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American Railcar Industries, Inc. Reports Results For The Fourth Quarter And The Year Ended December 31, 2010

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, anticipated future production rates, our entry into the railcar leasing business, 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, leasing, 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; 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 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.

 
CONSOLIDATED BALANCE SHEETS 
(In thousands, except share amounts)
  As of
  December 31, December 31,
  2010 2009
Assets    
Current assets:    
Cash and cash equivalents  $ 318,758  $ 347,290
Short-term investments - available for sale securities  --  3,802
Accounts receivable, net  21,002  11,409
Accounts receivable, due from affiliates  4,981  1,356
Income taxes receivable  14,939  1,768
Inventories, net  50,033  40,063
Deferred tax assets  3,029  2,018
Prepaid expenses and other current assets  2,654  4,898
Total current assets  415,396  412,604
     
Property, plant and equipment, net  181,255  199,349
Deferred debt issuance costs  1,951  2,568
Interest receivable, due from affiliates  187  982
Goodwill  7,169  7,169
Investment in and loans to joint ventures  48,169  41,155
Other assets  240  537
Total assets  $ 654,367  $ 664,364
     
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable  $ 29,334  $ 16,874
Accounts payable, due to affiliates  275  576
Accrued expenses and taxes  5,095  4,515
Accrued compensation  11,054  8,799
Accrued interest expense  6,875  6,875
Total current liabilities  52,633  37,639
     
Senior unsecured notes  275,000  275,000
Deferred tax liability  7,938  7,120
Pension and post-retirement liabilities, net of current  6,707  6,279
Other liabilities  4,313  2,686
Total liabilities  346,591  328,724
     
Commitments and contingencies    
     
Stockholders' equity:    
Common stock, $0.01 par value, 50,000,000 shares authorized, 21,316,296 and 21,302,296 shares issued and outstanding at December 31, 2010 and 2009, respectively  213  213
Additional paid-in capital  238,947  239,617
Retained earnings  67,209  94,215
Accumulated other comprehensive income  1,407  1,595
Total stockholders' equity  307,776  335,640
Total liabilities and stockholders' equity  $ 654,367  $ 664,364
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
     
  For the Three Months Ended December 31,
  2010 2009
Revenues:    
Manufacturing operations (including revenues from affiliates of $16,504 and $11,446 in 2010 and 2009, respectively)   $ 78,832  $ 64,004
     
Railcar services (including revenues from affiliates of $4,758 and $2,886 in 2010 and 2009, respectively)  16,458  14,456
Total revenues  95,290  78,460
     
Cost of revenues:    
Manufacturing operations  (78,626)  (57,473)
Railcar services  (13,539)  (11,592)
Total cost of revenues  (92,165)  (69,065)
     
Gross profit  3,125  9,395
     
Selling, administrative and other (including costs from affiliates of $165 and $154 in 2010 and 2009, respectively)  (7,666)  (5,983)
(Loss) earnings from operations  (4,541)  3,412
     
Interest income (including interest income from affiliates of $682 and $610 in 2010 and 2009, respectively)  962  1,703
Interest expense  (5,319)  (5,347)
Other income (including income related to affiliates of $5 in both 2010 and 2009, respectively)  13  17,831
Loss from joint ventures  (1,790)  (1,767)
(Loss) earnings before income tax expense  (10,675)  15,832
Income tax benefit (expense)  2,826  (5,324)
Net (loss) earnings  $ (7,849)  $ 10,508
     
Net (loss) earnings per share - basic and diluted  $ (0.37)  $ 0.50
Weighted average shares outstanding - basic and diluted  21,303  21,302
     
Dividends declared per share  $ --   $ -- 
 
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
     
  For the Years Ended December 31,
  2010 2009
Revenues:    
Manufacturing operations (including revenues from affiliates of $81,905 and $105,216 in 2010 and 2009, respectively)   $ 206,094  $ 365,329
     
Railcar services (including revenues from affiliates of $15,041 and $14,434 in 2010 and 2009, respectively)  67,469  58,102
Total revenues  273,563  423,431
     
Cost of revenues:    
Manufacturing operations  (210,269)  (329,025)
Railcar services  (54,353)  (47,015)
Total cost of revenues  (264,622)  (376,040)
     
Gross profit  8,941  47,391
     
Selling, administrative and other (including costs from affiliates of $627 and $616 in 2010 and 2009, respectively)  (25,591)  (25,141)
(Loss) earnings from operations  (16,650)  22,250
     
Interest income (including interest income from affiliates of $2,620 and $986 in 2010 and 2009, respectively)  3,519  6,613
Interest expense  (21,275)  (20,909)
Other income (including income related to affiliates of $17 and $9 in 2010 and 2009, respectively)  394  20,869
Loss from joint ventures  (7,789)  (6,797)
(Loss) earnings before income tax expense  (41,801)  22,026
Income tax benefit (expense)  14,795  (6,568)
Net (loss) earnings  $ (27,006)  $ 15,458
     
Net (loss) earnings per share - basic and diluted  $ (1.27)  $ 0.73
Weighted average shares outstanding - basic and diluted  21,302  21,302
     
Dividends declared per share  $ --   $ 0.06
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands) For the Years Ended December 31,
  2010 2009
Operating activities:    
Net (loss) earnings  $ (27,006)  $ 15,458
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:    
Depreciation  23,597  23,405
Amortization of deferred costs  699  718
Loss on disposal of property, plant and equipment  33  222
Stock based compensation  5,358  1,174
Change in interest receivable, due from affiliates  796  (982)
Change in joint venture investment as a result of loss  7,789  6,797
Unrealized loss on derivative assets  --  88
(Benefit) provision for deferred income taxes  (438)  1,492
Provision (adjustment) for losses on accounts receivable  113  (101)
Item related to investing activities:    
Realized loss on derivative assets  --  10
Realized gain on sale of short-term investments - available for sale securities  (379)  (23,825)
Impairment of short-term investments - available for sale securities  --  2,884
Changes in operating assets and liabilities:    
Accounts receivable, net  (9,664)  28,483
Accounts receivable, due from affiliates  (3,625)  8,928
Income taxes receivable  (13,171)  (1,768)
Inventories, net  (9,925)  57,260
Prepaid expenses and other current assets  2,244  331
Accounts payable  12,446  (25,366)
Accounts payable, due to affiliates  (301)  (4,617)
Accrued expenses and taxes  (486)  (5,517)
Other  (221)  (931)
Net cash (used in) provided by operating activities  (12,141)  84,143
Investing activities:    
Purchases of property, plant and equipment  (6,144)  (15,047)
Sale of property, plant and equipment  163  71
Purchases of short-term investments - available for sale securities  --  (36,841)
Sales of short-term investments - available for sale securities  4,180  60,795
Realized loss on derivative assets  --  (10)
Investments in and loans to joint ventures  (14,891)  (35,810)
Net cash used in investing activities  (16,692)  (26,842)
Financing activities:    
Common stock dividends  --  (1,917)
Proceeds from stock option exercises  294  --
Net cash provided by (used in) financing activities  294  (1,917)
Effect of exchange rate changes on cash and cash equivalents  7  118
(Decrease) increase in cash and cash equivalents  (28,532)  55,502
Cash and cash equivalents at beginning of year  347,290  291,788
Cash and cash equivalents at end of year  $ 318,758  $ 347,290
 
 
RECONCILIATION OF NET (LOSS) EARNINGS TO EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
 
  Three months ended  Years Ended 
  December 31, December 31,
  2010 2009 2010 2009
         
         
Net (loss) earnings  $ (7,849)  $ 10,508  $ (27,006)  $ 15,458
Income tax (benefit) expense  (2,826)  5,324  (14,795)  6,568
Interest expense  5,319  5,347  21,275  20,909
Interest income  (962)  (1,703)  (3,519)  (6,613)
Depreciation  5,820  5,928  23,597  23,405
EBITDA   $ (498)  $ 25,404  $ (448)  $ 59,727
Expense related to stock appreciation rights compensation 1  3,005  322  5,358  1,174
Other income on short-term investment activity  --  (17,826)  (379)  (20,858)
Adjusted EBITDA  $ 2,507  $ 7,900  $ 4,531  $ 40,043
         
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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