American Railcar Profit Dives 82 Percent

American Railcar Industries profit fell 82 percent to $1.1 million in the second quarter amid worries that one of its biggest customers, CIT, may seek bankruptcy protection. Revenue fell 46 percent to $109.9 million, compared with $204.5 million in the second quarter a year earlier.

Demand for railcars sank as ARI shipped 53 percent fewer, approximately 980 units, in the second quarter. The company’s backlog was reduced to approximately 1,770 railcars as of June 30. “The softer railcar market has and will continue to require us to evaluate our production levels at all manufacturing locations and we plan to adjust the workforce as needed,” said James Cowan, president and CEO of ARI.

The railcar services segment partially offset the decline in manufacturing by completing three plant expansions and increasing revenue 12 percent in the second quarter of 2009 compared to the same quarter of 2008.

One of the company’s largest customers, commercial lender CIT Group, recently announced that it may be forced to seek bankruptcy relief. CIT accounted for 13 percent of ARI revenue in the second quarter and 31 percent of revenue in the six months ended June 30. CIT accounts for 53 percent of orders included in the backlog as of June 30, 2009.

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. 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.

Contact Thomas L. Gallagher at tgallagher@joc.com.