American Railcar Industries, Inc. (ARI or the Company)
(Nasdaq:ARII) today reported its third quarter 2011 financial
results.
Third Quarter Highlights
- The Company's backlog increased to approximately 7,110 railcars
at September 30, 2011, the largest since June 2008. The Company's
backlog at September 30, 2011 included approximately 1,700 railcars
for lease. The Company had approximately 1,050 railcars in its
backlog at December 31, 2010.
- Total revenues for the third quarter of 2011 were $125.8
million compared to $64.8 million for the third quarter of
2010.
- Railcar shipments for the third quarter of 2011 were
approximately 1,340 railcars compared to approximately 420 railcars
for the same period in 2010.
- Gross profit was $15.0 million for the third quarter of 2011
compared to $2.3 million for the same period in 2010.
- Net earnings per share for the third quarter of 2011 were $0.19
compared to a net loss per share of $(0.29) for the same period in
2010.
- Adjusted EBITDA was $12.2 million for the third quarter of 2011
compared to $1.5 million for the same period in 2010.
Message from ARI's President and CEO
"Our orders of over 9,100 railcars during the first nine months
of 2011 have given us our largest backlog since June 2008.
Revenues, railcar shipments and gross profit have increased in the
third quarter of 2011 compared to the second quarter of 2011 and
the third quarter of 2010. We have continued to ramp up production
to meet customer demand with approximately 1,340 deliveries for the
third quarter," said James Cowan, President and CEO of
ARI. "Our railcar services segment also reported strong
results, with gross profit margin at 27% on revenues of $17.2
million for the third quarter of 2011."
Discussion of Results
For the third quarter of 2011, total revenues were $125.8
million compared to $64.8 million for the third quarter of 2010.
Revenues increased primarily due to an increase in railcar
shipments.
EBITDA, adjusted to exclude stock based compensation (Adjusted
EBITDA), was $12.2 million for the third quarter of 2011 compared
to $1.5 million for the comparable quarter of 2010. The increase
from 2010 resulted primarily from increases in revenues and gross
profit margin. The Company's gross profit margin increase was
primarily attributable to increased shipments, improved pricing and
leverage created by higher volumes, partially offset by decreased
railcar repair projects at the manufacturing facilities as this
capacity was returned to new railcar manufacturing. Selling,
administrative and other costs, exclusive of stock based
compensation, remained consistent with the third quarter of 2010. A
reconciliation of the Company's net earnings (loss) 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 $3.5 million for the third quarter of
2011 compared to $4.3 million of net interest expense for the
third quarter of 2010. Interest expense decreased due to
capitalized interest recorded for the investment in the Company's
joint venture.
The Company reported net earnings of $4.0 million, or $0.19 per
share, for the third quarter of 2011 compared to a net loss of
$(6.3) million, or $(0.29) per share, for the same period in 2010.
The Company's net earnings increased due to the factors mentioned
above and a decrease in stock based compensation of $4.6 million as
a result of fluctuations in the Company's stock price.
For the nine months ended September 30, 2011, total revenues
were $322.5 million compared to $178.3 million for the comparable
period in 2010. Revenues increased primarily due to an increase in
railcar shipments, partially offset by decreased railcar repair
projects at the manufacturing facilities as this capacity was
returned to new railcar manufacturing. During the nine months
ended September 30, 2011, approximately 3,060 railcars were
shipped compared to approximately 1,130 railcars for the same
period of 2010.
Adjusted EBITDA was $26.8 million for the nine months ended
September 30, 2011 compared to $2.0 million for the same period in
2010. The increase resulted primarily from an increase 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 was primarily attributable
to increased railcar shipments, improved pricing and leverage
created by higher volumes. Selling, administrative and other costs,
exclusive of stock based compensation, decreased primarily due to a
decrease in outside services. In addition, losses from the
Company's joint ventures increased, which were primarily
attributable to restarting production of the Company's castings
joint venture and the continued development of the Company's Indian
joint venture business.
Net interest expense for the nine months ended
September 30, 2011 was $12.3 million compared to
$13.4 million of net interest expense for the same period in
2010. Interest expense decreased due to capitalized interest
recorded for the investment in the Company's joint
venture.
The Company reported a net loss of $(0.7) million, or $(0.03)
per share, for the nine months ended September 30, 2011 compared to
a net loss of $(19.2) million, or $(0.90) per share, for the same
period in 2010. The Company's net loss decreased due to the factors
mentioned above and a decrease in stock based compensation of $3.5
million as a result of fluctuations in the Company's stock price.
ARI will host a webcast and conference call on Thursday, October
27, 2011 at 10:00 am (Eastern Time) to discuss the Company's third
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 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
ARI's 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 the
Company's 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;
ARI's reliance upon a small number of customers that represent a
large percentage of revenues and backlog; the health of and
prospects for the overall railcar industry; prospects in light of
the cyclical nature of the railcar manufacturing business and the
current economic environment; anticipated trends relating to
shipments, leasing, railcar services, revenues, financial condition
or results of operations; the Company's 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 that ARI uses in railcar
manufacturing; anticipated production schedules for products and
the anticipated financing needs, construction and production
schedules of ARI's joint ventures; the risks associated with
potential joint ventures, potential acquisitions or new business
endeavors; the international economic and political risks related
to ARI's joint ventures' current and potential international
operations; the risk of the lack of acceptance of new railcar
offerings by ARI's customers and the risk of initial production
costs for the Company's new railcar offerings being significantly
higher than expected; the sufficiency of the Company's liquidity
and capital resources; the conversion of ARI's railcar backlog into
revenues; compliance with covenants contained in the Company's
unsecured senior notes; the impact and anticipated benefits of any
acquisitions ARI may complete; the impact and costs and expenses of
any litigation ARI may be subject to now or in the future; the
ongoing benefits and risks related to the Company's relationship
with Mr. Carl Icahn (the chairman of the Company's board of
directors and, through his holdings of Icahn Enterprises LP, the
Company's principal beneficial stockholder) and certain of his
affiliates; 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.
CONDENSED CONSOLIDATED
BALANCE SHEETS |
|
|
(In thousands, except share amounts) |
As
of |
|
September 30,
2011 |
December 31,
2010 |
|
(unaudited) |
|
Assets |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 284,099 |
$ 318,758 |
Accounts receivable, net |
32,441 |
21,002 |
Accounts receivable, due from
related parties |
3,473 |
4,981 |
Income taxes receivable |
14,878 |
14,939 |
Inventories, net |
114,628 |
50,033 |
Deferred tax assets |
3,632 |
3,029 |
Prepaid expenses and other
current assets |
3,502 |
2,654 |
Total current assets |
456,653 |
415,396 |
|
|
|
Property, plant and equipment, net |
175,630 |
181,255 |
Deferred debt issuance costs |
1,489 |
1,951 |
Interest receivable, due from related
parties |
308 |
187 |
Goodwill |
7,169 |
7,169 |
Investments in and loans to joint
ventures |
45,319 |
48,169 |
Other assets |
862 |
240 |
Total assets |
$ 687,430 |
$ 654,367 |
|
|
|
Liabilities and Stockholders'
Equity |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 66,417 |
$ 29,334 |
Accounts payable, due to
related parties |
499 |
275 |
Accrued expenses and taxes |
8,909 |
5,095 |
Accrued compensation |
10,880 |
11,054 |
Accrued interest expense |
1,719 |
6,875 |
Total current liabilities |
88,424 |
52,633 |
|
|
|
Senior unsecured notes |
275,000 |
275,000 |
Deferred tax liability |
8,226 |
7,938 |
Pension and post-retirement liabilities |
6,132 |
6,707 |
Other liabilities |
2,700 |
4,313 |
Total liabilities |
380,482 |
346,591 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Stockholders' equity: |
|
|
Common stock, $0.01 par value, 50,000,000
shares authorized, 21,352,297 shares issued and outstanding at
September 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 |
66,475 |
67,209 |
Accumulated other comprehensive income |
651 |
1,407 |
Total stockholders' equity |
306,948 |
307,776 |
Total liabilities and
stockholders' equity |
$ 687,430 |
$ 654,367 |
|
|
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
(In thousands, except per share amounts,
unaudited) |
|
|
|
For the Three
Months Ended September 30, |
|
2011 |
2010 |
|
|
Revenues: |
|
|
Manufacturing operations (including $0 and
$19,274 from affiliates for the three months ended September 30,
2011 and 2010, respectively) |
$ 108,615 |
$ 48,404 |
|
|
|
Railcar services (including revenues from
affiliates of $6,916 and $4,263 for the three months ended
September 30, 2011 and 2010, respectively) |
17,169 |
16,393 |
Total revenues |
125,784 |
64,797 |
|
|
|
Cost of revenues: |
|
|
Manufacturing operations |
(98,211) |
(49,366) |
Railcar services |
(12,618) |
(13,141) |
Total cost of
revenues |
(110,829) |
(62,507) |
Gross profit |
14,955 |
2,290 |
|
|
|
Selling, administrative and other (including
costs to a related party of $145 and $154 for the three months
ended September 30, 2011 and 2010, respectively) |
(2,934) |
(6,232) |
Earnings (loss) from
operations |
12,021 |
(3,942) |
|
|
|
Interest income (including income from
related parties of $717 for both the three months ended September
30, 2011 and 2010) |
1,005 |
1,058 |
Interest expense |
(4,478) |
(5,316) |
Other income (including income from a related
party of $4 for both the three months ended September 30, 2011 and
2010) |
5 |
4 |
Loss from joint ventures |
(2,170) |
(1,946) |
Earnings (loss) before
income taxes |
6,383 |
(10,142) |
Income tax (expense) benefit |
(2,357) |
3,890 |
Net earnings
(loss) |
$ 4,026 |
$ (6,252) |
|
|
|
Net earnings (loss) per common share - basic
and diluted |
$ 0.19 |
$ (0.29) |
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 Nine
Months Ended September 30, |
|
2011 |
2010 |
|
|
Revenues: |
|
|
Manufacturing operations (including revenues
from affiliates of $1,221 and $65,401 for the nine months ended
September 30, 2011 and 2010, respectively) |
$ 271,908 |
$ 127,262 |
|
|
|
Railcar services (including revenues from
affiliates of $19,049 and $10,283 for the nine months ended
September 30, 2011 and 2010, respectively) |
50,632 |
51,011 |
Total revenues |
322,540 |
178,273 |
|
|
|
Cost of revenues: |
|
|
Manufacturing operations |
(250,892) |
(131,643) |
Railcar services |
(38,493) |
(40,814) |
Total cost of
revenues |
(289,385) |
(172,457) |
Gross profit |
33,155 |
5,816 |
|
|
|
Selling, administrative and other (including
costs to a related party of $436 and $462 for the nine months ended
September 30, 2011 and 2010, respectively) |
(14,878) |
(17,925) |
Earnings (loss) from
operations |
18,277 |
(12,109) |
|
|
|
Interest income (including income from
related parties of $2,111 and $1,938 for the nine months ended
September 30, 2011 and 2010, respectively) |
2,865 |
2,557 |
Interest expense |
(15,143) |
(15,956) |
Other income (including income from a related
party of $11 and $12 for the nine months ended September 30, 2011
and 2010, respectively) |
24 |
381 |
Loss from joint ventures |
(7,241) |
(5,999) |
Loss before income
taxes |
(1,218) |
(31,126) |
Income tax benefit |
484 |
11,969 |
Net
loss |
$ (734) |
$ (19,157) |
|
|
|
Net loss per common share - basic and
diluted |
$ (0.03) |
$ (0.90) |
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 Nine
Months Ended September 30, |
|
2011 |
2010 |
|
|
Operating activities: |
|
|
Net loss |
$ (734) |
$ (19,157) |
Adjustments to reconcile net earnings to net
cash used in operating activities: |
|
|
Depreciation |
16,872 |
17,777 |
Amortization of deferred
costs |
524 |
524 |
Loss on disposal of property,
plant and equipment |
82 |
34 |
Stock based compensation |
(1,128) |
2,353 |
Change in interest receivable,
due from related parties |
(120) |
837 |
Change in investments in joint
ventures as a result of loss |
7,241 |
5,999 |
Realized gain on short-term
investments - available-for-sale securities |
-- |
(379) |
Deferred income tax
benefit |
(312) |
(12,320) |
(Recovery) provision for
doubtful accounts receivable |
(26) |
68 |
Changes in operating assets and
liabilities: |
|
|
Accounts receivable, net |
(11,437) |
(7,663) |
Accounts receivable, due from
related parties |
1,448 |
(4,601) |
Income taxes receivable |
(12) |
831 |
Inventories, net |
(64,633) |
(18,049) |
Prepaid expenses and other
current assets |
(848) |
1,032 |
Accounts payable |
37,091 |
15,462 |
Accounts payable, due to
related parties |
224 |
(196) |
Accrued expenses and taxes |
(1,989) |
(4,408) |
Other |
(1,463) |
19 |
Net cash used in operating activities |
(19,220) |
(21,837) |
Investing activities: |
|
|
Purchases of property, plant
and equipment |
(11,836) |
(4,852) |
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 |
(4,453) |
(14,298) |
Net cash used in investing activities |
(16,172) |
(14,866) |
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 |
(23) |
1 |
Decrease in cash and cash equivalents |
(34,659) |
(36,702) |
Cash and cash equivalents at beginning of
period |
318,758 |
347,290 |
Cash and cash equivalents at end of
period |
$ 284,099 |
$ 310,588 |
|
|
|
|
|
RECONCILIATION OF NET
EARNINGS (LOSS) TO EBITDA AND ADJUSTED EBITDA |
|
|
|
|
(In thousands, unaudited) |
|
|
|
|
|
|
|
|
|
|
Three months
ended |
Nine months
ended |
|
September
30, |
September
30, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) |
$ 4,026 |
$ (6,252) |
$ (734) |
$ (19,157) |
Income tax expense (benefit) |
2,357 |
(3,890) |
(484) |
(11,969) |
Interest expense |
4,478 |
5,316 |
15,143 |
15,956 |
Interest income |
(1,005) |
(1,058) |
(2,865) |
(2,557) |
Depreciation |
5,418 |
5,876 |
16,872 |
17,777 |
EBITDA |
$ 15,274 |
$ (8) |
$ 27,932 |
$ 50 |
(Income) expense related to stock
appreciation rights compensation 1 |
(3,087) |
1,532 |
(1,128) |
2,353 |
Other income on short-term investment
activity |
-- |
-- |
-- |
(379) |
Adjusted EBITDA |
$ 12,187 |
$ 1,524 |
$ 26,804 |
$ 2,024 |
|
|
|
|
|
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. The 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 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 quarter based primarily upon changes in ARI's stock price.
Management believes that eliminating the expense or income
associated with stock based compensation and short-term investment
activity 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 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. The Company's 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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