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American Railcar Industries, Inc. Reports Second Quarter 2010 Results

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.

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