American Railcar Industries, Inc. (ARI) is the latest rail car manufacturing firm to report a decline in revenues in the second quarter.
For the three months ended June 30, ARI reported revenues of $109.9 million and net earnings of $1.1 million compared with revenues of $204.5 million and net earnings of $6.2 million for the same quarter in 2008. Revenues in the second quarter of 2009 were lower than the same period of 2008 primarily due to lower railcar shipments from decreased demand, partially offset by increased average railcar selling prices due to a change in product mix. During the three months ended June 30, 2009, the company shipped approximately 980 railcars compared with about 2,080 railcars in the same period of 2008.
"We shipped approximately 980 railcars in the second quarter of 2009, resulting in EBITDA of $11.2 million and net earnings of $1.1 million," said James Cowan, president and CEO of ARI. "As a result of a weaker economy and slowing demand for railcars, we shipped 53 percent fewer railcars in the second quarter of 2009 as compared to the same quarter of 2008."
The soft railcar market has and will continue to require the company to evaluate its production levels at all manufacturing locations and Cowan says it will adjust the workforce as needed. Joint venture earnings in the second quarter decreased $2.1 million primarily due to the idling of the company's castings joint venture and expenses from the axle joint venture.
He noted that ARI's railcar services segment completed three plant expansions and revenues there increased 12 percent in the second quarter of 2009 compared to the same quarter of 2008.
The company's backlog was reduced to approximately 1,770 railcars as of June 30, 2009. The backlog level has declined primarily due to weak demand for railcars, driven mostly by a weak economy and a difficult credit environment. ARI is worried that more than half of that backlog of orders comes from struggling CIT Group.
"In the event of bankruptcy for whatever reason, CIT, among other things, may have the right to cancel or could renegotiate its orders included in the backlog," ARI said in a press release. "Even if CIT does not seek bankruptcy relief, any continued financial difficulties of CIT could materially adversely affect the company's business relationship with CIT and the company's business, prospects and financial condition."
ARI is a leading North American designer and manufacturer of hopper and tank railcars and also repairs and refurbishes railcars, provides fleet management services and designs and manufactures certain railcar and industrial components.