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American Railcar Industries, Inc. Reports Record Operating Margins

Net earnings for the first six months of 2013 were $41.6 million, or $1.95 per share, compared to $25.4 million, or $1.19 per share, for the comparable period in 2012.

Cash Flow and Liquidity

The Company's strong earnings have contributed to cash flow from operations in the first six months of 2013 of $54.6 million. As a result of continued growth of the Company's lease fleet and redemption of the remaining $175 million of senior unsecured notes during the first quarter of 2013, partially offset by borrowings under the lease fleet financing, the Company's cash balance was $93.6 million at June 30, 2013.

At the board meeting in July, the Company's board of directors declared a cash dividend of $0.25 per share of common stock of the Company to shareholders of record as of September 20, 2013 that will be paid on September 27, 2013.

Backlog

ARI's backlog as of June 30, 2013 was approximately 6,940 railcars, with an estimated market value of $889.3 million. This backlog includes approximately 2,620 railcars for lease with an estimated market value of $357.2 million. ARI had approximately 7,060 railcars in its backlog with an estimated market value of $889.8 million as of December 31, 2012, including approximately 1,810 railcars for lease with an estimated market value of $227.0 million.

Conference Call and Webcast

ARI will host a webcast and conference call on Thursday, July 25, 2013 at 10:00 am (Eastern Time) to discuss the Company's second quarter 2013 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 ARI

ARI is a leading North American designer and manufacturer of hopper and tank railcars. ARI and its subsidiaries sell and lease railcars manufactured by the Company to certain markets. In addition, ARI 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. More information about American Railcar Industries, Inc. is available on its website at www.americanrailcar.com .

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 industry trends, customer demand for the Company's products, the Company's strategic objectives and long-term strategies, the growth of the Company's leasing business, anticipated future production rates, the Company's plans regarding future dividends, the Company's joint ventures, the Company's backlog and any implication that the Company's backlog may be indicative of future revenues. 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. The payment of future dividends, if any, and the amount thereof, will be at the discretion of ARI's board of directors and will depend upon the Company's operating results, strategic plans, capital requirements, financial condition, provisions of its borrowing arrangements, applicable law and other factors the Company's board of directors considers relevant. Other potential risks and uncertainties include, among other things: basing financial or other information on judgments or estimates based on future performance or events; the impact of an economic downturn, adverse market conditions and restricted credit markets; 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; the highly competitive nature of the railcar manufacturing industry; the conversion of ARI's railcar backlog into revenues; 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; 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; the risk of being unable to market or remarket railcars for sale or lease at favorable prices or on favorable terms or at all; 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 L.P., the Company's principal beneficial stockholder) and certain of his affiliates; the anticipated production schedules for our products and the anticipated financing needs, construction and production schedules of our joint ventures; the risks, impact and anticipated benefits associated with potential joint ventures, acquisitions or new business endeavors; the risks associated with international operations and joint ventures; the implementation, integration with other systems or ongoing management of the Company's new enterprise resource planning system; 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; compliance with covenants contained in the Company's financing arrangements; the impact and costs and expenses of any litigation ARI may be subject to now or in the future; 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.

 
AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
 
  June 30, 2013 December 31, 2012
  (unaudited)  
Assets    
Current assets:    
Cash and cash equivalents $93,585 $205,045
Short-term investments—available for sale securities 12,557
Accounts receivable, net 38,164 36,100
Accounts receivable, due from related parties 5,583 3,539
Inventories, net 92,988 110,075
Deferred tax assets 10,397 4,114
Prepaid expenses and other current assets 5,123 3,917
Total current assets 245,840 375,347
Property, plant and equipment, net 157,328 155,893
Railcars on operating lease, net 296,744 220,282
Deferred debt issuance costs 2,124 2,374
Goodwill 7,169 7,169
Investments in and loans to joint ventures 41,534 44,536
Other assets 7,934 4,157
Total assets $758,673 $809,758
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable $42,760 $64,971
Accounts payable, due to related parties 524 2,831
Accrued taxes 5,212 2,693
Accrued expenses 6,655 5,739
Accrued compensation 13,910 17,940
Accrued interest expense 286 4,465
Short-term debt, including current portion of long-term debt 6,618 2,755
Total current liabilities 75,965 101,394
Long-term debt, net of current portion 191,458 272,245
Deferred tax liability 78,485 53,466
Pension and post-retirement liabilities 9,104 9,518
Other liabilities 5,093 3,670
Total liabilities 360,105 440,293
Commitments and contingencies    
Stockholders' equity:    
Common stock, $0.01 par value, 50,000,000 shares authorized, 21,352,297 shares issued and outstanding as of both June 30, 2013 and December 31, 2012 213 213
Additional paid-in capital 239,609 239,609
Retained earnings 160,910 130,030
Accumulated other comprehensive loss (2,164) (387)
Total stockholders' equity 398,568 369,465
Total liabilities and stockholders' equity $758,673 $809,758
 
 
AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts, unaudited)
 
  Three Months Ended   June 30, Six Months Ended   June 30,
  2013 2012 2013 2012
Revenues:        
Manufacturing (including revenues from affiliates of $19,904 and $82,982 for the three and six months ended June 30, 2013, respectively, and $10,897 for both of the same periods in 2012) $132,242 $134,748 $305,217 $299,061
Railcar leasing 7,527 2,668 14,070 4,048
Railcar services (including revenues from affiliates of $4,546 and $9,154 for the three and six months ended June 30, 2013, respectively, and $5,832 and $11,003 for the same periods in 2012) 19,635 16,798 35,227 32,704
Total revenues 159,404 154,214 354,514 335,813
Cost of revenues:        
Manufacturing (97,709) (106,449) (234,832) (244,010)
Railcar leasing (3,301) (1,601) (6,205) (2,342)
Railcar services (14,860) (12,740) (27,449) (25,668)
Total cost of revenues (115,870) (120,790) (268,486) (272,020)
Gross profit 43,534 33,424 86,028 63,793
Selling, general and administrative (including costs to a related party of $216 and $596 for the three and six months ended June 30, 2013, respectively, and $149 and $295 for the same periods in 2012) (3,665) (7,464) (14,930) (14,028)
Earnings from operations 39,869 25,960 71,098 49,765
Interest income (including income from related parties of $676 and $1,357 for the three and six months ended June 30, 2013, respectively, and $729 and $1,474 for the same periods in 2012) 679 769 1,370 1,547
Interest expense (1,341) (5,090) (4,341) (10,216)
Loss on debt extinguishment (392)
Other income (including income from a related party of $5 and $9 for the three and six months ended June 30, 2013, respectively, and $3 and $6 for the same periods in 2012) 12 16 2,008 19
Earnings (loss) from joint ventures (804) 466 (1,777) 880
Earnings before income taxes 38,415 22,121 67,966 41,995
Income tax expense (14,796) (8,760) (26,410) (16,630)
Net earnings $23,619 $13,361 $41,556 $25,365
Net earnings per common share—basic and diluted $1.11 $0.63 $1.95 $1.19
Weighted average common shares outstanding—basic and diluted 21,352 21,352 21,352 21,352
Cash dividends declared per common share $0.25 $— $0.50 $—
 
 
AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
SEGMENT DATA
(In thousands, unaudited)
 
  Revenues Earnings (Loss) from Operations
  External Intersegment Total External Intersegment Total
Three Months Ended June 30, 2013            
Manufacturing $132,242 $45,083 $177,325 $32,780 $10,126 $42,906
Railcar Leasing 7,527 7,527 3,645 8 3,653
Railcar Services 19,635 46 19,681 4,083 (41) 4,042
Corporate/Eliminations (45,129) (45,129) (639) (10,093) (10,732)
Total Consolidated $159,404 $— $159,404 $39,869 $— $39,869
Three Months Ended June 30, 2012            
Manufacturing $134,748 $84,540 $219,288 $26,334 $14,346 $40,680
Railcar Leasing 2,668 2,668 1,021 7 1,028
Railcar Services 16,798 191 16,989 3,396 (44) 3,352
Corporate/Eliminations (84,731) (84,731) (4,791) (14,309) (19,100)
Total Consolidated $154,214 $— $154,214 $25,960 $— $25,960
Six Months Ended June 30, 2013            
Manufacturing $305,217 $100,491 $405,708 $66,759 $19,908 $86,667
Railcar Leasing 14,070 14,070 5,808 12 5,820
Railcar Services 35,227 95 35,322 6,388 2 6,390
Corporate/Eliminations (100,586) (100,586) (7,857) (19,922) (27,779)
Total Consolidated $354,514 $354,514 $71,098 $71,098
Six Months Ended June 30, 2012            
Manufacturing $299,061 $132,089 $431,150 $51,486 $23,268 $74,754
Railcar Leasing 4,048 4,048 1,617 13 1,630
Railcar Services 32,704 220 32,924 5,739 (50) 5,689
Corporate/Eliminations (132,309) (132,309) (9,077) (23,231) (32,308)
Total Consolidated $335,813 $335,813 $49,765 $49,765
 
 
AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
 
  Six Months Ended June 30,
  2013 2012
Operating activities:    
Net earnings $41,556 $25,365
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation 13,395 11,286
Amortization of deferred costs 313 349
Loss (Gain) on disposal of property, plant and equipment 47 (51)
Share-based compensation 3,075 2,813
Change in interest receivable, due from related parties 292
(Earnings) loss from joint ventures 1,777 (880)
Provision for deferred income taxes 19,297 15,948
Adjustment to provision for losses on accounts receivable (6) 279
Items related to investing activities:    
Realized gain on sale of short-term investments - available for sale securities (2,008)
Items related to financing activities:    
Loss on debt extinguishment 392
Changes in operating assets and liabilities:    
Accounts receivable, net (2,087) 13,355
Accounts receivable, due from related parties (2,065) (7,216)
Income taxes receivable (64) (966)
Inventories, net 17,034 (14,351)
Prepaid expenses and other current assets (1,208) (1,072)
Accounts payable (22,200) 13,319
Accounts payable, due to affiliates (2,307) 200
Accrued expenses and taxes (8,612) 2,920
Other (1,738) (189)
Net cash provided by operating activities 54,591 61,109
Investing activities:    
Purchases of property, plant and equipment (10,927) (5,343)
Capital expenditures - leased railcars (80,877) (113,513)
Proceeds from the sale of property, plant and equipment 2 148
Purchase of short-term investments - available for sale securities
Proceeds from the sale of short-term investments - available for sale securities 12,699
Proceeds from repayments of loans by joint ventures 1,300 164
Investments in and loans to joint ventures (116) (366)
Net cash used in investing activities (77,919) (118,910)
Financing activities:    
Repayments of long-term debt (176,765)
Premium on debt redemption
Proceeds from long-term debt 99,841
Payment of common stock dividends (10,676)
Debt issuance costs (413)
Net cash used in financing activities (88,013)
Effect of exchange rate changes on cash and cash equivalents (119) (12)
Decrease in cash and cash equivalents (111,460) (57,521)
Cash and cash equivalents at beginning of period 205,045 307,172
Cash and cash equivalents at end of period $93,585 $249,651
 
 
AMERICAN RAILCAR INDUSTRIES, INC. AND SUBSIDIARIES
RECONCILIATION OF NET EARNINGS TO EBITDA AND ADJUSTED EBITDA
(In thousands, unaudited)
 
  Three Months Ended   June 30, Six Months Ended   June 30,
  2013 2012 2013 2012
Net earnings $23,619 $13,361 $41,556 $25,365
Income tax expense 14,796 8,760 26,410 16,630
Interest expense 1,341 5,090 4,341 10,216
Loss on debt extinguishment 392
Interest income (679) (769) (1,370) (1,547)
Depreciation 6,860 5,884 13,395 11,286
EBITDA $45,937 $32,326 $84,724 $61,950
Other income related to short-term investments (2,008)
Stock appreciation rights compensation (income) expense (2,933) 2,117 3,075 2,813
Adjusted EBITDA $43,004 $34,443 $85,791 $64,763

EBITDA represents net earnings before income tax expense, interest expense (income), loss on debt extinguishment 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 earnings, cash flows provided by operating activities or other statement of operations or 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.

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