American Railcar Industries, Inc. (ARI or the Company) (NASDAQ:
ARII) today reported its second quarter 2010 financial results.
“The railcar industry has begun to see a modest improvement in
demand during 2010. Railcar orders have improved, railcar loadings
have increased and railcars are being returned to service from
storage. We received orders for approximately 1,080 railcars during
the second quarter of 2010. To fulfill the new railcar orders we
will begin modestly ramping up production rates. Our railcar
services segment continues to be strong, with revenues growing 25%
year-over-year, to $34.6 million for the six months ended June 30,
2010. This growth resulted from higher volumes driven by repair
plant expansions and repair work performed at our railcar
manufacturing plants,” said James Cowan, President and CEO of
ARI.
For the three months ended June 30, 2010, revenues were $61.2
million and net losses were $5.9 million or $0.28 per share. In
comparison, for the three months ended June 30, 2009, revenues were
$109.9 million and net earnings were $1.1 million or $0.05 per
share. Revenues were lower in the second quarter of 2010 when
compared to the same period of 2009 primarily due to lower railcar
shipments and a change in product mix. The decrease was partially
offset by increased railcar repair volumes primarily due to the
Company’s completed railcar repair facility expansions and the
utilization of its railcar manufacturing facilities for railcar
repair projects. During the three months ended June 30, 2010, the
Company shipped approximately 370 railcars as compared to
approximately 980 railcars in the same period of 2009. Our backlog
increased to approximately 1,210 railcars as of June 30, 2010.
EBITDA, adjusted to exclude investment activity and stock based
compensation expense (Adjusted EBITDA), was $0.8 million in the
second quarter of 2010 compared to $11.4 million in the second
quarter of 2009. This decrease was primarily due to a decrease in
railcar shipments and lower gross profit margin. The Company’s
gross profit margin decline is primarily attributable to decreased
railcar shipments, competitive pricing pressures and the impact of
fixed costs in a low production environment. A reconciliation of
the Company’s net loss to EBITDA and Adjusted EBITDA (both non-GAAP
financial measures) is set forth in the supplemental disclosure
attached to this press release.
The Company’s net loss for the second quarter of 2010 was
affected by lower operating earnings, as discussed above and an
increase in net interest expense.
For the six months ended June 30, 2010, revenues were $113.5
million and net losses were $12.9 million or $0.61 per share. In
comparison, for the six months ended June 30, 2009, revenues were
$266.9 million and net earnings were $3.9 million or $0.18 per
share. Revenues were lower in the six months ended June 30, 2010
when compared to the same period of 2009 primarily due to a
decrease in railcar shipments, an overall decrease in average
selling prices due to pricing pressures and a change in product
mix. These decreases were partially offset by increased railcar
repair volumes. During the six months ended June 30, 2010, the
Company shipped approximately 710 railcars as compared to
approximately 2,470 railcars in the same period of 2009.
Adjusted EBITDA was $0.5 million for the six months ended June
30, 2010 compared to $25.5 million in the six months ended June 30,
2009. This decrease resulted primarily from decreased railcar
shipment volume, a decrease in gross profit margin and an increase
in joint venture losses, all partially offset by a decrease in
selling, administrative and other costs. The Company’s gross profit
margin decline is primarily attributable to decreased railcar
shipments, decreased overall average selling prices due to
competitive pricing pressures and the impact of fixed costs in a
low production environment. The increase in joint venture losses
was primarily driven by losses at the Company’s axle joint venture
and due to low operating rates. The decrease in selling,
administrative and other costs was primarily attributable to cost
control measures and a non-recurring legal settlement recorded in
the first quarter of 2009.
The Company’s net loss for the six months ended June 30, 2010
was affected by lower operating earnings, as discussed above, an
increase in net interest expense and increased losses from joint
ventures, all partially offset by a decrease in our selling,
administrative and other costs.
ARI will host a webcast and conference call on Thursday, July
29, 2010 at 10:00 am (Eastern Time) to discuss the Company’s second
quarter 2010 financial results. To participate in the webcast,
please log on to ARI’s investor relations page through the ARI
website at www.americanrailcar.com. To participate in the
conference call, please dial 800-447-0521 and use participant code
27529501. 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
designer and manufacturer of hopper and tank railcars. ARI also
repairs and refurbishes railcars, provides fleet management
services and designs and manufactures certain railcar and
industrial components. 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. 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 potential improvements in
the railcar industry, the potential for increased order activity,
anticipated future production rates, the Company’s backlog and 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. Other potential risks and
uncertainties include, among other things: the impact of the
current economic downturn, adverse market conditions and restricted
credit markets, and the impact of the continuation of these
conditions; our reliance upon a small number of customers that
represent a large percentage of our revenues and backlog; the
health of and prospects for the overall railcar industry; our
prospects in light of the cyclical nature of the railcar
manufacturing business and the current economic environment;
anticipated trends relating to our shipments, revenues, financial
condition or results of operations; our ability to manage overhead
and production slowdowns; the highly competitive nature of the
railcar manufacturing industry; fluctuating 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 ARI uses in railcar manufacturing;
anticipated production schedules for our products and the
anticipated financing needs, construction and production schedules
of our joint ventures; risks associated with potential joint
ventures or potential acquisitions; the international economic and
political risks related to our joint ventures’ current and
potential international operations; the risk of lack of acceptance
of our new railcar offerings by our customers; the sufficiency of
our liquidity and capital resources; the conversion of our railcar
backlog into revenues; compliance with covenants contained in our
unsecured senior notes; the impact and anticipated benefits of any
acquisitions we may complete; the impact and costs and expenses of
any litigation we may be subject to now or in the future; the
ongoing benefits and risks related to our relationship with
Mr. Carl C. Icahn (the chairman of our board of directors and,
through his holdings of Icahn Enterprises LP, our principal
beneficial stockholder) and certain of his affiliates; 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share
amounts)
As of June 30, December 31,
2010 2009 (unaudited)
Assets Current
assets: Cash and cash equivalents $ 320,307 $ 347,290 Short-term
investments - available-for-sale securities - 3,802 Accounts
receivable, net 14,114 11,409 Accounts receivable, due from
affiliates 14,588 1,356 Income taxes receivable 107 1,768
Inventories, net 41,650 40,063 Deferred tax assets 2,878 2,018
Prepaid expenses and other current assets 4,458
4,898 Total current assets 398,102 412,604 Property,
plant and equipment, net 189,989 199,349 Deferred debt issuance
costs 2,260 2,568 Interest receivable, due from affiliates 2,203
982 Goodwill 7,169 7,169 Investments in and loans to joint ventures
47,739 41,155 Other assets 1,146 537 Total
assets $ 648,608 $ 664,364
Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $
21,332 $ 16,874 Accounts payable, due to affiliates 347 576 Accrued
expenses and taxes 6,382 4,515 Accrued compensation 8,283 8,799
Accrued interest expense 6,875 6,875 Total
current liabilities 43,219 37,639 Senior unsecured notes
275,000 275,000 Deferred tax liability 273 7,120 Pension and
post-retirement liabilities 6,278 6,279 Other liabilities
2,352 2,686 Total liabilities 327,122 328,724
Commitments and contingencies Stockholders' equity: Common
stock, $.01 par value, 50,000,000 shares authorized, 21,302,296
shares issued and outstanding at June 30, 2010 and December 31,
2009 213 213 Additional paid-in capital 238,687 239,617 Retained
earnings 81,310 94,215 Accumulated other comprehensive income
1,276 1,595 Total stockholders' equity
321,486 335,640 Total liabilities and stockholders'
equity $ 648,608 $ 664,364
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except per share
amounts, unaudited)
For the Three Months Ended
June 30, 2010 2009 Revenues:
Manufacturing operations (including revenues from affiliates of
$33,552 and $37,354 for the three months ended June 30, 2010 and
2009, respectively) $ 43,223 $ 94,608 Railcar services
(including revenues from affiliates of $3,179 and $4,452 for the
three months ended June 30, 2010 and 2009, respectively)
17,942 15,318 Total revenues 61,165
109,926 Cost of revenue: Manufacturing operations (44,890 )
(85,106 ) Railcar services (13,705 ) (12,011 )
Total cost of revenue (58,595 ) (97,117 ) Gross profit 2,570 12,809
Selling, administrative and other (including costs related
to affiliates of $154 for both the three months ended June 30, 2010
and 2009) (5,606 ) (5,661 ) (Loss) earnings
from operations (3,036 ) 7,148 Interest income (including
income related to affiliates of $614 and $5 for the three months
ended June 30, 2010 and 2009, respectively) 769 1,802 Interest
expense (5,319 ) (5,136 ) Other income (including income related to
affiliates of $4 and $0 for the three months ended June 30, 2010
and 2009, respectively) 292 13 Loss from joint ventures
(2,271 ) (1,971 ) (Loss) earnings before income taxes
(9,565 ) 1,856 Income tax benefit (expense) 3,683
(724 )
Net (loss) earnings $ (5,882 ) $
1,132 Net (loss) earnings per common share - basic
and diluted $ (0.28 ) $ 0.05 Weighted average common shares
outstanding - basic and diluted 21,302 21,302 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, 2010 2009 Revenues:
Manufacturing operations (including revenues from affiliates of
$46,127 and $85,759 for the six months ended June 30, 2010 and
2009, respectively) $ 78,858 $ 239,278 Railcar services
(including revenues from affiliates of $6,020 and $7,985 for the
six months ended June 30, 2010 and 2009, respectively)
34,618 27,595 Total revenues 113,476
266,873 Cost of revenue: Manufacturing operations (82,277 )
(215,204 ) Railcar services (27,673 ) (22,483
) Total cost of revenue (109,950 ) (237,687 ) Gross profit 3,526
29,186 Selling, administrative and other (including costs
related to affiliates of $308 for both the six months ended June
30, 2010 and 2009) (11,693 ) (12,674 ) (Loss)
earnings from operations (8,167 ) 16,512 Interest income
(including income related to affiliates of $1,221 and $10 for the
six months ended June 30, 2010 and 2009, respectively) 1,499 2,985
Interest expense (10,640 ) (10,276 ) Other income (loss) (including
income related to affiliates of $8 and $0 for the six months ended
June 30, 2010 and 2009, respectively) 377 (83 ) Loss from joint
ventures (4,053 ) (2,813 ) (Loss) earnings
before income taxes (20,984 ) 6,325 Income tax benefit (expense)
8,079 (2,467 )
Net (loss)
earnings $ (12,905 ) $ 3,858 Net (loss)
earnings per common share - basic and diluted $ (0.61 ) $ 0.18
Weighted average common shares outstanding - basic and diluted
21,302 21,302 Dividends declared per common share $ - $ 0.06
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In
thousands, unaudited)
For the Six Months
Ended June 30, 2010 2009
Operating activities: Net (loss) earnings $ (12,905 ) $ 3,858
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities: Depreciation 11,901 11,613
Amortization of deferred costs 349 341 Loss on disposal of
property, plant and equipment 28 115 Stock based compensation 821
201 Change in interest receivable, due from affiliates (1,221 ) -
Change in investments in joint ventures as a result of loss 4,053
2,813 Realized gain on short-term investments - available-for-sale
securities (379 ) - Unrealized loss on derivatives - 88 (Benefit)
provision for deferred income taxes (8,243 ) 1,571 Recovery for
doubtful accounts receivable 6 11 Investing activities reclassified
from operating activities: Interest income on short-term
investments - available-for-sale securities - (2,229 ) Realized
loss on derivatives - 10 Dividends received from short-term
investments - available-for-sale securities - (15 ) Changes in
operating assets and liabilities: Accounts receivable, net (2,711 )
16,318 Accounts receivable, due from affiliate (13,232 ) (4,777 )
Income taxes receivable 1,661 - Inventories, net (1,598 ) 34,247
Prepaid expenses and other current assets 440 902 Accounts payable
4,458 (18,291 ) Accounts payable, due to affiliate (229 ) (4,550 )
Accrued expenses and taxes 729 (3,893 ) Other (782 )
122 Net cash (used in) provided by operating
activities (16,854 ) 38,455 Investing activities: Purchases of
property, plant and equipment (3,727 ) (10,004 ) Proceeds from sale
of property, plant and equipment 104 - Sale (purchase) of
short-term investments - available-for-sale securities 4,180
(36,841 ) Interest income on short-term investments -
available-for-sale securities - 2,229 Realized loss on derivatives
- (10 ) Dividends received from short-term investments -
available-for-sale securities - 15 Investments in and loans to
joint ventures (10,680 ) (1,845 ) Net cash
used in investing activities (10,123 ) (46,456 ) Financing
activities: Common stock dividends -
(1,278 ) Net cash used in financing activities -
(1,278 ) Effect of exchange rate changes on cash and
cash equivalents (6 ) 108 Decrease in
cash and cash equivalents (26,983 ) (9,171 ) Cash and cash
equivalents at beginning of period 347,290
291,788 Cash and cash equivalents at end of period $
320,307 $ 282,617
RECONCILIATION OF NET EARNINGS TO
EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
Three months ended Six months ended
June 30, June 30, 2010
2009 2010 2009 Net
(loss) earnings $ (5,882 ) $ 1,132 $ (12,905 ) $ 3,858 Income tax
(benefit) expense (3,683 ) 724 (8,079 ) 2,467 Interest expense
5,319 5,136 10,640 10,276 Interest income (769 ) (1,802 ) (1,499 )
(2,985 ) Depreciation 5,986 5,969
11,901 11,613 EBITDA $ 971 $
11,159 $ 58 $ 25,229 Expense related to stock
appreciation rights compensation 1 121 236 821 201 Other (income)
loss on short-term investment activity (298 ) (13 )
(379 ) 83 Adjusted EBITDA $ 794 $
11,382 $ 500 $ 25,513 1 SARs are cash
settled at time of exercise
EBITDA represents net (loss) earnings before income tax
(benefit) expense, interest expense (income), net of 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 (loss) earnings, 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 share based
compensation expense related to stock appreciation rights (SARs),
and before gains or losses on investments and derivative
instruments. We believe that Adjusted EBITDA is useful to investors
evaluating our operating performance, and management also uses
Adjusted EBITDA for that purpose. Our SARs (which settle in cash)
are revalued each quarter based upon changes in our stock price.
Management believes that eliminating the expense associated with
our stock based compensation, investments and derivates allows us
and our investors to understand better our operating results
independent of financial changes caused by the fluctuating price
and value of our common stock, investments and derivative
instruments. 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 (loss) earnings,
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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