American Railcar Industries, Inc. ("ARI") (NASDAQ: ARII) today
reported its second quarter financial results. For the three months
ended June 30, 2006, revenues were $151.6 million versus $160.7
million for the same period of 2005. Revenues increased
significantly for all businesses, except for the Marmaduke tank
railcar manufacturing plant, which was shut down for the quarter
and under repair for damage from a tornado that occurred on April
2, 2006. The repairs at the Marmaduke plant are substantially
complete and the plant resumed production on August 7, 2006. The
second quarter was exceptionally strong for the covered hopper
railcar manufacturing plant, which set a new quarterly record for
railcar production and revenues. Net earnings attributable to
common stock were $10.8 million or $0.51 per diluted share for the
three months ended June 30, 2006, versus $1.9 million or $0.17 per
diluted share for the comparable period of 2005. Net earnings for
the quarter include $5.0 million of business interruption
compensation from the Company's insurance carrier for lost profits
while the tank railcar manufacturing plant was under repair. The
Company also received an additional $3.0 million of insurance to
cover continuing expenses for the second quarter, and expects
further business interruption insurance payments for the third
quarter. For the three months ended June 30, 2005, the Company
declared preferred dividends of $4.6 million, which had the effect
of reducing net earnings available to common shareholders. For the
six months ended June 30, 2006 revenues were $330.3 million versus
$291.6 million for the comparable period of 2005. Revenues for 2006
were reduced by the tank railcar manufacturing plant being under
repair for the entire quarter, but still exceeded the prior year
due to strong growth in covered hopper railcar production, and
growth in the railcar services business. Net earnings attributable
to common stock were $17.5 million or $0.87 per diluted share for
the six months ended June 30, 2006, which compares favorably to a
net loss attributable to common stock of $0.1 million or $0.00 per
diluted share for the six months ended June 30, 2005. The Company
declared preferred dividends of $0.6 million and $9.1 million for
the six months ended June 30, 2006 and 2005, respectively. The
preferred dividends had the effect of reducing net earnings
available to common shareholders. All of the Company's preferred
stock and substantially all of its debt were retired in the first
quarter of 2006 in connection with the Company's January 2006
initial public offering. EBITDA was $19.4 million for the second
quarter of 2006 and $13.7 million for the same quarter of 2005. For
the six months ended June 30, 2006 EBITDA was $33.7 million and
compares favorably to the $19.7 million for the same period of
2005. Adjusted EBITDA was $20.9 million in the second quarter of
2006 and $13.7 million for the same quarter of 2005. The adjustment
to EBITDA reflects stock based compensation expenses of $1.5
million. Adjusted EBITDA for the six months ended June 30, 2006 was
$38.8 million and reflects an adjustment to exclude $5.1 million of
stock based compensation expense. For the six months ended June 30,
2005 Adjusted EBITDA was $19.7 million. The Company expects to
incur an additional $1.5 million compensation expense, related to
previous grants of restricted stock and stock options, per quarter
for the balance of 2006. The improvements in net earnings, EBITDA
and Adjusted EBITDA from 2005 to 2006 resulted primarily from
improved profit margins which were primarily due to improved
operating efficiencies, the recovery of raw material cost increases
through variable pricing clauses in our customer contracts, and
insurance compensation for business interruption while our
Marmaduke tank railcar manufacturing plant was shut down and under
repair due to tornado damage. 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. ARI shipped 1,734 railcars in the second
quarter of 2006. This compares to 1,863 railcars shipped in the
second quarter of 2005. Second quarter 2006 shipments were
comprised of 1,649 covered hopper railcars and 85 tank railcars
(all of which were substantially complete at the time of the
storm). In the same quarter of 2005, shipments were comprised of
1,034 covered hopper railcars, 354 centerbeam platform railcars and
475 tank railcars. Railcar production and revenues were lower in
the quarter as a result of the Marmaduke plant closure, however the
Company's insurance is compensating the Company for its business
interruption losses (less a deductible). "The Company had a very
strong quarter, even though our tank railcar manufacturing plant
was undergoing repair. The covered hopper railcar plant set a new
production record with 1,649 railcars shipped in the quarter," said
James J. Unger, President and CEO of ARI. "Our substantial backlog
of unfilled orders for new railcars totaled 12,790 cars at June 30,
2006, and was almost double the 6,425 railcar backlog of one year
earlier. Our Marmaduke plant has resumed operations this week and
we expect to see production steadily increase and reach capacity
rates by the end of the third quarter. We expect the third quarter
to be strong with good operating rates for covered hopper railcars
and further payments from our business interruption insurance for
our tank railcar manufacturing plant, as production at that plant
increases to capacity production rates. The fourth quarter is
expected to be very strong, with both railcar assembly plants
expected to be operating at capacity levels by the beginning of
that quarter." ARI will host a webcast and conference call on
Thursday August 10th, 2006 at 10:00 am (Eastern time) to discuss
the Company's second quarter financial results. To participate in
the webcast, please log on to ARI's investor relations page through
the ARI web site at www.americanrailcar.com. To participate in the
conference call dial 1-800-573-4752 and use participant code
36243490. Participants are asked to logon 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 American Railcar Industries, Inc. American Railcar
Industries, Inc. is a leading North American manufacturer of
covered hopper and tank railcars. ARI also repairs and refurbishes
railcars, provides fleet management services and designs and
manufactures certain railcar and industrial components used in the
production of its railcars as well as railcars and non-railcar
industrial products produced by others. ARI provides its railcar
customers with integrated solutions through a comprehensive set of
high quality products and related services. Forward Looking
Statement Disclaimer This press release contains statements
relating to our expected financial performance and/or future
business prospects, events and plans that are "forward-looking
statements" as defined under the Private Securities Litigation
Reform Act of 1995. 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 estimated future production rates and
estimated third and fourth quarter results, statements regarding
expected insurance recoveries, and statements regarding any
implication that the Company's backlog may be indicative of future
sales. These forward-looking statements are subject to known and
unknown risks and uncertainties that could cause actual results to
differ materially from the results described in or anticipated by
our forward-looking statements. Estimated backlog reflects the
total sales attributable to the backlog reported at the end of the
particular period as if such backlog were converted to actual
sales. Estimated backlog does not reflect potential price increases
or decreases under our customer contracts that provide for variable
pricing based on changes in the cost of certain raw materials and
railcar components or the possibility that contracts may be
canceled or railcar delivery dates delayed, and does not reflect
the effects of any cancellation or delay of railcar orders that may
occur. ARI cannot guarantee that its insurance coverage, subject to
applicable deductibles, will be adequate to cover damage to the
facility and railcars. Nor can ARI guarantee that its business
interruption insurance will be adequate to cover its losses
resulting from the business interruption. ARI's insurance carrier
could also contest the scope of ARI's coverage or the amount of its
coverage or deductibles. Even if ARI's assessment of its insurance
coverage is correct, delays in receiving payments from, or disputes
with, its insurance carrier, could adversely affect ARI's business
and results of operations. Although the plant rebuilding is
substantially complete, ARI cannot guarantee the timing of
achieving full production rates at its Marmaduke facility, or
whether its rebuilding efforts, plant shut down or associated
delivery delays will result in unanticipated costs that may not be
covered by insurance. ARI cannot assure that it will be able to
retain its tank railcar customers or orders. Its tank railcar
orders may be subject to cancellation in connection with its plant
shut-down or otherwise, or ARI may incur disputes with those
customers over rescheduling deliveries. ARI also cannot guarantee
that it will be able to retain its employees, several of whom may
have been displaced from their homes. Other potential risks and
uncertainties include, among other things: the cyclical nature of
the railcar manufacturing business; adverse economic and market
conditions; fluctuating costs of raw materials, including steel and
railcar components, and delays in the delivery of such raw
materials and components; ARI's ability to maintain relationships
with its suppliers of railcar components and raw materials;
fluctuations in the supply of components and raw materials ARI uses
in railcar manufacturing; the highly competitive nature of the
railcar manufacturing industry; the risk of further damage to our
primary railcar manufacturing facilities or equipment in Paragould
or Marmaduke, Arkansas; our reliance upon a small number of
customers that represent a large percentage of our revenues; the
variable purchase patterns of our customers and the timing of
completion, delivery and acceptance of customer orders; our
dependence on key personnel; the risks of labor shortage in light
of our recent growth; the risk of lack of acceptance of our new
railcar offerings by our customers; and the additional risk factors
described in our filings with the Securities and Exchange
Commission. We expressly disclaim any duty to provide updates to
any forward-looking statements made in this press release, whether
as a result of new information, future events or otherwise. -0- *T
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per
share amounts, unaudited) December June 30, 31, ------------------
2005 2006
----------------------------------------------------------------------
Assets Current assets Cash and cash equivalents $ 28,692 $ 27,609
Accounts receivable, net 38,273 35,538 Accounts receivable, due
from affiliates 5,110 2,678 Insurance claim receivable, net - 8,000
Inventories, net 88,001 111,877 Prepaid expenses 2,523 4,001
Deferred tax asset 1,967 1,746 ----------------- Total current
assets 164,566 191,449 Property, plant and equipment Buildings
84,255 87,676 Machinery and equipment 68,187 80,189
----------------- 152,442 167,865 Less accumulated depreciation
65,398 69,834 ----------------- Net property, plant and equipment
87,044 98,031 Construction in process 3,759 12,553 Land 2,182 2,593
----------------- Total property, plant and equipment 92,985
113,177 Debt issuance costs 565 207 Deferred offering costs 4,860 -
Goodwill - 7,230 Other assets 26 37 Investment in joint venture
5,578 5,600 ----------------- Total assets $268,580 $317,700
================= CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(In thousands, except per share amounts, unaudited) December June
30, 31, ------------------ 2005 2006 --------- -------- Liabilities
and Stockholders' Equity Current liabilities: Current portion of
long-term debt $ 33,294 $ 85 Accounts payable 55,793 47,008
Accounts payable, due to affiliates 4,457 933 Accrued expenses and
taxes 7,675 7,774 Insurance advance - 2,881 Accrued compensation
7,243 9,360 Accrued dividends 11,336 636 Note payable to affiliate
- current 19,000 - ----------------- Total current liabilities
138,798 68,677 Long - term debt, net of current portion 7,076 53
Deferred tax liability 5,364 6,512 Pension and post-retirement
liabilities 10,522 10,261 Other amounts due to affiliates - 4 Other
liabilities 59 58 Mandatory redeemable preferred stock, stated
value $1,000, 99,000 shares authorized, 1 share issued and
outstanding at December 31, 2005, none outstanding at June 30, 2006
1 - ----------------- Total liabilities 161,820 85,565 Commitments
and contingencies - - Stockholders' equity: New Preferred Stock,
$.01 par value per share, stated value $1,000 per share, 500,000
shares authorized, 82,055 shares issued and outstanding at December
31, 2005, none outstanding at June 30, 2006 82,055 - Common stock,
$.01 par value, 50,000,000 shares authorized, 11,147,059 and
21,207,773 shares issued and outstanding at December 31, 2005 and
June 30, 2006, respectively 111 212 Additional paid-in capital
41,667 232,716 Retained earnings accumulated (deficit) (15,442) 801
Accumulated other comprehensive loss (1,631) (1,594)
----------------- Total stockholders' equity 106,760 232,135
----------------- Total Liabilities and stockholders' equity
$268,580 $317,700 ================= CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share amounts,
unaudited) For the Three Months Ended, June 30, June 30,
------------------ 2005 2006 ------------------ Revenues:
Manufacturing operations (including revenues from affiliates of
$17,050 and $5,182 for the three months ended June 30, 2005 and
2006, respectively) $149,284 $138,816 Railcar services (including
revenues from affiliates of $5,509 and $4,531 for the three months
ended June 30, 2005 and 2006, respectively) 11,437 12,734
----------------- Total revenues 160,721 151,550 Cost of goods
sold: Manufacturing operations (including costs related to
affiliates of $15,475 and $4,800 for the three months ended June
30, 2005 and 2006, respectively) 135,399 123,618 Railcar services
(including costs related to affiliates of $5,312 and $3,544 for the
three months ended June 30, 2005 and 2006, respectively) 10,323
9,947 ----------------- Total cost of goods sold 145,722 133,565
Gross profit 14,999 17,985 Income related to insurance recoveries,
net - 4,983 Selling, administrative and other 3,229 4,608 Stock
based compensation expense - 1,419 ----------------- Earnings from
operations 11,770 16,941 Interest income 109 429 Interest expense
(including interest expense to affiliates of $346 and $0 for the
three months ended June 30, 2005 and 2006, respectively) 1,296 103
Earnings (loss) from joint venture 180 (138) -----------------
Earnings before income tax expense 10,763 17,129 Income tax expense
4,264 6,308 ----------------- Net earnings $ 6,499 $ 10,821
================= Less preferred dividends (4,570) -
----------------- Earnings available to common shareholders $ 1,929
$ 10,821 Net earnings per common share - basic $ 0.17 $ 0.51 Net
earnings per common share - diluted $ 0.17 $ 0.51 Weighted average
common shares outstanding - basic 11,147 21,208 Weighted average
common shares outstanding - diluted 11,147 21,289 -----------------
Dividends declared per common share $ - $ 0.03 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per
share amounts, unaudited) For the Six Months Ended, June 30, June
30, -------------------- 2005 2006 -------------------- Revenues:
Manufacturing operations (including revenues from affiliates of
$28,148 and $20,209 for the six months ended June 30, 2005 and
2006, respectively) $269,978 $305,306 Railcar services (including
revenues from affiliates of $11,280 and $10,513 for the six months
ended June 30, 2005 and 2006, respectively) 21,665 24,973
----------------- Total revenues 291,643 330,279 Cost of goods
sold: Manufacturing operations (including costs related to
affiliates of $25,943 and $18,868 for the six months ended June 30,
2005 and 2006, respectively) 250,916 271,874 Railcar services
(including costs related to affiliates of $9,106 and $8,115 for the
six months ended June 30, 2005 and 2006, respectively) 18,575
20,160 ----------------- Total cost of goods sold 269,491 292,034
Gross profit 22,152 38,245 Gain related to insurance recoveries -
4,983 Selling, administrative and other 6,628 9,753 Stock based
compensation expense - 4,969 ----------------- Earnings from
operations 15,524 28,506 Interest income (including interest income
from affiliates of $823 and $0 for the six months ended June 30,
2005 and 2006, respectively) 977 915 Interest expense (including
interest expense to affiliates of $1,174 and $98 for the six months
ended June 30, 2005 and 2006, respectively) 2,382 1,133 Earnings
from joint venture 924 337 ----------------- Earnings before income
tax expense 15,043 28,625 Income tax expense 6,006 10,543
----------------- Net earnings $ 9,037 $ 18,082 =================
Less preferred dividends (9,090) (568) ----------------- Earnings
(loss) available to common shareholders $ (53)$ 17,514 Net earnings
(loss) per common share - basic $ (0.00)$ 0.87 Net earnings (loss)
per common share - diluted $ (0.00)$ 0.87 Weighted average common
shares outstanding - basic 11,147 20,116 Weighted average common
shares outstanding - diluted 11,147 20,220 -----------------
Dividends declared per common share $ - $ 0.06 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) For
the Six Months Ended June 30, June 30, ------------------ 2005 2006
------------------ Operating activities: Net earnings $ 9,037 $
18,082 Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities: Depreciation and amortization
3,229 4,915 Loss on the write-off of property, plant and equipment
- 3,867 Write-off of deferred financing costs - 566 Stock based
compensation - 5,064 Change in joint venture investment as a result
of earnings (924) (337) Expense relating to pre-recapitalization
liabilities 530 - Provision for deferred income taxes 4,619 (221)
Provision for losses on accounts receivable 39 263 Changes in
operating assets and liabilities: Accounts receivable, net (4,897)
2,479 Accounts receivable, due from affiliate - 2,423 Business
interruption insurance claim receivable - (8,000) Inventories
(4,067) (20,039) Prepaid expenses (4,399) (1,465) Accounts payable
27,543 (8,785) Accounts payable, due to affiliate - (2,048) Accrued
expenses and taxes 5,301 (2,546) Other (169) (239)
----------------- Net cash provided by (used in) operating
activities 35,842 (6,021) Investing activities: Purchases of
property, plant and equipment (9,392) (21,036) Property insurance
advance on Marmaduke tornado damage - 7,500 Repayment of note
receivable from affiliate (Ohio Castings LLC) - 315 Acquisitions -
(17,220) ----------------- Net cash used in investing activities
(9,392) (30,441) Financing activities: Proceeds from sale of common
stock - 205,275 Offering costs - (14,605) Preferred stock
redemption - (82,056) Preferred stock dividends - (11,904) Common
stock dividends - (636) Decrease in amounts due to affiliates
(35,233) (20,473) Majority shareholder capital contribution - 275
Finance fees related to new credit facility - (265) Proceeds from
debt issuance 30,770 - Repayment of debt (1,126) (40,232)
----------------- Net cash (used in) provided by financing
activities (5,589) 35,379 ----------------- Increase (decrease) in
cash and cash equivalents 20,861 (1,083) Cash and cash equivalents
at beginning of period 6,943 28,692 ----------------- Cash and cash
equivalents at end of period $ 27,804 $ 27,609 ================= *T
-0- *T Three months Six months ended ended ------------------
----------------- June 30, June 30, ------------------
----------------- 2005 2006 2005 2006
----------------------------------------------------
----------------- Net earnings $ 6,499 $10,821 $ 9,037 $18,082
Income tax expense 4,264 6,308 6,006 10,543 Interest expense 1,296
103 2,382 1,133 Interest income (109) (429) (977) (915)
Depreciation 1,704 2,596 3,229 4,857 ------- ------- -------
------- EBITDA $13,654 $19,399 $19,677 $33,700 ======= =======
======= ======= Stock based compensation expense - 1,514 - 5,064
------- ------- ------- ------- Adjusted EBITDA $13,654 $20,913
$19,677 $38,764 ======= ======= ======= ======= *T EBITDA
represents net earnings (loss) before income tax expense (benefit),
interest expense (income), net of amortization and depreciation of
property and equipment. We believe EBITDA is useful to investors in
evaluating our operating performance compared to that of other
companies in our industry. In addition, our management uses EBITDA
to evaluate our 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, or U.S. GAAP. Accordingly, when analyzing
our operating performance, investors should not consider EBITDA in
isolation or as a substitute for net earnings (loss), cash flows
from operating activities or other statements of operations or
statements of cash flow data prepared in accordance with U.S. GAAP.
Our calculation of EBITDA is not necessarily comparable to that of
other similarly titled measures reported by other companies.
Adjusted EBITDA represents EBITDA before stock based compensation
expense related to a restricted stock grant and stock options. We
believe that Adjusted EBITDA is useful to investors evaluating our
operating performance compared to that of other companies in our
industry. In addition, these charges are excluded from our
calculation of EBITDA under our new revolving credit agreement
entered into in January 2006. Management also uses Adjusted EBITDA
in evaluating our operating performance. Adjusted EBITDA is not a
financial measure presented in accordance with U.S. GAAP.
Accordingly, when analyzing our operating performance, investors
should not consider Adjusted EBITDA in isolation or as a substitute
for net income, cash flows from operating activities or other
statements of operations or statements of cash flow data prepared
in accordance with U.S. GAAP. Our calculation of Adjusted EBITDA is
not necessarily comparable to that of other similarly titled
measures reported by other companies.
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