American Railcar Industries, Inc.
American Railcar Industries, Inc. (Form: 8-K, Received: 05/02/2017 08:17:03)


 
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 2, 2017
 
 
  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 2, 2017, American Railcar Industries, Inc. (“ARI” or the “Company”) issued a press release announcing its financial results for the first quarter ended March 31, 2017. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference. In conjunction with the press release, ARI has posted a supplemental information presentation to its website (americanrailcar.com) and a copy of the presentation is attached hereto as Exhibit 99.2 and is incorporated herein in its entirety by reference.
Limitation on Incorporation by Reference.  The information furnished in this Item 2.02, including the press release attached hereto as Exhibit 99.1 and the presentation attached hereto as Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release and presentation attached as Exhibits 99.1 and 99.2 hereto, the press release and presentation contain forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary notes in the press release and presentation, respectively, regarding these forward-looking statements.
Item 9.01 Financial Statements and Exhibits.
(d)
Exhibits
 
 
 
Exhibit Number
  
Description
 
 
Exhibit 99.1
  
Press release dated May 2, 2017 of American Railcar Industries, Inc.
Exhibit 99.2
 
Supplemental Information Presentation for the period ended March 31, 2017





SIGNATURE
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  
Date: May 2, 2017
 
 
American Railcar Industries, Inc.
 
 
 
 
 
By:
/s/ Luke M. Williams
 
 
Name:
Luke M. Williams
 
 
Title:
Senior Vice President, Chief Financial Officer and Treasurer






Exhibit Number
  
Description
 
 
Exhibit 99.1
  
Press release dated May 2, 2017 of American Railcar Industries, Inc.
Exhibit 99.2
 
Supplemental Information Presentation for the period ended March 31, 2017





Exhibit 99.1
 
P RESS  R ELEASE
ARIILOGOA01A01A01A16.JPG
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
May 2, 2017
 
 
  
 
  
 
 
 
 
 
  
 
  
 
 
 
 
 
  
 
  
 

AMERICAN RAILCAR INDUSTRIES, INC.
REPORTS FIRST QUARTER 2017 RESULTS
First Quarter 2017 Highlights
 
Quarterly revenue and net earnings of $114.7 million and $10.6 million , or $0.55 per share, respectively
Quarterly adjusted EBITDA of $36.1 million , or 31.5% of revenue
Lease fleet reaches 11,869 railcars vs. prior year of 10,556 railcars, with railcar leasing revenue up 3%
Current liquidity of $351.2 million , including $200.0 million available under revolving credit facility
St. Charles, MO, May 2, 2017 - American Railcar Industries, Inc. (ARI or the Company) (NASDAQ: ARII) today reported its first quarter 2017 financial results. Jeff Hollister, President and CEO of ARI, commented, “Despite lower production levels due to continued softness in the North American railcar market, our manufacturing facilities continue to operate efficiently, which we attribute to our skilled workforce, our vertically integrated supply chain, and our flexible operations. In addition, our railcar leasing and railcar services segments continue to complement our core manufacturing business and provide us with supplemental streams of revenue, helping to partially offset the impact and current challenges of operating in a soft market for new railcars.
As announced previously, the sale of our current lease fleet manager, American Railcar Leasing (ARL), is expected to close during the second quarter of 2017. Accordingly, we are working with ARL to transition the management of our lease fleet operations to be handled in-house. Our focus and commitment to the leasing business is shown by the continued increase in our lease fleet. This past quarter, over half our production and shipments were for lease. We continue to look for ways to partner with our customers by providing railcars for lease and direct sale and providing solutions to support their needs throughout the life cycle of the railcar.”
First Quarter Revenue Summary
Total consolidated revenues were $114.7 million for the first quarter of 2017 , a decrease of 35% when compared to $176.2 million for the same period in 2016 . This decrease was due to decreased revenues in the manufacturing segment, partially offset by increased revenues in the railcar leasing and railcar services segments.
Manufacturing revenues were $60.7 million for the first quarter of 2017 , a decrease of 51% compared to $123.8 million for the same period in 2016 . This decrease was primarily driven by fewer railcar shipments for direct sale as more than half of our railcar shipments were for lease during the first quarter of 2017. Railcar shipments during the first quarter of 2017 had a higher mix of hopper railcars sold, which generally have lower average selling prices than tank railcars due to less material and labor content. Furthermore, both railcar types experienced a more competitive pricing environment during the first quarter of 2017 compared to the same period in 2016. The Company also continues to produce a large mix of specialty railcars for both the hopper and tank railcar markets.
During the first quarter of 2017 , ARI shipped 549 railcars for direct sale and 602 railcars for lease compared to 1,130 railcars for direct sale and 200 railcars for lease during the same period in 2016 . Railcars built for the lease fleet represented 52% of ARI’s railcar shipments during the first quarter of 2017 compared to 15% for the same period in 2016 . Although this rate is relatively high for a given quarter compared to our historical average, these shipments and orders for railcars on long term leases not only help us to maintain a steady level of production during the manufacturing period, but also provide a steady stream of future cash flows to complement our manufacturing and railcar services segments. Because revenues and earnings related to leased





railcars are recognized over the life of the lease, ARI's quarterly 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 2017 exclude $60.1 million of revenues related to railcars built for the Company's lease fleet compared to $23.6 million for the same period in 2016 . Revenues related to railcars built for the Company's lease fleet increased due to a higher quantity of railcars shipped for lease. Such revenues are based on an estimated fair market value of the leased railcars as if they had been sold to a third party, and are not recognized in consolidated revenues as railcar sales. Rather lease revenues are recognized in accordance with the terms of the contract over the life of the lease.
Railcar leasing revenues were $33.8 million for the first quarter of 2017 , an increase of 3% over the $32.8 million for the comparable period in 2016 . The primary reason for the increase in revenue was an increase in the number of railcars on lease, partially offset by a slight decline in weighted average lease rates. ARI had 11,869 railcars in its lease fleet as of March 31, 2017 compared to 10,556 railcars as of March 31, 2016 .
Railcar services revenues were $20.1 million for the first quarter of 2017 , an increase of 3% compared to $19.6 million for the same period in 2016 . The primary reasons for the increase in revenue were due to increased demand for our mobile repair services and repair projects performed at our tank railcar manufacturing facility, partially offset by an unfavorable mix of repair work in the current quarter at certain other repair facilities during 2017. Our tank car manufacturing facility provides us the flexibility not only to produce railcars, but also to perform repair and retrofit services in a production line set-up, offering another option for us to meet our customers' repair needs. This additional flexibility allowed us to complete certain repair projects at our tank railcar manufacturing facility in the first quarter of 2017 that were not performed during the comparable period of 2016.
First Quarter Earnings Summary
Consolidated earnings from operations were $21.9 million for the first quarter of 2017 , a decrease of 46% from the $40.7 million for the same period in 2016 . Consolidated operating margins decreased to 19.1% for the first quarter of 2017 compared to 23.1% for the same period in 2016 . These decreases were primarily driven by lower earnings from operations in the Company's manufacturing and railcar services segments combined with slightly lower earnings from operations in the railcar leasing segment.
Manufacturing earnings from operations were $3.0 million for the first quarter of 2017 compared to earnings of $19.3 million for the same period in 2016 . The decrease was primarily a result of fewer overall direct sale shipments, as discussed above, more competitive pricing on both hopper and tank railcars, and higher costs associated with lower production volumes. Profit on railcars built for the Company’s lease fleet was $6.1 million and $3.4 million for the first quarter of 2017 and 2016 , respectively, and is excluded from manufacturing earnings from operations. Profit on railcars built for the Company's lease fleet is based on an estimated fair market value of revenues as if the railcars had been sold to a third party, less the cost to manufacture.
Railcar leasing earnings from operations were $21.5 million for the first quarter of 2017 compared to $22.7 million for the same period in 2016 . This decrease was primarily due to increased maintenance costs associated with the Company's lease fleet as well as slightly lower lease rates on certain renewals.
Railcar services earnings from operations were $1.7 million for the first quarter of 2017 compared to $3.2 million for the same period in 2016 . This decrease was primarily due to an unfavorable mix of work causing inefficiencies at certain repair facilities, partially offset by increased demand for our mobile repair services.
Selling, general and administrative expenses were $8.8 million for the first quarter of 2017 compared to $8.0 million for the same period in 2016 . This $0.8 million increase was primarily due to higher bad debt expense, compensation costs, and depreciation.
Net earnings for the first quarter of 2017 were $10.6 million , or $0.55 per share compared to $22.8 million , or $1.16 per share, in the same period in 2016 . This decrease was primarily due to decreased earnings from operations as discussed above, driven largely by the heavier mix of railcars produced for our lease fleet during the first quarter of 2017 and lower overall shipments.
EBITDA, adjusted to exclude share-based compensation expense and other income related to short-term investment activity (Adjusted EBITDA), was $36.1 million for the first quarter of 2017 compared to $54.5 million for the comparable quarter in 2016 . The decrease resulted primarily from decreased earnings from operations as discussed above. A reconciliation of the Company’s net earnings to EBITDA and Adjusted EBITDA (both non-GAAP financial measures) is set forth in the supplemental disclosure attached to this press release.
Cash Flow and Liquidity
The Company’s earnings have contributed to cash flow from operations in the first three months of 2017 of $42.4 million . As of March 31, 2017 , ARI had working capital of $206.1 million , including $151.2 million of cash and cash equivalents.





As of March 31, 2017 , the Company had $564.7 million of debt outstanding, net of unamortized debt issuance costs of $4.8 million , and borrowing availability of $200.0 million under a revolving loan.
The Company paid dividends totaling $7.6 million during the first three months of 2017. At the board meeting in April, 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 16, 2017 that will be paid on June 29, 2017 .
The Company has not repurchased any shares of its common stock thus far in 2017 under its stock repurchase program. Board authorization for approximately $164.0 million remains available for further stock repurchases.
Backlog
ARI's backlog as of March 31, 2017 was 3,286 railcars with an estimated market value of $304.1 million . Of the total backlog, we currently expect 1,199 railcars, or 37% , having an estimated market value of $111.1 million , will be placed into our lease fleet.
Conference Call and Webcast
ARI will host a webcast and conference call on Tuesday, May 2, 2017 at 10:00 am (Eastern Time) to discuss the Company’s first quarter 2017 financial results. In conjunction with this press release, ARI has posted a supplemental information presentation to its website. To participate in the webcast, please log-on to ARI’s investor relations page through the ARI website at americanrailcar.com . To participate in the conference call, please dial 877-745-9389. Participants are asked to log-on to the ARI website or dial in to the conference call approximately 10 to 15 minutes prior to the start time. An audio replay of the call will also be available on the Company’s website promptly following the earnings call.
About ARI
ARI is a prominent North American designer and manufacturer of hopper and tank railcars. ARI provides its railcar customers with integrated solutions through a comprehensive set of high quality products and related services. ARI manufactures and sells railcars, custom designed railcar parts, and other industrial products. ARI and its subsidiaries also lease railcars manufactured by the Company to certain markets. 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 response to governmental directives, 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, our plans, and the industry's ability, to address the Federal Railroad Administration (FRA) directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive), our plans to transition management of our lease fleet in-house from ARL, expected future trends relating to our industry, products and markets, the potential impact of regulatory developments, including developments related to the Directive, 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 projects to expand our manufacturing flexibility and repair capacity, 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; risks relating to our compliance with the Directive, any developments related to the Directive and any costs or loss of revenue related thereto; risks relating to timely and successfully transitioning the management of our railcar leasing business in-house from ARL and managing our lease fleet leading up to and after the ARL Sale; the risk of being unable to market or remarket railcars for sale or lease at favorable prices or on favorable terms or at all; fluctuations in commodity prices, including oil and gas; the impact, costs and expenses of any warranty claims we may be subject to now or in the future; the highly competitive nature of the manufacturing, railcar leasing and railcar services industries; the variable purchase patterns of our railcar customers and the timing of completion, customer acceptance and shipment of orders, as well as the mix of railcars for lease versus direct sale; risks relating to our compliance with, and the overall railcar industry's implementation of, United States and Canadian regulations related to the transportation of flammable liquids by rail; our ability to manage overhead and variations in production rates; our ability to recruit, retain and train qualified personnel; the impact of any economic downturn, adverse market conditions or restricted credit markets; our reliance upon a small number of customers that represent a large percentage of our revenues and backlog; fluctuations in the costs of raw materials, including steel and railcar components, and delays in the delivery of such raw materials and components; fluctuations in the supply of components and raw materials we use in railcar manufacturing; the ongoing risks related to our relationship with Mr. Carl Icahn, our principal beneficial stockholder through Icahn Enterprises L.P. (IELP), and certain of his affiliates; the risks associated with ongoing compliance with environmental, health, safety, and regulatory laws and regulations, which may be subject to change; the impact, costs and expenses of any litigation we may be subject to now or in the future; the sufficiency of our liquidity and capital resources, including long-term capital needs to support the growth of our lease fleet; the impact of repurchases pursuant to our Stock Repurchase Program on our current liquidity and the ownership percentage of our principal beneficial stockholder through IELP, Mr. Carl Icahn; the risks associated with our current joint ventures and anticipated capital needs of, and production capabilities at our joint ventures; the conversion of our railcar backlog into revenues equal to our reported estimated backlog value; the risks and impact associated with any potential joint ventures, acquisitions, strategic opportunities, dispositions or new business endeavors; the integration with other systems and ongoing management of our new enterprise resource planning system; the risks related to our and our subsidiaries' indebtedness and compliance with covenants contained in our and our subsidiaries' financing arrangements and the additional risk factors described in ARI’s filings with the Securities and Exchange Commission. The Company expressly disclaims any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
 
March 31,
2017
 
December 31,
2016
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
151,246

 
$
178,571

Restricted cash
16,710

 
16,714

Short-term investments—available for sale securities
7,518

 
8,958

Accounts receivable, net
25,320

 
39,727

Accounts receivable, due from related parties
6,483

 
4,790

Inventories, net
78,811

 
75,028

Prepaid expenses and other current assets
8,624

 
8,623

Total current assets
294,712

 
332,411

Property, plant and equipment, net
173,069

 
177,051

Railcars on lease, net
955,622

 
908,010

Goodwill
7,169

 
7,169

Investments in and loans to joint ventures
25,385

 
26,332

Other assets
3,680

 
5,277

Total assets
$
1,459,637

 
$
1,456,250

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
30,217

 
$
29,314

Accounts payable, due to related parties
3,562

 
3,252

Accrued expenses, including loss contingency of $10,045 and $10,127 at March 31, 2017 and December 31, 2016, respectively
17,079

 
15,411

Accrued income taxes payable
1,607

 
7,660

Accrued compensation
10,533

 
11,628

Short-term debt, including current portion of long-term debt
25,649

 
25,588

Total current liabilities
88,647

 
92,853

Long-term debt, net of unamortized debt issuance costs of $4,809 and $4,863 at March 31, 2017 and December 31, 2016, respectively
539,076

 
545,392

Deferred tax liability
265,285

 
252,943

Pension and post-retirement liabilities
8,658

 
8,648

Other liabilities, including loss contingency of $2,161 at both March 31, 2017 and December 31, 2016
5,466

 
6,144

Total liabilities
907,132

 
905,980

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 50,000,000 shares authorized, 19,083,878 shares outstanding as of March 31, 2017 and December 31, 2016, respectively
213

 
213

Additional paid-in capital
239,609

 
239,609

Retained Earnings
405,744

 
402,810

Accumulated other comprehensive loss
(7,030
)
 
(6,331
)
Treasury Stock
(86,031
)
 
(86,031
)
Total stockholders’ equity
552,505

 
550,270

Total liabilities and stockholders’ equity
$
1,459,637

 
$
1,456,250







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 
 
Three Months Ended
 
March 31,
 
2017
 
2016
Revenues:
 
 
 
Manufacturing (including revenues from affiliates of zero and $553 for the three months ended March 31, 2017 and 2016, respectively)
$
60,726

 
$
123,792

Railcar leasing (including revenues from affiliates of $224 and zero for the three months ended March 31, 2017 and 2016, respectively)
33,835

 
32,768

Railcar services (including revenues from affiliates of $6,147 and $7,994 for the three months ended March 31, 2017 and 2016, respectively)
20,120

 
19,620

Total revenues
114,681

 
176,180

Cost of revenues:
 
 
 
Manufacturing
(54,559
)
 
(102,281
)
Other operating income
31

 

Railcar leasing
(12,059
)
 
(10,175
)
Railcar services
(17,390
)
 
(15,237
)
Total cost of revenues
(83,977
)
 
(127,693
)
Gross profit
30,704

 
48,487

Selling, general and administrative
(8,802
)
 
(7,957
)
Net gains on disposition of leased railcars
13

 
167

Earnings from operations
21,915

 
40,697

Interest income (including income from related parties of $336 and $457 for the three months ended March 31, 2017 and 2016, respectively)
373

 
478

Interest expense
(5,531
)
 
(5,906
)
Other income
54

 

Earnings from joint ventures
550

 
1,486

Earnings before income taxes
17,361

 
36,755

Income tax expense
(6,793
)
 
(13,963
)
Net earnings
$
10,568

 
$
22,792

Net earnings per common share—basic and diluted
$
0.55

 
$
1.16

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

 
19,665

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, 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

 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
123,792

 
$
23,631

 
$
147,423

 
$
22,686

Railcar leasing
32,768

 

 
32,768

 
19,675

Railcar services
19,620

 
959

 
20,579

 
3,508

Corporate

 

 

 
(4,508
)
Eliminations

 
(24,590
)
 
(24,590
)
 
(664
)
Total Consolidated
$
176,180

 
$

 
$
176,180

 
$
40,697






AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Three Months Ended
 
March 31,
 
2017
 
2016
Operating activities:
 
 
 
Net earnings
$
10,568

 
$
22,792

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
13,873

 
12,655

Amortization of deferred costs
125

 
126

(Gain) loss on disposal of property, plant, equipment and leased railcars
(13
)
 
25

Earnings from joint ventures
(550
)
 
(1,486
)
Provision for deferred income taxes
12,780

 
8,640

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
14,310

 
694

Accounts receivable, due from related parties
(1,680
)
 
2,071

Income taxes receivable
(52
)
 
1,246

Inventories, net
(3,770
)
 
21,429

Prepaid expenses and other current assets
52

 
(1,796
)
Accounts payable
897

 
(9,786
)
Accounts payable, due to related parties
311

 
(1,999
)
Accrued expenses and taxes
(5,482
)
 
3,674

Other
1,050

 
(417
)
Net cash provided by operating activities
42,419

 
57,868

Investing activities:
 
 
 
Purchases of property, plant and equipment
(1,550
)
 
(4,367
)
Grant Proceeds
100

 

Capital expenditures - leased railcars
(55,909
)
 
(20,620
)
Proceeds from the sale of property, plant, equipment and leased railcars
73

 
640

Proceeds from repayments of loans and distributions from joint ventures
1,477

 
1,477

Net cash used in investing activities
(55,809
)
 
(22,870
)
Financing activities:
 
 
 
Repayments of debt
(6,310
)
 
(106,402
)
Change in restricted cash related to long-term debt
3

 
142

Stock repurchases

 
(10,872
)
Payment of common stock dividends
(7,633
)
 
(7,825
)
Debt issuance costs

 
(10
)
Net cash used in financing activities
(13,940
)
 
(124,967
)
Effect of exchange rate changes on cash and cash equivalents
5

 
(14
)
Decrease in cash and cash equivalents
(27,325
)
 
(89,983
)
Cash and cash equivalents at beginning of period
178,571

 
298,064

Cash and cash equivalents at end of period
$
151,246

 
$
208,081







AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS TO EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
 
 
Three Months Ended 
 March 31,
 
2017
 
2016
Net earnings
$
10,568

 
$
22,792

Income tax expense
6,793

 
13,963

Interest expense
5,531

 
5,906

Interest income
(373
)
 
(478
)
Depreciation
13,873

 
12,655

EBITDA
$
36,392

 
$
54,838

Income related to stock appreciation rights compensation
(247
)
 
(311
)
Other Income on short-term investment activity
$
(54
)
 

Adjusted EBITDA
$
36,091

 
$
54,527


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.



Q1 2017 Supplemental Information INVESTOR CONTACT: (636) 940-6000 WEBSITE: AMERICANRAILCAR.COM American Railcar Industries, Inc. Exhibit 99.2


 
Forward Looking Disclaimer 2 Safe Harbor Statement This presentation contains statements relating to the Company's response to governmental directives, 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 presentation. Such statements include, without limitation, statements regarding: various estimates we have made in preparing our financial statements, our plans, and the industry's ability, to address the Federal Railroad Administration (FRA) directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive), our plans to transition the management of our lease fleet in- house from ARL, expected future trends relating to our industry, products and markets, the potential impact of regulatory developments, including developments related to the Directive, 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 projects to expand our manufacturing flexibility and repair capacity, 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. 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; risks relating to our compliance with the Directive, any developments related to the Directive and any costs or loss of revenue related thereto; risks relating to timely and successfully transitioning the management of our railcar leasing business in-house from ARL and managing our lease fleet leading up to and after the ARL Sale; the risk of being unable to market or remarket railcars for sale or lease at favorable prices or on favorable terms or at all; fluctuations in commodity prices, including oil and gas; the impact, costs and expenses of any warranty claims we may be subject to now or in the future; the highly competitive nature of the manufacturing, railcar leasing and railcar services industries; the variable purchase patterns of our railcar customers and the timing of completion, customer acceptance and shipment of orders, as well as the mix of railcars for lease versus direct sale; risks relating to our compliance with, and the overall railcar industry's implementation of, United States and Canadian regulations related to the transportation of flammable liquids by rail; our ability to manage overhead and variations in production rates; our ability to recruit, retain and train qualified personnel; the impact of any economic downturn, adverse market conditions or restricted credit markets; our reliance upon a small number of customers that represent a large percentage of our revenues and backlog; fluctuations in the costs of raw materials, including steel and railcar components, and delays in the delivery of such raw materials and components; fluctuations in the supply of components and raw materials we use in railcar manufacturing; the ongoing risks related to our relationship with Mr. Carl Icahn, our principal beneficial stockholder through Icahn Enterprises L.P. (IELP), and certain of his affiliates; the risks associated with ongoing compliance with environmental, health, safety, and regulatory laws and regulations, which may be subject to change; the impact, costs and expenses of any litigation we may be subject to now or in the future; the sufficiency of our liquidity and capital resources, including long-term capital needs to support the growth of our lease fleet; the impact of repurchases pursuant to our Stock Repurchase Program on our current liquidity and the ownership percentage of our principal beneficial stockholder through IELP, Mr. Carl Icahn; the risks associated with our current joint ventures and anticipated capital needs of, and production capabilities at our joint ventures; the conversion of our railcar backlog into revenues equal to our reported estimated backlog value; the risks and impact associated with any potential joint ventures, acquisitions, strategic opportunities, dispositions or new business endeavors; the integration with other systems and ongoing management of our new enterprise resource planning system; the risks related to our and our subsidiaries' indebtedness and compliance with covenants contained in our and our subsidiaries' financing arrangements and the additional risk factors described in ARI’s filings with the Securities and Exchange Commission. The Company expressly disclaims any duty to provide updates to any forward-looking statements made in this presentation, whether as a result of new information, future events or otherwise.


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


 
ARI Locations 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 • Specialty Chemical Products • Sand • Cement * Based upon backlog as of 3/31/2017 per the Railway Supply Institute, Inc ARCI 2017 – 1st Quarter Reporting Statistics (issued April 2017) 5


 
ARI’s Railcar Backlog 6 Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Mar 2017 Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 1,199 Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 2,087 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 To ta l R a ilcar B a ck lo g 1,050 6,530 7,060 8,560 11,732 7,081 4,240 550 3,813 3,286


 
Manufacturing Segment • Flexible and labor efficient manufacturing facilities • Strategic locations near customers and major rail lines • Vertical integration from joint ventures and component manufacturing • Experienced core group of employees • Ability to adapt to evolving customer demands 7 -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 Q1 2017 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. Q1 2017 TTM and 2016 both include impact of ~2%, or $12.3 million, for the loss contingency reserve related to the FRA Directive. Broad manufacturing base allows ARI to be competitive and provide quality railcars and components


 
Railcar Leasing Segment - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 $- $20 $40 $60 $80 $100 $120 $140 2012 2013 2014 2015 2016 Q1 2017 TTM Revenue Lease Fleet (millions) • Broad mix of customers and commodities • Relatively young lease fleet with low maintenance expense • Building in-house capabilities to manage the railcar leasing business as a result of the ARL sale anticipated to close in Q2 2017 • Includes adding to our existing sales and lease operations staff • Continuing to prepare for this new opportunity to further integrate ARI’s business model • ARI will obtain certain software and data owned and used by ARL to manage leased railcars • Further fleet growth expected to come from existing liquidity and future railcar leveraged financing(s) • Unencumbered leased railcars available to borrow against 8 Diversifying and supplementing our business with revenue streams generated over the life of the railcar


 
Railcar Services Segment 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 • Additional retrofit and repair capacity from Repair Services Agreement with ACF 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 Q1 '17 TTM Revenue Operating Margin % (millions) Supporting both ARI’s lease fleet and customers' railcar needs, while gaining valuable industry insight ARI’s repair network is capable and responding to the Revised Directive with an inspection plan reviewed by the FRA.


 
Our Financial History $808.8 $423.4 $273.6 $519.4 $711.7 $750.6 $733.0 $889.3 $639.1 $577.6 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 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 $60.5 $78.8 $40.0 $4.5 $50.5 $149.5 $181.1 $209.0 $278.9 $188.0 $169.6 ($50.0) $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 TTM Net Earnings Adj. EBITDA * * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. 10 Consolidated Revenue ($ mil) ^ Net Earnings & Adj. EBITDA ($ mil) Q1 2017 TTM and 2016 Net Earnings and Adj. EBITDA* impacted by $12.3 million loss contingency reserve related to the FRA Directive.


 
Our Financial History (continued) $10.4 $0.0 $0.0 $29.4 $185.9 $162.1 $307.7 $211.6 $90.3 $125.6 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 TTM Lease Railcar CAPEX ($ mil) Operational CAPEX ($ mil) $42.0 $15.0 $6.1 $6.2 $20.0 $22.0 $20.1 $36.6 $23.0 $20.2 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 TTM 11


 
Quarterly Financial Comparison $263.8 $192.0 $172.7 $260.9 $176.2 $150.5 $144.9 $167.5 $114.7 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 ^ 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 $72.0 $68.5 $62.6 $75.8 $54.5 $50.4 $31.3 $51.8 $36.1 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Net Earnings Adjusted EBITDA * * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. Net Earnings & Adj. EBITDA ($ mil) Consolidated Revenue ($ mil) ^ 12 2016 Net Earnings and Adj. EBITDA* impacted by the $12.3 million loss contingency reserve related to the FRA Directive.


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


 
Exhibit A – Adj. EBITDA Reconciliation Annual Reconciliation 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q1 2017 TTM Net earnings (loss) $ 31,382 $ 15,458 $ (27,006) $ 4,336 $ 63,823 $ 86,896 $ 99,533 $ 133,453 $ 72,663 $ 60,439 Income tax expense (benefit) 18,403 6,568 (14,795) 3,866 42,022 52,440 65,074 77,291 41,537 34,367 Interest expense 20,299 20,909 21,275 20,291 17,765 7,337 7,622 21,801 22,803 22,428 Loss on debt extinguishment - - - - 2,267 392 1,896 2,126 - - Interest income (7,835) (6,613) (3,519) (3,654) (3,003) (2,716) (2,517) (2,164) (1,785) (1,680) Depreciation 20,148 23,405 23,597 22,167 23,850 27,712 34,212 45,729 52,216 53,434 EBITDA $ 82,397 $ 59,727 $ (448) $ 47,006 $ 146,724 $ 172,061 $ 205,820 $ 278,236 $ 187,434 $ 168,988 Loss on sale of investment in India joint venture - - - - - 5,917 - - - - Expense related to stock based compensation 62 1,174 5,358 3,537 4,668 5,129 3,192 646 751 815 Other income on short-term investment activity (3,657) (20,858) (379) - (1,863) (2,008) - - (80) (234) Adjusted EBITDA $ 78,802 $ 40,043 $ 4,531 $ 50,543 $ 149,529 $ 181,099 $ 209,012 $ 278,882 $ 188,005 $ 169,569 Quarterly Reconciliation Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Net earnings $ 34,976 $ 32,969 $ 29,357 $ 36,151 $ 22,792 $ 19,896 $ 7,689 $ 22,286 $ 10,568 Income tax expense 20,541 19,297 16,729 20,724 13,963 12,312 4,864 10,398 6,793 Interest expense 4,738 5,694 5,645 5,724 5,906 5,678 5,632 5,587 5,531 Loss on debt extinguishment 2,126 - - - - - - - - Interest income (563) (550) (542) (509) (478) (453) (429) (425) (373) Depreciation 10,061 10,910 12,214 12,544 12,655 12,961 13,113 13,487 13,873 EBITDA $ 71,879 $ 68,320 $ 63,403 $ 74,634 $ 54,838 $ 50,394 $ 30,869 $ 51,333 $ 36,392 Expense (Income) related to stock appreciation rights 107 184 (762) 1,117 (311) 24 395 643 (247) Other income on short-term investment activity - - - - - - - (180) (54) Adjusted EBITDA $ 71,986 $ 68,504 $ 62,641 $ 75,751 $ 54,527 $ 50,418 $ 31,264 $ 51,796 $ 36,091 In Thousands, unaudited 14 Q1 2017 TTM & 2016 Net Earnings and Adj. EBITDA* impacted by the $12.3 million loss contingency recorded as of 3/31/17 & 12/31/16 respectively related to the FRA Directive. * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A.


 
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


 
A Tradition of Industry Leadership 16