American Railcar Industries, Inc. (NASDAQ:ARII) Q2 2018 Earnings Conference Call - Final Transcript

Aug 01, 2018 • 10:00 am ET


American Railcar Industries, Inc. (NASDAQ:ARII) Q2 2018 Earnings Conference Call - Final Transcript


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Good morning. My name is James, and I will be conference operator today. At this time I would like to welcome everyone to the Q2 2018 American Railcar Industries Inc., Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks there will be a question-and-answer session. (Operator Instructions) Thank you. As an advisement, this call is being recorded.

I would now like to turn the call over to SVP, CFO and Treasurer, Luke Williams. Mr. Williams, the floor is yours.

Luke Williams

Good morning. I would like to welcome you to the American Railcar Industries Second Quarter 2018 Conference Call. I am Luke Williams, CFO, and I would like to thank you for joining us this morning. For those who are interested, a replay of this call will also be available on our website,, shortly after this call ends. Joining me this morning is John O'Bryan, our President and CEO.

Our call today will include comments about the railcar industry, our operations and financial results. Following these remarks, we will have a question-and-answer session.

(Forward-Looking Cautionary Statements)

EBITDA and adjusted EBITDA are non-GAAP financial measures we will discuss today that are reconciled to net earnings in our press release that was issued this morning. The press release is available through the Investor Relations page of our website as is a supplemental information presentation.

Now, it's my pleasure to introduce John O'Bryan.

John O'Bryan

Good morning. Thanks for joining us today. The North American rail market has shown signs of recovery, including carload growth driven by a wide array of commodity types and a decline in railcars and storage over the first half of 2018. The industry reported quarterly orders of over 23,000, which represents its highest point since the fourth quarter of 2014. With certain industry orders placed during the quarter being large orders for long-term needs, the pricing environment remains competitive to meet customers needs.

During the second quarter of 2018, we received orders of 1,176 railcars and delivered 933 railcars for a book-to-bill ratio of approximately 1.3:1. Our orders were for direct sale and lease for a variety of hopper and tank railcars. This order activity has increased our backlog to 3,387 railcars at quarter-end. We expect approximately 31% of that to go to our lease fleet. As we announced this morning, we entered into a long-term supply agreement with GATX to supply them railcars over a five-year period beginning in 2019. We are excited to partner with GATX, a global leader in railcar leasing space, for the next several years to meet their needs.

In the long term, we remain focused on setting production levels consistent with industry demand, strategically investing in our lease fleet and managing our costs. With a large portion of our recent orders scheduled for delivery in 2019 and beyond, we expect our overall shipments for 2018 to come in below 2017 levels.

I now turn it back to Luke for a discussion of second quarter financial