Railcar leasing market picks up steam

American Railcar Industries (ARI) has announced a third consecutive year of record earnings, driven by high production volumes and a major boost to its leasing activities.

Jeff Hollister, president and CEO of ARI, said: “We believe our production processes are efficiently producing high quality railcars, which has played a significant role in the 13% improvement in consolidated operating earnings in 2014, compared to 2013. Our railcar leasing segment was also a strong contributor to our increased consolidated operating margins.”

“We remain committed to the growth of our lease fleet to further diversify our business as demonstrated by the 74% growth in our lease fleet from December 31, 2013 to December 31, 2014. Our backlog of 11,732 railcars at December 31, 2014 is at its highest point since December 2007 and includes 2,844 railcars being manufactured for lease,” Hollister added.

Railcar leasing revenues were $22.3 million for Q4 2014, an increase of 134% over the $9.5 million for the comparable period in 2013. ARI said the primary reasons for the increase in revenue were an increase in the number of railcars on lease and higher average lease rates. ARI had 7,730 railcars in its lease fleet at the end of 2014, compared to approximately 4,450 railcars at the end of 2013.

Separately, Trinity Industries has also reported strong growth in railcar leasing in Q4 2014, with its railcar leasing and management services group reporting revenues of $238million, compared to $190.8 million in Q42013. Operating profit rose to $96.6 million up from $85.5 million, and the company said the improvements were due to higher rental rates as well as increased railcar sales from the lease fleet.

At the end of last year, Trinity Industries sold $114.8 million of railcars to Element Financial Corporation under the strategic alliance announced in 2013. With these railcar sales, the leasing group has completed the sale of the first $1 billion of leased railcars to Element and anticipates fulfilling the entirety of the $2 billion alliance in 2015.

Commenting on railcar orders and backlog, Trinity said the rail group received orders for 17,770 new railcars during the fourth quarter with a record value of over $2.1 billion resulting in an all-time high backlog of 61,035 units with a record value of $7.2 billion.

Timothy R. Wallace, Trinity’s chairman, CEO and president. “Our leasing group achieved record financial results in 2014 and generated strong earnings and cash flow from strategic railcar leasing transactions completed during the year.”