10-year

10-Year Anniversary Promotion (20% off)

Join GuruFocus Premium Membership Now for Only $279/Year

Once a decade discount

Save up to $500 on Global Membership.

Don't Miss It !

Free 7-day Trial
All Articles and Columns »

American Railcar Industries Inc. Reports Operating Results (10-Q)

November 02, 2012 | About:
10qk

10qk

18 followers
American Railcar Industries Inc. (ARII) filed Quarterly Report for the period ended 2012-09-30.

American Railcar Industries, Inc. has a market cap of $627.8 million; its shares were traded at around $28.69 with a P/E ratio of 13.8 and P/S ratio of 1.2.

Highlight of Business Operations:

Our total consolidated cost of revenues for the three months ended September 30, 2012 increased to $131.5 million from $110.8 million for the same period in 2011. This increase was primarily due to increases experienced by our manufacturing segment, and to a lesser extent, increases in our railcar leasing and railcar services segments. Cost of revenues increased for our manufacturing segment by 18.8%. An increase of 31.2% in this segment was driven by a shift in production to a higher mix of tank railcars, which generally have more material and labor content. This increase was partially offset by a decrease of 7.2% due to a lower number of railcars shipped for direct sale, as discussed above, and a decrease of 5.2% driven by lower material costs for key components and steel. The decrease in costs for key components and steel is also reflected as a decrease to selling prices as our sales contracts include provisions to adjust prices for increases and decreases in the cost of most raw materials and components on a dollar for dollar basis.

Our manufacturing revenues, including an estimate of revenues for railcars built for our lease fleet, increased to $185.4 million for the three months ended September 30, 2012 from $117.5 million for the three months ended September 30, 2011. During the three months ended September 30, 2012, we shipped approximately 1,460 railcars, including approximately 310 railcars built for our lease fleet, compared to approximately 1,340 railcars for the same period of 2011, including approximately 90 railcars built for our lease fleet. The primary reasons for the increase in revenues were a higher mix of tank railcars shipped, which generally sell at higher prices due to more material and labor content, and improved general market conditions and an increase in railcar shipments. These increases were partially offset by lower revenues from certain material cost changes that we pass through to customers, as discussed above. The increase in railcar shipments for the segment primarily reflected an increase in railcars shipped for our leasing business, which was driven by strong leasing customer demand, partially offset by a decline in direct sale shipments. Manufacturing revenues for the three months ended September 30, 2012 included estimated revenues of $38.2 million relating to railcars built for our lease fleet, compared to $9.1 million for the three months ended September 30, 2011. Such revenues are based on an estimated fair market value of the leased railcars as if they had been sold to a third party, and are eliminated in consolidation. Revenues from railcars manufactured for our leasing segment are not recognized in consolidated revenues as railcar sales, but rather lease revenues are recognized over the term of the lease in accordance with the monthly lease revenues. Railcars built for our lease fleet represented over 20% of our railcar shipments during the three months ended September 30, 2012 compared to 7% for the three months ended September 30, 2011.

Earnings from operations for manufacturing, which include an allocation of selling, general and administrative costs, as well as estimated profit for railcars manufactured for our leasing segment, increased to $34.2 million for the three months ended September 30, 2012 compared to $8.7 million for the same period in 2011. Estimated profit on railcars built for our lease fleet, which is eliminated in consolidation, was $5.0 million for the three months ended September 30, 2012, and is based on an estimated fair market value of revenues as if the railcars had been sold to a third party, less the cost to manufacture. Operating margin from manufacturing increased to 18.5% for the three months ended September 30, 2012 from 7.4% for the same period in 2011. These increases were due primarily to improved sales mix, as discussed above, increased volumes, and operating leverage and efficiencies as a result of higher tank railcar production volumes, partially offset by softer hopper railcar volumes. We also continue to benefit from cost savings achieved by the vertical integration projects put in place during the past several years.

Our total consolidated cost of revenues for the nine months ended September 30, 2012 increased to $403.6 million from $289.4 million for the same period in 2011. This increase was primarily due to increases experienced by our manufacturing segment, and to a lesser extent, our railcar leasing and railcar repair segments. Cost of revenues increased for our manufacturing segment by 43.9%, due to an increase of 38.9% driven by higher direct sale railcar shipments, an increase of 3.0% driven by a shift in production to a higher mix of tank railcars, which generally have more material and labor content, and an increase of 2.0% driven by higher material costs for key components and steel. The increase in costs for key components and steel is also reflected as an increase in selling prices as our sales contracts include provisions to adjust prices for increases or decreases in the cost of most raw materials and components on a dollar for dollar basis.

Our manufacturing revenues, including an estimate of revenues for railcars built for our lease fleet, increased to $616.5 million for the nine months ended September 30, 2012 from $280.9 million for same period in 2011. During the nine months ended September 30, 2012, we shipped approximately 5,870 railcars, including approximately 1,690 railcars built for our lease fleet, compared to approximately 3,060 railcars for the same period of 2011, including approximately 90 railcars built for our lease fleet. The primary reasons for the increase in revenues were higher railcar shipments, a higher mix of tank railcars, which generally sell at higher prices due to more material and labor content, and improved general market conditions and higher revenues from certain material cost changes that we pass through to customers, as discussed above. The increase in railcar shipments for the segment primarily reflected those shipped for our leasing business and was driven by strong customer demand. Manufacturing segment revenues for the nine months ended September 30, 2012 included estimated revenues of $170.3 million relating to railcars built for our lease fleet, compared to $9.6 million for same period in 2011. Such revenues are based on an estimated fair market value of the leased railcars as if they had been sold to a third party, and are eliminated in consolidation. Revenues for railcars manufactured for our leasing segment are not recognized in consolidated revenues as railcar sales, but rather lease revenues are recognized over the term of the lease in accordance with the monthly lease revenues. Railcars built for the lease fleet represented over 28% of our railcar shipments for the nine months ended September 30, 2012 compared to 3% for the nine months ended September 30, 2011.

Read the The complete Report

About the author:

10qk
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 5.0/5 (1 vote)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK