American Railcar Industries, Inc.
American Railcar Industries, Inc. (Form: 8-K, Received: 08/01/2017 09:16:38)


 
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): August 1, 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 August 1, 2017 , American Railcar Industries, Inc. (“ARI” or the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 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 August 1, 2017 of American Railcar Industries, Inc. announcing financial results for the second quarter of 2017
Exhibit 99.2
 
Supplemental Information Presentation for the period ended June 30, 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: August 1, 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 August 1, 2017 of American Railcar Industries, Inc. announcing financial results for the second quarter of 2017
Exhibit 99.2
 
Supplemental Information Presentation for the period ended June 30, 2017





Exhibit 99.1
 
P RESS  R ELEASE
ARIILOGOA01A01A01A17.JPG
  
AMERICAN RAILCAR INDUSTRIES, INC.
100 Clark Street, St. Charles, Missouri 63301
americanrailcar.com
 
 
 
636.940.6000
 
FOR RELEASE:
August 1, 2017
 
 
  
 
  
 
 
 
 
 
  
 
  
 
 
 
 
 
  
 
  
 

AMERICAN RAILCAR INDUSTRIES, INC.
REPORTS SECOND QUARTER 2017 RESULTS
Second Quarter 2017 Highlights
 
Quarterly revenue of $109.0 million
Quarterly net earnings of $10.9 million , or $0.57 per share
Quarterly adjusted EBITDA of $37.0 million , or 34.0% of revenue
Lease fleet reaches 12,414 railcars as of June 30, 2017 vs. 10,641 railcars as of June 30, 2016, with 545 railcars added during the second quarter
Current liquidity of $302.8 million , including $200.0 million available under revolving credit facility
St. Charles, MO, August 1, 2017 - American Railcar Industries, Inc. (ARI or the Company) (NASDAQ: ARII) today reported its second quarter 2017 financial results. Jeff Hollister, President and CEO of ARI, commented, "As announced in our press release in early June, we began managing our railcar leasing business in-house upon completion of the sale of our previous lease fleet manager, American Railcar Leasing (ARL). As a result, we have added personnel to increase our sales force and to support managing our lease fleet, and we feel we have a strong team in place. This group is comprised of numerous key employees including existing ARI employees, former ARL employees, and others who have joined us from elsewhere in the industry. The commercial team is led by John O'Bryan, our Chief Commercial Officer. Managing our lease fleet in-house enhances our ability to serve our customers with a complete suite of products and services to support all of their needs. Our balanced sales and lease strategy across a broad group of customers and railcar types is complemented by our strong core manufacturing business and repair services network, which together allow us to better position ourselves in the current challenging railcar market.
Shipments for the second quarter of 2017 were 1,076 railcars, which represent an increase of 5.8% when compared to the same period of 2016. Furthermore, we have received orders for 798 railcars during the second quarter of 2017, bringing total orders to 1,672 railcars for the first six months of 2017. This total compares to orders for 1,568 railcars for the full year of 2016. While industry orders during the second quarter of 2017 were reported at their highest level since the second quarter of 2015, we still see softness in the tank railcar market. There are consistent levels of interest in certain hopper railcar types, but these opportunities have been and continue to be competitive. We feel we are strategically positioned with our vertically integrated business model to capitalize on limited opportunities that arise as we work with customers operating within the hopper and tank railcar markets."
Second Quarter Revenue Summary
Total consolidated revenues were $109.0 million for the second quarter of 2017 , a decrease of 28% when compared to $150.5 million for the same period in 2016 . This decrease was due to decreased revenues in the manufacturing segment, partially offset by slightly increased revenues in the railcar leasing and railcar services segments.
Manufacturing revenues were $55.1 million for the second quarter of 2017 , a decrease of 44% compared to $97.5 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 second quarter of 2017. Furthermore, the Company experienced a more competitive pricing environment during the second quarter of 2017 compared to the same period in 2016.
During the second quarter of 2017 , ARI shipped 531 railcars for direct sale and 545 railcars for lease compared to 932 railcars for direct sale and 85 railcars for lease during the same period in 2016 . Railcars built for the lease fleet represented 51% of ARI’s railcar shipments during the second quarter of 2017 compared to 8% for the same period in 2016 . This quarterly rate is





high relative to our historical average, but it is consistent with our strategy to continue to invest in and grow our lease fleet as demand dictates in certain railcar types. Shipments and orders for railcars on long-term leases not only help us to maintain a steady level of production during the manufacturing period, but also provide a steady stream of future cash flows. Because revenues and earnings related to leased railcars are recognized over the life of the lease, our quarterly results may vary depending on the mix of lease versus direct sale railcars that we ship during a given period.
Manufacturing revenues for the second quarter of 2017 , on a consolidated basis, exclude $54.6 million of revenues related to railcars built for the Company's lease fleet compared to $9.3 million for the same period in 2016 . Revenues related to railcars built for the Company's lease fleet increased due to a higher volume of railcars 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 $33.7 million for the second quarter of 2017 , an increase of 2% over the $33.2 million for the comparable period in 2016 . The primary reason for the increase in revenue was an increase in the number of railcars on lease, partially offset by a decline in weighted average lease rates. ARI had 12,414 railcars in its lease fleet as of June 30, 2017 compared to 10,641 railcars as of June 30, 2016 .
Railcar services revenues were $20.2 million for the second quarter of 2017 , an increase of 2% compared to $19.7 million for the same period in 2016 . The primary reasons for the increase in revenue were due to increased demand and additional capacity from our mobile repair operations, partially offset by decreased demand for tank railcar qualifications and tank railcar exterior paint and interior linings. Our tank railcar manufacturing facility provides us the flexibility not only to produce new railcars, but also to perform repair and retrofit services in a production line set-up 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 during the three and six months ended June 30, 2017 that were performed to a lesser extent during the comparable periods of 2016. We also saw increased intercompany repair work for our growing lease fleet.
Consolidated earnings from operations were $22.2 million for the second quarter of 2017 , a decrease of 38% from the $36.0 million for the same period in 2016 . Consolidated operating margins decreased to 20.3% for the second quarter of 2017 compared to 23.9% for the same period in 2016 . These decreases were primarily driven by lower earnings from operations in the Company's manufacturing segment combined with slightly lower earnings from operations in the railcar leasing segment and higher selling, general and administrative costs.
Manufacturing earnings from operations were $2.5 million for the second quarter of 2017 compared to earnings of $14.4 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 $4.8 million and $1.1 million for the second 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. Partially offsetting this decrease was a reduction of the loss contingency established in response to the FRA Revised Directive, as discussed further in our SEC filings.
Railcar leasing earnings from operations were $21.6 million for the second quarter of 2017 compared to $22.9 million for the same period in 2016 . This decrease was primarily due to increased maintenance costs associated with our growing lease fleet and certain railcars reassigned to other lessees and lower lease rates on certain renewals.
Railcar services earnings from operations were $3.0 million for the second quarter of 2017 compared to $3.1 million for the same period in 2016 . This decrease was primarily due to an unfavorable mix of work, partially offset by an increase in demand for our mobile repair services.
Selling, general and administrative expenses were $9.0 million for the second quarter of 2017 compared to $7.3 million for the same period in 2016 . This $1.7 million increase was primarily due to higher legal costs, a prior year credit to bad debt expense and compensation costs primarily related to the increased workforce in sales and fleet management due to the transition of managing our lease fleet in-house, partially offset by decreased commissions due to a lower mix of railcar shipments for direct sale compared to the prior year and stock-based compensation costs due to fluctuations in the Company’s stock price.
Net earnings for the second quarter of 2017 were $10.9 million , or $0.57 per share compared to $19.9 million , or $1.02 per share, in the same period in 2016 . This decrease was driven largely by decreased earnings from operations, as discussed above, as well as the impact of increased tax expense during the second quarter of 2017 as the Company recorded a valuation allowance of $1.0 million against a deferred tax asset related to a capital loss carryforward. This valuation allowance equates to a decrease of $0.05 per share for the second quarter of 2017.





EBITDA, adjusted to exclude share-based compensation expense and other income related to short-term investment activity (Adjusted EBITDA), was $37.0 million for the second quarter of 2017 compared to $50.4 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.
Year-to-Date Results
Consolidated revenues for the first six months of  2017  were  $223.7 million  compared to  $326.7 million  for the comparable period in  2016 . The Company shipped  1,080  direct sale railcars and  1,147  railcars built for the Company's lease fleet during the first six months of  2017  compared to  2,062  direct sale railcars and  285  railcars built for the lease fleet during the same period in  2016 . Railcars built for the lease fleet represented  52%  of ARI's railcar shipments in the first six months of  2017  compared to  12%  for the same period in  2016 .
Consolidated earnings from operations for the first six months of  2017  were  $44.1 million , a decrease of  43%  from  $76.7 million  for the comparable period in  2016 . Consolidated earnings from operations for the first six months of  2017  and  2016  excluded  $10.9 million  and  $4.5 million , respectively, of profit on railcars built for the lease fleet that is eliminated in consolidation. Operating margins were  19.7%  for the first six months of  2017  compared to  23.5%  for the same period of  2016 . These decreases were primarily driven by lower earnings from operations in the Company's manufacturing segment combined with slightly lower earnings from operations in the railcar leasing and railcar services segments and higher selling, general and administrative costs.
Net earnings for the first six months of  2017  were  $21.5 million , or  $1.12  per share compared to  $42.7 million , or  $2.18  per share, for the comparable period in  2016 , 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 half of 2017 and lower overall shipments.

Adjusted EBITDA was  $73.1 million  for the first six months of  2017 , a decrease of  $31.8 million  from  $104.9 million for the comparable period in  2016 . The decrease resulted primarily from decreased earnings from operations as discussed above. A reconciliation of the Company’s net earnings to EBITDA and Adjusted EBITDA (both non-GAAP financial measures) is set forth in the supplemental disclosure attached to this press release.
Cash Flow and Liquidity
The Company’s earnings have contributed to cash flow from operations in the first six months of 2017 of $52.2 million . As of June 30, 2017 , ARI had working capital of $172.0 million , including $102.8 million of cash and cash equivalents.
As of June 30, 2017 , the Company had $558.4 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 $15.3 million during the first six months of 2017. At the board meeting in July, 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 8, 2017 that will be paid on September 22, 2017 .
The Company has not repurchased any shares of its common stock thus far in 2017 under its stock repurchase program. Board authorization for approximately $164.0 million remains available for further stock repurchases.
Backlog
ARI's backlog as of June 30, 2017 was 2,878 railcars with an estimated market value of $270.0 million . Of the total backlog, we currently expect 715 railcars, or 25% , having an estimated market value of $66.5 million , will be placed into our lease fleet.
Conference Call and Webcast
ARI will host a webcast and conference call on Tuesday, August 1, 2017 at 10:00 am (Eastern Time) to discuss the Company’s second quarter 2017 financial results. In conjunction with this press release, ARI has posted a supplemental information presentation to its website. To participate in the webcast, please log-on to ARI’s investor relations page through the ARI website at americanrailcar.com . To participate in the conference call, please dial 877-745-9389. Participants are asked to log-on to the ARI website or dial in to the conference call approximately 10 to 15 minutes prior to the start time. An audio replay of the call will also be available on the Company’s website promptly following the earnings call.





About ARI
ARI is a prominent North American designer and manufacturer of hopper and tank railcars. ARI provides its railcar customers with integrated solutions through a comprehensive set of high quality products and related services. ARI manufactures and sells railcars, custom designed railcar parts, and other industrial products. ARI and its subsidiaries also lease railcars manufactured by the Company to certain markets, and ARI has begun managing these lease railcars in-house. In addition, ARI and its subsidiaries provide railcar repair services through its various repair facilities, including mini-shops and mobile units, offering a range of services from full to light repair. More information about American Railcar Industries, Inc. is available on its website at americanrailcar.com or call the Investor Relations Department, 636.940.6000.






Forward Looking Statement Disclaimer
This press release contains statements relating to the Company's expected financial performance, objectives, long-term strategies and/or future business prospects, events and plans that are forward-looking statements. Forward-looking statements represent the Company’s estimates and assumptions only as of the date of this press release. Such statements include, without limitation, statements regarding: various estimates we have made in preparing our financial statements, expected future trends relating to our industry, products and markets, anticipated customer demand for our products and services, trends relating to our shipments, leasing business, railcar services, revenues, profit margin, capacity, financial condition, and results of operations, trends related to shipments for direct sale versus lease, our backlog and any implication that our backlog may be indicative of our future revenues, our strategic objectives and long-term strategies, our results of operations, financial condition and the sufficiency of our capital resources, our capital expenditure plans, short- and long-term liquidity needs, ability to service our current debt obligations and future financing plans, our Stock Repurchase Program, anticipated benefits regarding the growth of our leasing business, the mix of railcars in our lease fleet and our lease fleet financings, anticipated production schedules for our products and the anticipated production schedules of our joint ventures, our plans regarding future dividends and the anticipated performance and capital requirements of our joint ventures. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated. Investors should not place undue reliance on forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance. The payment of future dividends, if any, and the amount thereof, will be at the discretion of ARI’s board of directors and will depend upon the Company’s operating results, strategic plans, capital requirements, financial condition, provisions of its borrowing arrangements, applicable law and other factors the Company’s board of directors considers relevant. Other potential risks and uncertainties that could adversely affect our business and prospects include without limitation: our prospects in light of the cyclical nature of our business; the health of and prospects for the overall railcar industry; risks relating to our compliance with the FRA directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive), any developments related to the Directive and any costs or loss of revenue related thereto; risks relating to the ongoing transition of the management of our railcar leasing business from ARL to in-house management following completion of the 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)
 
 
June 30,
2017
 
December 31,
2016
 
(unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
102,811

 
$
178,571

Restricted cash
16,684

 
16,714

Short-term investments—available for sale securities
1,815

 
8,958

Accounts receivable, net
44,780

 
39,727

Accounts receivable, due from related parties
2,453

 
4,790

Inventories, net
70,807

 
75,028

Prepaid expenses and other current assets
9,155

 
8,623

Total current assets
248,505

 
332,411

Property, plant and equipment, net
169,628

 
177,051

Railcars on lease, net
994,821

 
908,010

Income Tax Receivable
11,721

 
234

Goodwill
7,169

 
7,169

Investments in and loans to joint ventures
24,683

 
26,332

Other assets
3,831

 
5,043

Total assets
$
1,460,358

 
$
1,456,250

Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
24,346

 
$
29,314

Accounts payable, due to related parties
186

 
3,252

Accrued expenses, including loss contingency of $8,104 and $10,127 at June 30, 2017 and December 31, 2016, respectively
15,509

 
15,411

Accrued income taxes payable

 
7,660

Accrued compensation
10,800

 
11,628

Short-term debt, including current portion of long-term debt
25,681

 
25,588

Total current liabilities
76,522

 
92,853

Long-term debt, net of unamortized debt issuance costs of $4,756 and $4,863 at June 30, 2017 and December 31, 2016, respectively
532,740

 
545,392

Deferred tax liability
279,709

 
252,943

Pension and post-retirement liabilities
8,672

 
8,648

Other liabilities, including loss contingency of $1,970 and $2,161 at June 30, 2017 and December 31, 2016, respectively
5,616

 
6,144

Total liabilities
903,259

 
905,980

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value, 50,000,000 shares authorized, 19,083,878 shares outstanding as of both June 30, 2017 and December 31, 2016
213

 
213

Additional paid-in capital
239,609

 
239,609

Retained Earnings
409,010

 
402,810

Accumulated other comprehensive loss
(5,702
)
 
(6,331
)
Treasury Stock
(86,031
)
 
(86,031
)
Total stockholders’ equity
557,099

 
550,270

Total liabilities and stockholders’ equity
$
1,460,358

 
$
1,456,250







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,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Manufacturing (including revenues from affiliates of $137 for both the three and six months ended June 30, 2017 and $223 and $776 for the three and six months ended June 30 2016, respectively)
$
55,087

 
$
97,548

 
$
115,813

 
$
221,340

Railcar leasing (including revenues from affiliates of $223 and $447 for the three and six months ended June 30, 2017, respectively, and zero for the same periods in 2016)
33,717

 
33,209

 
67,552

 
65,977

Railcar services (including revenues from affiliates of $4,425 and $10,572 for the three and six months ended June 30, 2017, respectively, and $7,249 and $15,243 for the same periods in 2016)
20,216

 
19,727

 
40,336

 
39,347

Total revenues
109,020

 
150,484

 
223,701

 
326,664

Cost of revenues:
 
 
 
 
 
 
 
Manufacturing
(51,121
)
 
(81,437
)
 
(105,680
)
 
(183,718
)
Other operating income
1,033

 

 
1,064

 

Railcar leasing
(11,617
)
 
(10,356
)
 
(23,676
)
 
(20,531
)
Railcar services
(16,146
)
 
(15,420
)
 
(33,536
)
 
(30,657
)
Total cost of revenues
(77,851
)
 
(107,213
)
 
(161,828
)
 
(234,906
)
Gross profit
31,169

 
43,271

 
61,873

 
91,758

Selling, general and administrative
(9,019
)
 
(7,297
)
 
(17,821
)
 
(15,254
)
Net gains on disposition of leased railcars

 

 
13

 
167

Earnings from operations
22,150

 
35,974

 
44,065

 
76,671

Interest income (including income from related parties of $306 and $642 for the three and six months ended June 30, 2017, respectively, and $427 and $884 for the same periods in 2016)
368

 
453

 
741

 
931

Interest expense
(5,488
)
 
(5,678
)
 
(11,019
)
 
(11,584
)
Other income
1,867

 
1

 
1,921

 
1

Earnings from joint ventures
796

 
1,458

 
1,346

 
2,944

Earnings before income taxes
19,693

 
32,208

 
37,054

 
68,963

Income tax expense
(8,794
)
 
(12,312
)
 
(15,587
)
 
(26,275
)
Net earnings
$
10,899

 
$
19,896

 
$
21,467

 
$
42,688

Net earnings per common share—basic and diluted
$
0.57

 
$
1.02

 
$
1.12

 
$
2.18

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

 
19,511

 
19,084

 
19,588

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, 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

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
97,548

 
$
9,266

 
$
106,814

 
$
15,538

Railcar leasing
33,209

 

 
33,209

 
20,237

Railcar services
19,727

 
609

 
20,336

 
3,059

Corporate

 

 

 
(4,441
)
Eliminations

 
(9,875
)
 
(9,875
)
 
1,581

Total Consolidated
$
150,484

 
$

 
$
150,484

 
$
35,974

 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
 
Revenues
 
 
 
External
 
Intersegment
 
Total
 
Earnings (Loss) from Operations
 
(in thousands)
Manufacturing
$
221,340

 
$
32,897

 
$
254,237

 
$
38,224

Railcar leasing
65,977

 

 
65,977

 
39,912

Railcar services
39,347

 
1,568

 
40,915

 
6,567

Corporate

 

 

 
(8,949
)
Eliminations

 
(34,465
)
 
(34,465
)
 
917

Total Consolidated
$
326,664

 
$

 
$
326,664

 
$
76,671






AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
Six Months Ended
 
June 30,
 
2017
 
2016
Operating activities:
 
 
 
Net earnings
$
21,467

 
$
42,688

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation
28,174

 
25,616

Amortization of deferred costs
250

 
252

(Gain) loss on disposal of property, plant, equipment and leased railcars
(12
)
 
18

Earnings from joint ventures
(1,346
)
 
(2,944
)
Provision for deferred income taxes
26,720

 
15,163

Items related to investing activities:
 
 
 
Realized gain on short-term investments - available for sale securities
(1,823
)
 

Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net
(393
)
 
(11,421
)
Accounts receivable, due from related parties
2,357

 
3,322

Income taxes receivable
(12,248
)
 
926

Inventories, net
4,264

 
20,167

Prepaid expenses and other current assets
235

 
(2,643
)
Accounts payable
(4,983
)
 
(11,377
)
Accounts payable, due to related parties
(3,065
)
 
(2,569
)
Accrued expenses and taxes
(8,401
)
 
8,514

Other
956

 
1,772

Net cash provided by operating activities
52,152

 
87,484

Investing activities:
 
 
 
Purchases of property, plant and equipment
(3,422
)
 
(11,187
)
Grant Proceeds

 
75

Capital expenditures - leased railcars
(103,765
)
 
(33,444
)
Proceeds from the disposal of property, plant, equipment and leased railcars
73

 
640

Proceeds from sale of short-term investments - available for sale securities
4,086

 

Proceeds from repayments of loans by joint ventures
2,953

 
2,953

Net cash used in investing activities
(100,075
)
 
(40,963
)
Financing activities:
 
 
 
Repayments of debt
(12,669
)
 
(112,834
)
Change in restricted cash related to long-term debt
30

 
263

Stock repurchases

 
(16,917
)
Payment of common stock dividends
(15,267
)
 
(15,613
)
Debt issuance costs

 
(14
)
Net cash used in financing activities
(27,906
)
 
(145,115
)
Effect of exchange rate changes on cash and cash equivalents
69

 
(19
)
Decrease in cash and cash equivalents
(75,760
)
 
(98,613
)
Cash and cash equivalents at beginning of period
178,571

 
298,064

Cash and cash equivalents at end of period
$
102,811

 
$
199,451







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,
 
2017
 
2016
 
2017
 
2016
Net earnings
$
10,899

 
$
19,896

 
$
21,467

 
$
42,688

Income tax expense
8,794

 
12,312

 
15,587

 
26,275

Interest expense
5,488

 
5,678

 
11,019

 
11,584

Interest income
(368
)
 
(453
)
 
(741
)
 
(931
)
Depreciation
14,301

 
12,961

 
28,174

 
25,616

EBITDA
$
39,114

 
$
50,394

 
$
75,506

 
$
105,232

Expense (Income) related to stock appreciation rights compensation
(225
)
 
24

 
(472
)
 
(287
)
Other Income on short-term investment activity
$
(1,867
)
 

 
$
(1,921
)
 

Adjusted EBITDA
$
37,022

 
$
50,418

 
$
73,113

 
$
104,945


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.



Q2 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 continue to transition the management of our lease fleet from ARL to in-house and terminate our contractual agreements with ARL, expected future trends relating to our industry, products and markets, 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 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 the ongoing transition of the management of our railcar leasing business from ARL to in-house management following completion of 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 • Sand • Specialty Chemical Products • Cement * Based upon backlog as of 6/30/2017 per the Railway Supply Institute, Inc ARCI 2017 – 2nd Quarter Reporting Statistics (issued July 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 Jun 2017 Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 715 Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 2,163 - 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 2,878


 
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 Q2 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. 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 $160 2012 2013 2014 2015 2016 Q2 2017 TTM Revenue Lease Fleet(millions) • Broad mix of customers and commodities • Relatively young lease fleet with low maintenance expense • Began in-house management of the railcar leasing business as a result of the ARL sale on June 1, 2017 • Added to our existing sales force and established lease fleet management group • Further integration of ARI’s business model • ARI obtained and is using 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 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 Q2 '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 $536.2 $0.0 $200.0 $400.0 $600.0 $800.0 $1,000.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 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 $51.4 $78.8 $40.0 $4.5 $50.5 $149.5 $181.1 $209.0 $278.9 $188.0 $156.2 ($50.0) $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 TTM Net Earnings Adj. EBITDA * * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. 10 Consolidated Revenue ($ mil) ^ Net Earnings & Adj. EBITDA ($ mil)


 
Our Financial History (continued) $10.4 $0.0 $0.0 $29.4 $185.9 $162.1 $307.7 $211.6 $90.3 $160.7 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 TTM Lease Railcar CAPEX ($ mil) # Operational CAPEX ($ mil) $42.0 $15.0 $6.1 $6.2 $20.0 $22.0 $20.1 $36.6 $23.0 $15.3 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 TTM 11 # Includes effect of leased railcars in process.


 
Quarterly Financial Comparison $263.8 $192.0 $172.7 $260.9 $176.2 $150.5 $144.9 $167.5 $114.7 $109.0 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 ^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease. $35.0 $33.0 $29.4 $36.2 $22.8 $19.9 $7.7 $22.3 $10.6 $10.9 $72.0 $68.5 $62.6 $75.8 $54.5 $50.4 $31.3 $51.8 $36.1 $37.0 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Net Earnings Adjusted EBITDA * * Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A. Net Earnings & Adj. EBITDA ($ mil) Consolidated Revenue ($ mil) ^ 12


 
Quarterly Financial Comparison $5.0 $10.4 $11.1 $10.1 $4.4 $6.7 $4.8 $7.1 $1.6 $1.8 $0.0 $2.0 $4.0 $6.0 $8.0 $10.0 $12.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 $48.1 $84.5 $77.7 $1.3 $20.6 $12.8 $36.0 $20.9 $55.9 $47.9 $0.0 $20.0 $40.0 $60.0 $80.0 $100.0 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 # Includes effect of leased railcars in process. Operational CAPEX ($ mil) Lease Railcar CAPEX ($ mil) # 13


 
Exhibit A – Adj. EBITDA Reconciliation In Thousands, unaudited 14 Annual Reconciliation 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q2 2017 TTM Net earnings (loss) $ 31,382 $ 15,458 $ (27,006) $ 4,336 $ 63,823 $ 86,896 $ 99,533 $ 133,453 $ 72,663 $ 51,442 Income tax expense (benefit) 18,403 6,568 (14,795) 3,866 42,022 52,440 65,074 77,291 41,537 30,849 Interest expense 20,299 20,909 21,275 20,291 17,765 7,337 7,622 21,801 22,803 22,238 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) (1,595) Depreciation 20,148 23,405 23,597 22,167 23,850 27,712 34,212 45,729 52,216 54,774 EBITDA $ 82,397 $ 59,727 $ (448) $ 47,006 $ 146,724 $ 172,061 $ 205,820 $ 278,236 $ 187,434 $ 157,708 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 3,192 646 751 566 Other income on short-term investment activity (3,657) (20,858) (379) - (1,863) (2,008) - - (80) (2,101) Adjusted EBITDA $ 78,802 $ 40,043 $ 4,531 $ 50,543 $ 149,529 $ 181,099 $ 209,012 $ 278,882 $ 188,105 $ 156,173 Quarterly Reconciliation Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Net earnings $ 34,976 $ 32,969 $ 29,357 $ 36,151 $ 22,792 $ 19,896 $ 7,689 $ 22,286 $ 10,568 $ 10,899 Income tax expense 20,541 19,297 16,729 20,724 13,963 12,312 4,864 10,398 6,793 8,794 Interest expense 4,738 5,694 5,645 5,724 5,906 5,678 5,632 5,587 5,531 5,488 Loss on debt extinguishment 2,126 - - - - - - - - - Interest income (563) (550) (542) (509) (478) (453) (429) (425) (373) (368) Depreciation 10,061 10,910 12,214 12,544 12,655 12,961 13,113 13,487 13,873 14,301 EBITDA $ 71,879 $ 68,320 $ 63,403 $ 74,634 $ 54,838 $ 50,394 $ 30,869 $ 51,333 $ 36,392 $ 39,114 Expense (Income) related to stock based compensation 107 184 (762) 1,117 (311) 24 395 643 (247) (225) Other income on short-term investment activity - - - - - - - (180) (54) (1,867) Adjusted EBITDA $ 71,986 $ 68,504 $ 62,641 $ 75,751 $ 54,527 $ 50,418 $ 31,264 $ 51,796 $ 36,091 $ 37,022


 
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