Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - American Railcar Industries, Inc. | ariiex991q32017.htm |
| 8-K - 8-K - American Railcar Industries, Inc. | q32017results8k.htm |
Q3 2017
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: our plans to continue to transition the management of our lease fleet from ARL to in-house and terminate our
contractual agreements with ARL, our plans to address the Federal Railroad Administration (FRA) directive released September 30,
2016 and subsequently revised and superseded on November 18, 2016 (Directive) and the settlement we entered into related
thereto, 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, and revenues, trends related to shipments for direct sale versus lease, 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, 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, our backlog, 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;
risks relating to our compliance with the 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; 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; fluctuations in commodity prices, including oil and gas; the impact, costs and expenses of any
warranty claims to which we may be subject now or in the future; the risks associated with our ongoing compliance with
transportation, environmental, health, safety, and regulatory laws and regulations, which may be subject to change; 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 recruit, retain and train qualified personnel; our ability to manage
overhead and variations in production rates; the impact of any economic downturn, adverse market conditions or restricted
credit markets; our reliance upon a small number of customers that represent a large percentage of our revenues and backlog;
fluctuations in the 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 we use in railcar manufacturing; 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; 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;
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 or new business endeavors; the integration with other systems and ongoing management of our new enterprise
resource planning system; risks related to our and our subsidiaries’ indebtedness and compliance with covenants contained in our
and our subsidiaries’ financing arrangements; 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
Strategic Developments
• Integration of strong sales force and fleet management group
• Transitioning the management of our lease fleet in-house gives us the
opportunity to streamline processes and realize synergies and cost
savings in integrating with the rest of our organization
• Our sales and marketing strategy begins with listening to our customers
and finding solutions to fit their needs
• ARI has now evolved into a one-stop shop with product offerings
including manufacturing, leasing and railcar services
• With all of these pieces in place, and with this fully integrated business
model, “It’s all here”
4
ARI Locations
Added strategically placed sales force to cover all of our customers’ needs
5
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 9/30/17 per the Railway Supply Institute, Inc ARCI 2017 – 3rd Quarter Reporting Statistics (issued October 2017)
6
7
Dec 2008 Dec 2009 Dec 2010 Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Sep 2017
Railcar backlog for lease - - - 2,200 1,810 2,330 2,844 1,452 1,637 657
Railcar backlog for direct sale 4,240 550 1,050 4,330 5,250 6,230 8,888 5,629 2,176 2,026
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
T
otal
Ra
il
c
ar
Ba
c
k
lo
g
1,050
6,530
7,060
8,560
11,732
7,081
4,240
550
3,813
2,683
ARI’s Railcar Backlog
8
• 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 core group of
employees
• 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 Q3
2017
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
9
-
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 Q3 2017
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
• ARI obtained and is using software and data
owned and used by ARL to manage leased
railcars
• Further fleet growth 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
10
0%
5%
10%
15%
20%
25%
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 '17
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
ARI’s repair network is capable and responding to the
Revised Directive with an inspection plan reviewed by the FRA.
FRA Railworthiness Directive No. 2016-01 [Revised]
SETTLEMENT
In August 2017, ARI entered into a settlement agreement with the Federal Railroad
Administration (“FRA”)
• Settlement applies to railcars owned by ARI and certain of its affiliates and provides
regulatory clarity
• Extends deadline for completing inspection and testing of 15% highest mileage tank railcars
to December 31, 2017
• Provides that all other directive tank railcars are inspected, tested, and if necessary repaired
at the earlier of the next qualification, scheduled maintenance, shopping or repair event, or
December 31, 2025
• Provides flexibility if the FRA imposes, or fails to impose, requirements on the other owners of
the directive tank railcars
• Modifies and clarifies inspection protocol
• ARI dismissed its lawsuit against the FRA
11
12
$808.8
$423.4
$273.6
$519.4
$711.7
$750.6 $733.0
$889.3
$639.1
$512.0
$0.0
$200.0
$400.0
$600.0
$800.0
$1,000.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017
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
$52.6
$78.8
$40.0
$4.5
$50.5
$149.5
$181.1
$209.0
$278.9
$188.0
$159.6
($50.0)
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017
TTM
Net Earnings Adj. EBITDA**
* Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A.
Consolidated Revenue ($ mil) ^
Net Earnings & Adj. EBITDA ($ mil)
Our Financial History
13
$10.4 $0.0 $0.0
$29.4
$185.9
$162.1
$307.7
$211.6
$90.3
$153.3
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 TTM
Lease Railcar CAPEX ($ mil) #
Operational CAPEX ($ mil)
$42.0
$15.0
$6.1 $6.2
$20.0 $22.0 $20.1
$36.6
$23.0
$11.9
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 TTM
Our Financial History (continued)
# Includes effect of leased railcars in process.
14
$263.8
$192.0
$172.7
$260.9
$176.2
$150.5 $145.0
$167.5
$114.7 $109.0 $120.7
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
^ 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
$72.0 $68.5
$62.6
$75.8
$54.5 $50.4
$31.3
$51.8
$36.1 $37.0 $34.6
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Net Earnings Adjusted EBITDA *
* Please see reconciliation of net earnings (loss) to Adj. EBITDA on Exhibit A.
Net Earnings & Adj. EBITDA ($ mil)
Consolidated Revenue ($ mil) ^
Quarterly Financial Comparison
15
$5.0
$10.4
$11.1
$10.1
$4.4
$6.7
$4.8
$7.1
$1.6 $1.8 $1.4
$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
$48.1
$84.5
$77.7
$1.3
$20.6
$12.8
$36.0
$20.9
$55.9
$47.9
$28.6
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
# Includes effect of leased railcars in process.
Operational CAPEX ($ mil)
Lease Railcar CAPEX ($ mil) #
Quarterly Financial Comparison (continued)
16
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.
17
A Tradition of Industry Leadership
18