American Railcar Industries, Inc. (NASDAQ:ARII) Q3 2018 Earnings Conference Call - Final Transcript

Oct 30, 2018 • 10:00 am ET


American Railcar Industries, Inc. (NASDAQ:ARII) Q3 2018 Earnings Conference Call - Final Transcript


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Good morning. My name is James, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q3 2018 American Railcar Industries Incorporated 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. Please note that this call is being recorded today, October 30, 2018.

I'd now like to turn the call over to SVP and CFO, Luke Williams. Please go ahead.

Luke Williams

Thank you, James. Good morning. I would like to welcome you to the American Railcar Industries third quarter 2018 conference call. I am Luke Williams, our 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 are John O'Bryan, our President and CEO; and Yevgeny Fundler, our General Counsel. 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 IR page of our website as is a supplemental information presentation.

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

John O'Bryan

Thank you, Luke, and good morning. Thanks for joining us this morning. The North American railcar market has continued to show signs of recovery, including carload growth driven by a variety of commodity types and a continued decline in railcars in storage. The industry reported quarterly orders of nearly 25,000 railcars, which represents its highest point since the fourth quarter of 2014. The pricing environment is slowly recovering, but remains competitive.

During the third quarter of 2018, we received orders for 8,482 railcars and delivered 654 railcars. Our orders were for direct sale and lease for a variety of hopper and tank railcars, including 7,650 railcars ordered through the agreement with GATX. This increased our backlog to 11,215 railcars at quarter-end, and we currently expect 13% of that will go to our lease fleet. Consistent with our guidance last quarter, we expect all -- our overall shipments for 2018 to come in below 2017 levels.

Last week, we announced a merger agreement, whereby our Company will merge with a subsidiary of ITE Rail Fund. We currently expect to complete the merger in the fourth quarter of 2018. Completion of the merger is subject to various conditions, and it is possible that factors outside of the parties' control could result in the merger being completed at a later time or not at all. As we work with the ITE team to complete the merger, we continue to focus on our vision of aligning people, process and tools to deliver world-class results in safety, quality