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EX-99.1 - EXHIBIT 99.1 - American Railcar Industries, Inc. | ariiex991q12018.htm |
8-K - 8-K - American Railcar Industries, Inc. | q12018results8k.htm |
Q1 2018
Supplemental
Information
Investor Contact: 636.940.6000
Website: americanrailcar.com
American Railcar Industries, Inc.
Exhibit 99.2
Forward Looking
Disclaimer
Safe Harbor Statement
This presentation contains statements relating to our expected financial performance, objectives, long-term strategies and/or future
business prospects, events and plans that are forward-looking statements. Forward-looking statements represent our estimates and
assumptions only as of the date of this presentation. Such statements include, without limitation, statements regarding: the impact of the
Tax Cuts and Jobs Act of 2017 on our business and financial statements, various estimates we have made in preparing our financial
statements, expected future trends relating to our industry, products and markets, anticipated customer demand for our products and
services, trends relating to our shipments, leasing business, railcar services, revenues, profit margin, capacity, financial condition, and
results of operations, trends related to shipments for direct sale versus lease, our backlog and any implication that our backlog may be
indicative of our future revenues, our strategic objectives and long-term strategies, our results of operations, financial condition and the
sufficiency of our capital resources, our capital expenditure plans, short- and long-term liquidity needs, ability to service our current debt
obligations and future financing plans, our stock repurchase program, anticipated benefits regarding the growth of our leasing business,
the mix of railcars, customers and commodities in our lease fleet and our lease fleet financings, anticipated production schedules for our
products and the anticipated production schedules of our joint ventures, and the anticipated performance and capital requirements of
our joint ventures. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual
results to differ materially from those anticipated. Investors should not place undue reliance on forward-looking statements, which speak
only as of the date they are made and are not guarantees of future performance. Potential risks and uncertainties that could adversely
affect our business and prospects include, among other things: our prospects in light of the cyclical nature of our business; the health of
and prospects for the overall railcar industry; 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 highly competitive nature of the manufacturing, railcar leasing and railcar services industries; the risks
associated with our ongoing compliance with transportation, environmental, health, safety, and regulatory laws and regulations, which
may be subject to change; the impact, costs and expenses of any warranty claims to which we may be subject now or in the future; our
ability to recruit, retain and train qualified personnel; risks relating to our compliance with the Federal Railroad Administration (FRA)
directive released September 30, 2016 and subsequently revised and superseded on November 18, 2016 (Directive)Directive and the
settlement related thereto, any developments related to the Directive and the settlement agreement related thereto or other regulatory
actions and any costs or loss of revenue related thereto; the impact of policies and priorities of certain governments or other issues that
may cause trade and market conditions that result in fluctuations in the supply and costs of raw materials, including steel and railcar
components, and delays in the delivery of such raw materials and components and their impact on demand and margin; the variable
purchase patterns of our railcar customers and the timing of completion, customer acceptance and shipment of orders, as well as the
mix of railcars for lease versus direct sale; our ability to manage overhead and variations in production rates; risks relating to the ongoing
transition of the management of our railcar leasing business from ARL to in-house management following completion of the ARL Sale; our
reliance upon a small number of customers that represent a large percentage of our revenues and backlog; fluctuations in commodity
prices, including oil and gas; uncertainties regarding the Tax Cuts and Jobs Act of 2017; the ongoing risks related to our relationship with
Mr. Carl Icahn, our principal beneficial stockholder through Icahn Enterprises L.P. (IELP), and certain of his affiliates; the impact, costs and
expenses of any litigation to which we may be subject now or in the future; risks related to the loss of executive officers; the risks
associated with our current joint ventures and anticipated capital needs of and production capabilities at our joint ventures; the
sufficiency of our liquidity and capital resources, including long-term capital needs to further support the growth of our lease fleet; risks
related to our and our subsidiaries’ indebtedness and compliance with covenants contained in our and our subsidiaries’ financing
arrangements; the impact of repurchases pursuant to our stock repurchase program on our current liquidity and the ownership
percentage of our principal beneficial stockholder through IELP, Mr. Carl Icahn; the conversion of our railcar backlog into revenues equal
to our reported estimated backlog value; the risks and impact associated with any potential joint ventures, acquisitions, strategic
opportunities, dispositions or new business endeavors; the integration with other systems and ongoing management of our new enterprise
resource planning system; 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 presentation, whether as a result of new
information, future events or otherwise.
2
ARI – Successful and Diversified Business Model
Complete life cycle solutions for the railcar industry.
Railcars Components
Manufacturing
Railcar Repair
Services
Railcar
Leasing
3
ARI Locations
Added to strategically placed sales force to cover our customers’ needs
4
ARI Key Railcar Markets -
Two Largest Product Segments in the Railcar Industry*
TANK RAILCARS
• Product offerings include general service,
pressurized, coiled, lined and insulated
carbon steel or stainless steel railcars that
are capable of transporting:
• Chemicals
• Ethanol
• Food Products
• Natural Gas Liquids
• Crude Oil
HOPPER RAILCARS
• Product offerings include general service
and specialty carbon steel or stainless steel
railcars that are capable of transporting:
• Plastic Pellets
• Food Products
• Grain
• Sand
• Specialty Chemical Products
• Cement
* Based upon backlog as of 3/31/18 per the Railway Supply Institute, Inc ARCI 2018 – 1st Quarter Reporting Statistics (issued April 2018)
5
6
Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Dec 2017 Mar 2018
Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 389 259
Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 1,551 2,885
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
To
ta
l R
ai
lc
ar
B
ac
kl
og
1,050
6,530
7,060
8,560
11,732
7,081
4,240
550
3,813
1,940
3,144
ARI’s Railcar Backlog
7
• Flexible and labor efficient
manufacturing facilities able to respond to
customer delivery demands
• Strategic locations near customers and
major rail lines
• Vertical integration from joint ventures
and component manufacturing helps us to
be cost competitive
• Experienced team striving for excellence
(safety, quality, service)
• Numerous product offerings/designs that
can be manufactured for direct sale or
lease
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
$-
$200
$400
$600
$800
$1,000
$1,200
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1
2018
TTM
Revenue Operating Margin % ^(millions)
^: Manufacturing segment revenues and operating margin % presented above include an estimate of
revenue and profit, respectively, for railcars built for our lease fleet. Such revenues and profit are based
on an estimated fair market value of the leased railcars as if they had been sold to a third party, less the
cost to manufacture for operating margin %. Estimated revenues related to railcars built for our lease
fleet are eliminated in consolidation.
Broad manufacturing base allows ARI to be competitive and provide quality railcars and components
Manufacturing Segment
Manufacturing core competency allows ARI to be competitive and provide low cost, quality railcars and components
8
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$-
$20
$40
$60
$80
$100
$120
$140
$160
2012 2013 2014 2015 2016 2017 Q1-18
TTM
Revenue Lease Fleet(millions)• Disciplined lease strategy balancing mix of
customers, commodities, acceptable market
rates, and staggered lease terms
• Relatively young lease fleet with low
maintenance expense
• Began in-house management of the
railcar leasing business as a result of the ARL
sale on June 1, 2017
• Added to our existing sales force and
established lease fleet management group
• Further integration of ARI’s business model
• Further fleet growth as demand dictates
expected to come from existing liquidity and
future railcar leveraged financing(s)
• Unencumbered leased railcars available to
borrow against
Diversifying and supplementing our business with revenue streams generated over the life of the railcar
Railcar Leasing Segment
9
0%
5%
10%
15%
20%
25%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1-18
TTM
Revenue Operating Margin %
(millions)
Supporting both ARI’s lease fleet and customers' railcar needs, while gaining valuable industry insight
Railcar Services Segment
Supporting both ARI’s lease fleet and customers' railcar needs, while gaining valuable industry insight
TRADITIONAL REPAIR
• Railcar qualifications and inspections
• Light/heavy railcar repairs
• Exterior and interior coatings
• Cleaning
• Valve replacement and testing
• Wheel and axle replacement
• Additional offerings for mini-shops and mobile
on-site customer repairs
TANK RAILCAR RETROFITTING
• Tank railcar manufacturing facility offers
retrofit capabilities along with traditional
repair services
10
$808.8
$423.4
$273.6
$519.4
$711.7 $750.6 $733.0
$889.3
$639.1
$476.8 $478.4
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018
TTM^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease.
$31.4 $15.5
($27.0) $4.3
$63.8
$86.9 $99.5
$133.5
$72.7
$34.9 $37.3
$78.8
$40.0
$4.5
$50.5
$149.5
$181.1
$107.8
$278.9
$188.0
$141.5 $142.3
($50.0)
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018
TTM
Net Earnings Adj. EBITDA**
****
* Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A.
Consolidated Revenue ($ mil) ^
Net Earnings & Adj. EBITDA ($ mil)
Our Financial History
** 2017 and Q1 2018 TTM net earnings exclude a $107.3 million tax benefit related to a one-time adjustment driven by the Tax Cuts and Jobs Act of 2017. Please see reconciliation of the impact of the tax adjustments due to the Tax Cuts and Jobs Act of 2017 on net earnings and earnings per
share on Exhibit B.
11
$10.4 $0.0 $0.0
$29.4
$185.9
$162.1
$307.7
$211.6
$90.3
$163.8
$125.9
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM
Lease Railcar CAPEX ($ mil) #
Operational CAPEX ($ mil)
$42.0
$15.0
$6.1 $6.2
$20.0 $22.0 $20.1
$36.6
$23.0
$7.2 $6.5
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 2018 TTM
Our Financial History (continued)
# Includes effect of leased railcars in process.
12
$192.0
$172.7
$260.9
$176.2
$150.5 $145.0
$167.5
$114.7 $109.0 $120.7
$132.4 $116.2
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
^ Revenues related to railcars built for the Company's lease fleet are not recognized in consolidated revenues as railcar sales, but rather as lease revenues in accordance with the terms of the contract over the life of the lease.
$35.0 $33.0
$29.4
$36.2
$22.8 $19.9
$7.7
$22.3
$10.6 $10.9 $8.9 $4.6
$13.0
$72.0 $68.5
$62.6
$75.8
$54.5 $50.4
$31.3
$51.8
$36.1 $37.0 $34.6 $33.8 $36.9
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Net Earnings Adjusted EBITDA
* Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A.
Net Earnings & Adj. EBITDA ($ mil)
Consolidated Revenue ($ mil) ^
Quarterly Financial Comparison
** Q4-2017 net earnings exclude a $107.3 million tax benefit related to a one-time adjustment driven by the Tax Cuts and Jobs Act of 2017. Please see reconciliation of the impact of the tax adjustments due to the Tax Cuts and Jobs Act of 2017 on net earnings and earnings per share on Exhibit B.
**
*
13
$5.0
$10.4 $11.1 $10.1
$4.4
$6.7
$4.8
$7.1
$1.6 $1.8 $1.4
$2.3
$0.8
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
$48.1
$84.5
$77.7
$1.3
$20.6
$12.8
$36.0
$20.9
$55.9
$47.9
$28.6 $31.4
$18.1
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
# Includes effect of leased railcars in process.
Operational CAPEX ($ mil)
Lease Railcar CAPEX ($ mil) #
Quarterly Financial Comparison (continued)
14
In Thousands, unaudited
Exhibit A – Adj. EBITDA Reconciliation
Exhibit A – Adj. EBITDA Reconciliation
EBITDA represents net earnings before income tax expense, 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 earnings (loss), cash flows
provided by operating activities or other statements 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.
Adjusted EBITDA represents EBITDA before share based compensation expense (income) related to stock appreciation rights (SARs)
and other income related to our 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 period based primarily upon changes in ARI’s stock price. Management believes that eliminating the
expense (income) associated with share-based compensation and income associated with short-term investments 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 earnings, cash flows provided by operating activities or other statements of
operations or 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.
15
16
In Thousands, except per share amounts, unaudited
Exhibit B – Impact of 2017 Tax Act Reconciliation
Exhibit B –Impact of 2017 Tax Act Reconciliation
Net earnings excluding tax adjustments represents net earnings before a one-time adjustment related to the impact of the new Tax
Cuts and Jobs Act of 2017 (the "2017 Tax Act"). The Company believes that net earnings excluding tax adjustments is a useful measure
to investors in evaluating ARI’s operating performance compared to prior quarters as the impact of the 2017 Tax Act is not expected
to be repeated. The calculation of net earnings excluding tax adjustments excludes the income tax benefit recognized by the
Company related to its revaluation of deferred tax assets and liabilities to account for the future impact of lower corporate tax rates
and other provisions of the 2017 Tax Act. Net earnings excluding tax adjustments 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 net earnings excluding tax adjustments 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 net earnings excluding tax adjustments is not necessarily comparable to that of other similarly titled measures reported
by other companies.
17
A Tradition of Industry Leadership
18