American Railcar Industries, Inc. (ARI or the Company)
(Nasdaq:ARII) today reported its second quarter 2011 financial
results.
Second Quarter Highlights
- Total revenues for the second quarter of 2011 were $111.9
million as compared to $61.2 million for the second quarter of
2010.
- Railcar shipments for the second quarter of 2011 were
approximately 1,040 railcars as compared to approximately 370
railcars for the same period in 2010.
- Gross profit was $13.3 million for the second quarter of 2011
as compared to $2.6 million for the same period in 2010.
- Net earnings for the second quarter of 2011 were $0.6 million
or $0.03 per share as compared to a net loss of $5.9 million or a
loss of $0.28 per share for the same period in 2010.
- Adjusted EBITDA was $10.9 million for the second quarter of
2011 as compared to $0.8 million for the same period in 2010.
- The Company's backlog increased to approximately 5,290 railcars
at June 30, 2011 from approximately 1,050 at December 31, 2010. The
Company's backlog at June 30, 2011 includes approximately 640
railcars for lease.
- Subsequent to June 30, 2011, the Company has received
additional orders for over 2,200 railcars, including 435 railcars
for lease.
Message from our President and CEO
"Revenues, shipments and gross profit increased in the second
quarter of 2011 as compared to the first quarter of 2011 and the
second quarter of 2010. We continue to see strong quote and order
activity along with improved pricing," said James Cowan, President
and CEO of ARI. "Our railcar services segment also reported strong
results, with gross profit margins at 28% on revenues of $17.3
million for the second quarter of 2011."
Discussion of Results
For the second quarter of 2011, total revenues were $111.9
million as compared to $84.8 million in the first quarter of 2011,
and $61.2 million in the second quarter of 2010. Revenues increased
primarily due to an increase in railcar shipments, partially offset
by a decrease in railcar services revenues as a result of a
reduction in railcar repair projects performed at the Company's
railcar manufacturing facilities. However, revenues at railcar
repair facilities in the second quarter of 2011 increased by 7.0%
over the comparable quarter of 2010.
EBITDA, adjusted to exclude investment activity and stock based
compensation (Adjusted EBITDA), was $10.9 million in the second
quarter of 2011, compared to $3.7 million in the first quarter of
2011, and $0.8 million in the comparable quarter of 2010. The
increase from 2010 resulted primarily from increases in revenues
and gross profit margin, and a decrease in selling, administrative
and other costs, exclusive of stock based compensation. The
Company's gross profit margin increase is primarily attributable to
increased shipments, improved pricing and efficiencies created by
higher volumes. Selling, administrative and other costs decreased
primarily due to a decrease in outside services. These improvements
were partially offset by an increase in losses from our joint
ventures. The increase in joint venture losses was primarily
attributable to the restart of our castings joint venture. Losses
at our axle joint venture were consistent with the prior year. 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.
Net interest expense was $4.4 million for the second quarter of
2011, which was consistent with the same quarter of the prior
year.
The Company reported net earnings of $0.6 million or $0.03 per
share for the second quarter of 2011 as compared to a net loss of
$5.9 million or $0.28 per share for the same period in 2010. The
Company's net earnings increased due to the factors mentioned
above.
For the six months ended June 30, 2011, total revenues were
$196.8 million as compared to $113.5 million for the comparable
period in 2010. Revenues increased primarily due to an increase in
railcar shipments, partially offset by a decrease in railcar
services revenues as a result of a reduction in railcar repair
projects performed at the Company's railcar manufacturing
facilities. However, revenues for the railcar repair facilities in
the six months ended June 30, 3011 increased by 4.0% over the
comparable period in 2010.
Adjusted EBITDA was $14.6 million for the six months ended June
30, 2011 compared to $0.5 million for the same period in 2010. The
increase resulted primarily from increases in revenues and gross
profit margin, and a decrease in selling, administrative and other
costs, exclusive of stock based compensation. The Company's gross
profit margin increase is primarily attributable to increased
shipments, improved pricing and efficiencies created by higher
volumes. Selling, administrative and other costs decreased
primarily due to a lower bonus accrual and a decrease in outside
services. These improvements were partially offset by an increase
in losses from our joint ventures, which were primarily
attributable to the restart of our castings joint venture and
losses at our Indian joint venture. Our axle joint venture losses
were consistent with the prior year.
Net interest expense was $8.8 million for the six months ended
June 30, 2011, which was consistent with the same period of
2010.
The Company reported a net loss of $4.8 million or $0.22 per
share for the six months ended June 30, 2011 as compared to a net
loss of $12.9 million or $0.61 per share for the same period in
2010. The Company's net loss decreased due to the factors mentioned
above.
ARI will host a webcast and conference call on Thursday, July
28, 2011 at 10:00 am (Eastern Time) to discuss the Company's second
quarter 2011 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 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 American Railcar Industries, Inc.
American Railcar Industries, Inc. is a leading North American
designer and manufacturer of hopper and tank railcars. ARI also
leases, 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
our business and the overall railcar industry, the potential for
increased order activity, improved pricing, 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 recent 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, leasing, railcar services, revenues, financial condition
or results of operations; our ability to manage overhead and
variations in production rates; 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; the risks associated with
potential joint ventures, potential acquisitions or new business
endeavors; the international economic and political risks related
to our joint ventures' current and potential international
operations; the risk of the lack of acceptance of new railcar
offerings by our customers and the risk of initial production costs
for our new railcar offerings being significantly higher than
expected; 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 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, |
|
2011 |
2010 |
|
(unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 301,051 |
$ 318,758 |
Accounts receivable, net |
40,762 |
21,002 |
Accounts receivable, due from
related parties |
2,640 |
4,981 |
Income taxes receivable |
14,878 |
14,939 |
Inventories, net |
70,161 |
50,033 |
Deferred tax assets |
2,655 |
3,029 |
Prepaid expenses and other current
assets |
3,436 |
2,654 |
Total current assets |
435,583 |
415,396 |
|
|
|
Property, plant and equipment, net |
171,478 |
181,255 |
Deferred debt issuance costs |
1,643 |
1,951 |
Interest receivable, due from related
parties |
274 |
187 |
Goodwill |
7,169 |
7,169 |
Investments in and loans to joint
ventures |
45,353 |
48,169 |
Other assets |
862 |
240 |
Total assets |
$ 662,362 |
$ 654,367 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 40,032 |
$ 29,334 |
Accounts payable, due to related
parties |
92 |
275 |
Accrued expenses and taxes |
9,535 |
5,095 |
Accrued compensation |
12,761 |
11,054 |
Accrued interest expense |
6,875 |
6,875 |
Total current liabilities |
69,295 |
52,633 |
|
|
|
Senior unsecured notes |
275,000 |
275,000 |
Deferred tax liability |
4,735 |
7,938 |
Pension and post-retirement liabilities |
6,263 |
6,707 |
Other liabilities |
3,206 |
4,313 |
Total liabilities |
358,499 |
346,591 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Stockholders' equity: |
|
|
Common stock, $.01 par value, 50,000,000
shares authorized, 21,352,297 shares issued and outstanding at June
30, 2011 and 21,316,296 shares issued and outstanding at December
31, 2010 |
214 |
213 |
Additional paid-in capital |
239,608 |
238,947 |
Retained earnings |
62,449 |
67,209 |
Accumulated other comprehensive income |
1,592 |
1,407 |
Total stockholders' equity |
303,863 |
307,776 |
Total liabilities and stockholders'
equity |
$ 662,362 |
$ 654,367 |
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
(In thousands, except per share amounts,
unaudited) |
|
|
|
For the Three Months
Ended |
|
June
30, |
|
2011 |
2010 |
|
|
Revenues: |
|
|
Manufacturing operations (including no
revenues from affiliates for the three months ended June 30, 2011
and $33,552 for the three months ended June 30, 2010) |
$ 94,597 |
$ 43,223 |
|
|
|
Railcar services (including revenues from
affiliates of $6,596 and $3,179 for the three months ended June 30,
2011 and 2010, respectively) |
17,316 |
17,942 |
Total revenues |
111,913 |
61,165 |
|
|
|
Cost of revenue: |
|
|
Manufacturing operations |
(86,100) |
(44,890) |
Railcar services |
(12,557) |
(13,705) |
Total cost of revenue |
(98,657) |
(58,595) |
Gross profit |
13,256 |
2,570 |
|
|
|
Selling, administrative and other (including
costs to a related party of $145 and $154 for the three months
ended June 30, 2011 and 2010, respectively) |
(5,062) |
(5,606) |
Earnings (loss) from
operations |
8,194 |
(3,036) |
|
|
|
Interest income (including income from
related parties of $705 and $614 for the three months ended June
30, 2011 and 2010, respectively) |
944 |
769 |
Interest expense |
(5,330) |
(5,319) |
Other income (including income from a related
party of $3 and $4 for the three months ended June 30, 2011 and
2010, respectively) |
15 |
292 |
Loss from joint ventures |
(2,829) |
(2,271) |
Earnings (loss) before income
taxes |
994 |
(9,565) |
Income tax (expense) benefit |
(425) |
3,683 |
Net earnings
(loss) |
$ 569 |
$ (5,882) |
|
|
|
Net earnings (loss) per common share - basic
and diluted |
$ 0.03 |
$ (0.28) |
Weighted average common shares outstanding -
basic and diluted |
21,352 |
21,302 |
|
|
|
Dividends declared per common share |
$ -- |
$ -- |
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
(In thousands, except per share amounts,
unaudited) |
|
|
|
For the Six Months
Ended |
|
June
30, |
|
2011 |
2010 |
|
|
Revenues: |
|
|
Manufacturing operations (including revenues
from affiliates of $1,221 and $46,127 for the six months ended June
30, 2011 and 2010, respectively) |
$ 163,293 |
$ 78,858 |
|
|
|
Railcar services (including revenues from
affiliates of $12,133 and $6,020 for the six months ended June 30,
2011 and 2010, respectively) |
33,463 |
34,618 |
Total revenues |
196,756 |
113,476 |
|
|
|
Cost of revenue: |
|
|
Manufacturing operations |
(152,681) |
(82,277) |
Railcar services |
(25,875) |
(27,673) |
Total cost of revenue |
(178,556) |
(109,950) |
Gross profit |
18,200 |
3,526 |
|
|
|
Selling, administrative and other (including
costs to a related party of $291 and $308 for the six months ended
June 30, 2011 and 2010, respectively) |
(11,944) |
(11,693) |
Earnings (loss) from
operations |
6,256 |
(8,167) |
|
|
|
Interest income (including income from
related parties of $1,384 and $1,221 for the six months ended June
30, 2011 and 2010, respectively) |
1,860 |
1,499 |
Interest expense |
(10,665) |
(10,640) |
Other income (including income from a related
party of $7 and $8 for the six months ended June 30, 2011 and 2010,
respectively) |
19 |
377 |
Loss from joint ventures |
(5,071) |
(4,053) |
Loss before income taxes |
(7,601) |
(20,984) |
Income tax benefit |
2,841 |
8,079 |
Net loss |
$ (4,760) |
$ (12,905) |
|
|
|
Net loss per common share - basic and
diluted |
$ (0.22) |
$ (0.61) |
Weighted average common shares outstanding -
basic and diluted |
21,351 |
21,302 |
|
|
|
Dividends declared per common share |
$ -- |
$ -- |
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS |
|
|
(In thousands, unaudited) |
|
|
|
For the Six Months
Ended |
|
June
30, |
|
2011 |
2010 |
|
|
Operating activities: |
|
|
Net loss |
$ (4,760) |
$ (12,905) |
Adjustments to reconcile net earnings to net
cash (used in) provided by operating activities: |
|
|
Depreciation |
11,454 |
11,901 |
Amortization of deferred costs |
349 |
349 |
Loss on disposal of property, plant and
equipment |
66 |
28 |
Stock based compensation |
1,959 |
821 |
Change in interest receivable, due from
related parties |
(87) |
(1,221) |
Change in investments in joint ventures
as a result of loss |
5,071 |
4,053 |
Realized gain on short-term investments -
available-for-sale securities |
-- |
(379) |
Deferred income tax benefit |
(2,831) |
(8,243) |
(Provision) recovery for doubtful
accounts receivable |
(22) |
6 |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable, net |
(19,722) |
(2,711) |
Accounts receivable, due from related
parties |
2,348 |
(13,232) |
Income taxes receivable |
(12) |
1,661 |
Inventories, net |
(20,098) |
(1,598) |
Prepaid expenses and other current
assets |
(781) |
440 |
Accounts payable |
10,690 |
4,458 |
Accounts payable, due to related
parties |
(183) |
(229) |
Accrued expenses and taxes |
3,073 |
729 |
Other |
(1,249) |
(782) |
Net cash used in operating activities |
(14,735) |
(16,854) |
Investing activities: |
|
|
Purchases of property, plant and
equipment |
(1,561) |
(3,727) |
Proceeds from the sale of property, plant
and equipment |
117 |
104 |
Proceeds from the sale of short-term
investments - available-for-sale securities |
-- |
4,180 |
Investments in and loans to joint
ventures |
(2,296) |
(10,680) |
Net cash used in investing activities |
(3,740) |
(10,123) |
Financing activities: |
|
|
Proceeds from stock option exercises |
756 |
-- |
Net cash provided by financing
activities |
756 |
-- |
Effect of exchange rate changes on cash and
cash equivalents |
12 |
(6) |
Decrease in cash and cash equivalents |
(17,707) |
(26,983) |
Cash and cash equivalents at beginning of
period |
318,758 |
347,290 |
Cash and cash equivalents at end of
period |
$ 301,051 |
$ 320,307 |
|
|
|
|
|
RECONCILIATION OF NET EARNINGS (LOSS)
TO EBITDA AND ADJUSTED EBITDA |
|
|
|
|
(In thousands, unaudited) |
|
|
|
|
|
Three months
ended |
Six months
ended |
|
June
30, |
June
30, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ 569 |
$ (5,882) |
$ (4,760) |
$ (12,905) |
Income tax expense (benefit) |
425 |
(3,683) |
(2,841) |
(8,079) |
Interest expense |
5,330 |
5,319 |
10,665 |
10,640 |
Interest income |
(944) |
(769) |
(1,860) |
(1,499) |
Depreciation |
5,688 |
5,986 |
11,454 |
11,901 |
EBITDA |
$ 11,068 |
$ 971 |
$ 12,658 |
$ 58 |
(Income) expense related to stock
appreciation rights compensation 1 |
(189) |
121 |
1,959 |
821 |
Other income on short-term investment
activity |
-- |
(298) |
-- |
(379) |
Adjusted EBITDA |
$ 10,879 |
$ 794 |
$ 14,617 |
$ 500 |
|
|
|
|
|
1 SARs are cash settled at time of
exercise |
|
|
|
|
EBITDA represents net earnings (loss) before income tax expense
(benefit), 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 loss, cash
flows used in 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 related to stock appreciation rights (SARs), and
before income on investments. 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 primarily
upon changes in our stock price. Management believes that
eliminating the expense or income associated with our stock based
compensation and investments 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 and investments. 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, cash flows
used in 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.
CONTACT: Dale C. Davies
Michael Obertop
636.940.6000
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