284

 
2,107

 
24,391

 
2,985

Corporate

 

 

 
(4,534
)
Eliminations

 
(4,386
)
 
(4,386
)
 
2,650

Total Consolidated
$
146,528

 
$

 
$
146,528

 
$
17,361

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
55,087

 
$
55,442

 
$
110,529

 
$
7,299

Railcar leasing
33,717

 

 
33,717

 
18,690

Railcar services
20,216

 
1,883

 
22,099

 
3,329

Corporate

 

 

 
(4,953
)
Eliminations

 
(57,325
)
 
(57,325
)
 
(2,215
)
Total Consolidated
$
109,020

 
$

 
$
109,020

 
$
22,150

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
153,581

 
$
23,054

 
$
176,635

 
$
6,677

Railcar leasing (1)
68,925

 

 
68,925

 
31,414

Railcar services
40,260

 
4,211

 
44,471

 
4,681

Corporate

 

 

 
(8,312
)
Eliminations

 
(27,265
)
 
(27,265
)
 
3,942

Total Consolidated
$
262,766

 
$

 
$
262,766

 
$
38,402

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
115,813

 
$
115,546

 
$
231,359

 
$
16,450

Railcar leasing
67,552

 

 
67,552

 
37,500

Railcar services
40,336

 
2,215

 
42,551

 
5,045

Corporate

 

 

 
(9,225
)
Eliminations

 
(117,761
)
 
(117,761
)
 
(5,705
)
Total Consolidated
$
223,701

 
$

 
$
223,701

 
$
44,065

(1)—
The earnings from operations for the leasing segment include the impact of an impairment loss recognized on certain railcars within the Company's lease fleet. The impact of the impairment loss was $(3.6) million, net of an intercompany elimination of $8.0 million, for both the three and six months ended June 30, 2018 and zero for the same periods in 2017.






AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Six Months Ended
 
June 30,
 
2018
 
2017
Operating activities:
 
 
 
Net earnings
$
22,183

 
$
21,467

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
30,573

 
28,174

Amortization of deferred costs
251

 
250

Gain on disposal of property, plant, equipment and leased railcars
(267
)
 
(12
)
Non-cash impairment on leased railcars
3,554

 

Earnings from joint ventures
(1,878
)
 
(1,346
)
Provision for deferred income taxes
7,365

 
26,720

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
9,188

 
(393
)
Accounts receivable, due from related parties
388

 
2,357

Income taxes receivable
957

 
(12,248
)
Inventories, net
(26,703
)
 
4,264

Prepaid expenses and other current assets
(503
)
 
235

Accounts payable
6,281

 
(4,983
)
Accounts payable, due to related parties
(41
)
 
(3,065
)
Accrued expenses and taxes
707

 
(8,401
)
Other
(688
)
 
956

Net cash provided by operating activities
51,367

 
52,152

Investing activities:
 
 
 
Purchases of property, plant and equipment
(4,542
)
 
(3,422
)
Grant Proceeds

 

Capital expenditures - leased railcars
(19,269
)
 
(103,765
)
Proceeds from the disposal of property, plant, equipment and leased railcars
1,157

 
73

Proceeds from repayments of loans by joint ventures
2,953

 
2,953

Net cash used in investing activities
(19,701
)
 
(100,075
)
Financing activities:
 
 
 
Repayments of debt
(12,762
)
 
(12,669
)
Payment of common stock dividends
(15,267
)
 
(15,267
)
Net cash used in financing activities
(28,029
)
 
(27,936
)
Effect of exchange rate changes on cash
(150
)
 
69

Net increase (decrease) in cash, cash equivalents, and restricted cash
3,487

 
(75,790
)
Cash, cash equivalents, and restricted cash at beginning of period
116,884

 
195,285

Cash, cash equivalents, and restricted cash at end of period
$
120,371

 
$
119,495

 
 
 
 
Balance Sheet Reconciliation:
 
 
 
Cash and cash equivalents
$
103,765

 
$
102,811

Restricted cash
16,606

 
16,684

Total cash, cash equivalents and restricted cash as presented above
$
120,371

 
$
119,495







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS TO EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2018
 
2017
 
2018
 
2017
Net earnings
$
9,192

 
$
10,899

 
$
22,183

 
$
21,467

Income tax expense
3,905

 
8,794

 
8,377

 
15,587

Interest expense
5,296

 
5,488

 
10,636

 
11,019

Interest income
(496
)
 
(368
)
 
(915
)
 
(741
)
Depreciation
15,642

 
14,301

 
30,573

 
28,174

EBITDA
$
33,539

 
$
39,114

 
$
70,854

 
$
75,506

Expense (income) related to stock appreciation rights compensation
366

 
(225
)
 
(46
)
 
(472
)
Other income on short-term investment activity
$

 
(1,867
)
 
$

 
(1,921
)
Loss on impairment of leased railcars
$
3,554

 

 
3,554

 

Adjusted EBITDA
$
37,459

 
$
37,022

 
$
74,362

 
$
73,113


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), other income related to our short-term investments, and losses from the impairment of long-lived assets. 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.



ariiex992q22018
Exhibit 99.2 Q2 2018 Supplemental Information 1


 
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 Forward Looking date of this presentation. 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 Disclaimer related to shipments for direct sale versus lease, our backlog and any implication that our backlog may be indicative of our future revenues, our vision, strategic objectives and long-term strategies, our results of operations, financial condition and the sufficiency of our capital resources, our capital expenditure plans and their anticipated benefits, 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, the impact of the Tax Cuts and Jobs Act of 2017 on our business and financial statements, 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 ability to meet our vision, strategic objectives and long-term strategies; 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 Forward Looking regulatory laws and regulations, which may be subject to change; the impact, costs and expenses of any warranty claims or impairment losses 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 Disclaimer (Directive) and the settlement agreement 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; 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; the risks associated with our current joint ventures and anticipated capital needs of and production capabilities at our joint ventures; uncertainties regarding the Tax Cuts and Jobs Act of 2017 or other changes in our tax provisions or positions; 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 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; risks related to the loss of executive officers; 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


 
3


 
ARI Successful Manufacturing and Diversified Railcars Components Business Model Railcar Repair Railcar Services Leasing Complete life cycle solutions for the railcar industry 4


 
ARI Locations 5


 
ARI Key Railcar Markets - Two Largest Product Segments in the Railcar Industry* HOPPER RAILCARS TANK RAILCARS • Product offerings include general service • Product offerings include general service, and specialty carbon steel or stainless steel pressurized, coiled, lined and insulated railcars that are capable of transporting: carbon steel or stainless steel railcars that • Plastic Pellets are capable of transporting: • Food Products • Chemicals • Grain • Ethanol • Sand • Food Products • Specialty Chemical Products • Natural Gas Liquids • Cement • Crude Oil 6 * Based upon backlog as of 6/30/18 per the Railway Supply Institute, Inc ARCI 2018 – 2nd Quarter Reporting Statistics (issued July 2018)


 
ARI’s Railcar Backlog 14,000 12,000 11,732 10,000 8,560 8,000 7,060 7,081 6,530 6,000 Total Railcar Backlog Railcar Total 4,240 3,813 4,000 3,387 1,940 2,000 1,050 550 - Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Jun 2018 Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 389 1,041 Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 1,551 2,346 7


 
Manufacturing Segment ManufacturingBroad manufacturing core competency base allows allows ARI ARI to to be be competitive competitive and and provide provide low quality cost, railcarsquality railcarsand components and components (millions) Revenue Operating Margin % ^ • Flexible and labor efficient $1,200 30% manufacturing facilities able to respond to 25% customer delivery demands $1,000 20% • Strategic locations near customers and $800 major rail lines 15% • Vertical integration from joint ventures $600 10% and component manufacturing helps us to 5% be cost competitive $400 0% • Experienced team striving for excellence $200 (safety, quality, service) -5% • Numerous product offerings/designs that $- -10% can be manufactured for direct sale or 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018 lease TTM ^: 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 8 fleet are eliminated in consolidation.


 
Railcar Leasing Segment Diversifying and supplementing our business with revenue streams generated over the life of the railcar (millions) Revenue Lease Fleet • Disciplined lease strategy balancing mix of customers, commodities, acceptable market $160 16,000 rates, and staggered lease terms $140 14,000 • Relatively young lease fleet with minimal maintenance expense $120 12,000 • Began in-house management of the railcar leasing business as a result of the ARL $100 10,000 sale on June 1, 2017 • Added to our existing sales force and $80 8,000 established lease fleet management group • Further integration of ARI’s business model $60 6,000 • Further fleet growth based on strategic opportunities and as demand dictates with $40 4,000 funding expected to come from existing liquidity and future railcar leveraged financing(s) $20 2,000 • Unencumbered leased railcars available to borrow against $- - 2012 2013 2014 2015 2016 2017 Q2-18 TTM 9


 
Railcar Services Segment SupportingSupporting both both ARI’s ARI’s lease lease fleet fleet and and customers' customers' railcar railcar needs, needs, while while gaining gaining valuable valuable industry industry insight insight Revenue Operating Margin % TRADITIONAL REPAIR (millions) $90 25% • Railcar qualifications and inspections • Light/heavy railcar repairs $80 20% • Exterior and interior coatings $70 • Cleaning • Valve replacement and testing $60 • Wheel and axle replacement 15% • Additional offerings for mini-shops and mobile $50 on-site customer repairs $40 10% TANK RAILCAR RETROFITTING $30 • Tank railcar manufacturing facility offers $20 retrofit capabilities along with traditional 5% repair services $10 $- 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2-18 TTM 10


 
Our Financial History Consolidated Revenue ($ mil) ^ $1,000.0 $889.3 $808.8 $750.6 $800.0 $711.7 $733.0 $639.1 $519.4 $515.9 $600.0 $476.8 $423.4 $400.0 $273.6 $200.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018 ^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease. TTM Net Earnings & Adj. EBITDA ($ mil) $300.0 $278.9 Net Earnings Adj. EBITDA** $250.0 $200.0 $181.1 $188.0 $149.5 $142.8 $150.0 $133.5 $141.5 $107.8 $86.9 $99.5 $100.0 $78.8 $72.7 $50.5 $63.8 $40.0 $34.9 ** $35.6 ** $50.0 $31.4 $15.5 ($27.0) $4.5 $4.3 $0.0 ($50.0) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018 TTM * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. ** 2017 and Q2 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 11 share on Exhibit B.


 
Our Financial History (continued) Operational CAPEX ($ mil) $50.0 $42.0 $40.0 $36.6 $30.0 $23.0 $20.0 $22.0 $20.1 $20.0 $15.0 $8.4 $10.0 $6.1 $6.2 $7.2 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018 TTM Lease Railcar CAPEX ($ mil) # $350.0 $307.7 $300.0 $250.0 $211.6 $185.9 $200.0 $162.1 $163.8 $150.0 $90.3 $100.0 $79.3 $50.0 $29.4 $10.4 $0.0 $0.0 $0.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q2 2018 TTM 12 # Includes effect of leased railcars in process.


 
Quarterly Financial Comparison Consolidated Revenue ($ mil) ^ $200.0 $176.2 $167.5 $150.5 $145.0 $146.5 $150.0 $132.4 $120.7 $114.7 $109.0 $116.2 $100.0 $50.0 $0.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 ^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease. * Net Earnings & Adj. EBITDA ($ mil) Net Earnings Adjusted EBITDA $60.0 $54.5 $50.4 $51.8 $50.0 $36.1 $37.0 $34.6 $36.9 $37.5 $40.0 $31.3 $33.8 $30.0 $22.8 $22.3 $20.0 $19.9 $13.0 $10.6 $10.9 ** $9.2 $10.0 $7.7 $8.9 $4.6 $0.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. ** 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


 
Quarterly Financial Comparison (continued) Operational CAPEX ($ mil) $8.0 $6.7 $7.1 $6.0 $4.4 $4.8 $3.7 $4.0 $2.3 $1.8 $2.0 $1.6 $1.4 $0.8 $0.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Lease Railcar CAPEX ($ mil) # $60.0 $55.9 $47.9 $40.0 $36.0 $28.6 $31.4 $20.9 $20.6 $18.1 $20.0 $12.8 $1.2 $0.0 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 # Includes effect of leased railcars in process. 14


 
Exhibit A – Adj. EBITDA Reconciliation In Thousands, unaudited 15


 
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 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), other income related to our short-term investments, and losses from the impairment of long-lived assets. 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. 16


 
Exhibit B – Impact of 2017 Tax Act Reconciliation In Thousands, except per share amounts, unaudited 17


 
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. 18


 
A Tradition of Industry Leadership


 
Exhibit


Exhibit 99.3
 
PRESS RELEASE
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12381540&doc=24
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
August 1, 2018
 
 
  
 
  
 
 
 
 
 
  
 
  
 
 
 
 
 
  
 
  
 

AMERICAN RAILCAR INDUSTRIES, INC.
ANNOUNCES LONG-TERM RAILCAR SUPPLY AGREEMENT WITH GATX
St. Charles, MO, August 1, 2018 - American Railcar Industries, Inc. (ARI or the Company) (NASDAQ: ARII) today announced that it has entered into a long-term supply agreement with GATX Corporation (GATX) to deliver a minimum of 7,650 railcars, consisting of tank and covered hopper railcars, through 2023 with a currently estimated backlog value of approximately $750 million. The agreement also includes an option for GATX to order up to an additional 4,400 railcars from ARI through 2023, subject to certain restrictions, including on quantity levels of tank and covered hopper railcars in each year.

John O'Bryan, President and CEO of ARI, commented, "We are excited to partner with GATX on this long term agreement and to build a new strategic relationship. GATX is a global leader in railcar leasing and we look forward to working with them over the next several years to meet their needs. This agreement will provide a level of consistent and efficient production at our manufacturing facilities. A longer term production plan will help us achieve our vision of world class results in safety, quality and service, and will support our talented team members with a backlog that extends out for several years.”
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: anticipated benefits from the new long-term supply agreement with GATX, expectations regarding our future production and delivery rates as a result of the new agreement, anticipated benefits from a longer term production plan, our backlog, estimated backlog value, and any implication that our backlog may be indicative of our future revenues, and our strategic objectives and long-term strategies. 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. Estimated backlog value, which does not reflect any additional railcars that may be ordered subject to the option, is based upon an assumed product mix consistent with the terms of the supply agreement. Changes in product mix from what is assumed would affect the estimated value of our backlog. Estimated backlog value also reflects known price adjustments for material cost changes but does not reflect a projection of any future material price adjustments that may be made under the agreement. Our competitors may not define railcar backlog in the same manner as we do, which could make comparisons of our railcar backlog with theirs misleading. Other potential risks and uncertainties that could adversely affect our business and prospects include, without limitation, risks relating to our ability to successfully perform under the new supply agreement, risks relating to managing our production rates and plans under the new agreement, risks relating to the conversion of our railcar backlog into revenues equal to our reported estimated backlog value, 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.