Operating Segment and Sales Concentrations

9 Months Ended

Sep. 30, 2017

Segment Reporting [Abstract]

Operating Segment and Sales and Credit Concentrations

Operating Segments and Sales and Credit Concentrations

ARI operates in three reportable segments: manufacturing, railcar leasing and railcar services. These reportable segments are organized based upon a combination of the products and services offered and performance is evaluated based on revenues and segment earnings (loss) from operations. Intersegment revenues are accounted for as if sales were to third parties.

Manufacturing

Manufacturing consists of railcar manufacturing, and railcar and industrial component manufacturing. Revenues for railcars manufactured for the Company’s railcar leasing segment are not recognized in consolidated revenues as railcar sales, but rather lease revenues are recognized over the term of the lease. Earnings from operations for manufacturing include an allocation of selling, general and administrative costs, as well as profit for railcars manufactured for the Company’s railcar leasing segment based on revenue determined as described above. Intersegment revenues and profits are determined based on an estimated fair market value of the railcars manufactured for the Company’s railcar leasing segment, as if such railcars had been sold to a third party.

Railcar leasing

Railcar leasing consists of railcars manufactured by the Company and leased to third parties under operating leases. Earnings from operations for railcar leasing include an allocation of selling, general and administrative costs and also reflect origination fees paid to ARL associated with originating the lease to the Company’s leasing customers prior to the ARL Sale. The origination fees represent a percentage of the revenues from the lease over its initial term and are paid up front.

Railcar services

Railcar services consists of railcar repair services provided through the Company's various repair facilities, including mini repair shops and mobile repair units, offering a range of services from full to light repair. Earnings from operations for railcar services include an allocation of selling, general and administrative costs as well as certain operating costs related to this segment's use of a portion of the Company's tank railcar manufacturing facility to perform railcar repair work.

Segment financial results

The information in the following table is derived from the segments’ internal financial reports used by the Company’s management for purposes of assessing segment performance and for making decisions about allocation of resources.

	Three Months Ended September 30, 2017
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing (1)	$	68,442	$	33,625		$	102,067		$	3,733
Railcar leasing	33,440		—			33,440			19,029
Railcar services	18,864		976			19,840			1,941
Corporate	—		—			—			(4,603		)
Eliminations	—		(34,601		)	(34,601		)	(553		)
Total Consolidated	$	120,746	$	—		$	120,746		$	19,547
	Three Months Ended September 30, 2016
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing (1)	$	93,546	$	31,283		$	124,829		$	(2,773	)
Railcar leasing	32,798		—			32,798			19,320
Railcar services	18,618		167			18,785			2,797
Corporate	—		—			—			(2,649		)
Eliminations	—		(31,450		)	(31,450		)	(610		)
Total Consolidated	$	144,962	$	—		$	144,962		$	16,085
	Nine Months Ended September 30, 2017
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing (1)	$	184,255	$	149,171		$	333,426		$	20,183
Railcar leasing	100,992		—			100,992			56,529
Railcar services	59,200		3,191			62,391			6,986
Corporate	—		—			—			(13,828		)
Eliminations	—		(152,362		)	(152,362		)	(6,258		)
Total Consolidated	$	344,447	$	—		$	344,447		$	63,612
	Nine Months Ended September 30, 2016
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing (1)	$	314,886	$	64,180		$	379,066		$	35,451
Railcar leasing	98,775		—			98,775			59,232
Railcar services	57,965		1,735			59,700			9,364
Corporate	—		—			—			(11,598		)
Eliminations	—		(65,915		)	(65,915		)	307
Total Consolidated	$	471,626	$	—		$	471,626		$	92,756

(1)— The earnings (loss) from operations for the manufacturing segment include the impact of the loss contingency reserve related to the FRA Revised Directive, which is recognized by the manufacturing segment. The impact of the loss contingency reserve was $(0.9) million and 0.1 million for the three and nine months ended September 30, 2017, respectively, and $(17.0) million for both the three and nine months ended September 30, 2016.

Total Assets	September 30, 2017			December 31, 2016
	(in thousands)
Manufacturing	$	225,157		$	256,622
Railcar leasing	1,357,891			1,254,824
Railcar services	61,361			57,061
Corporate/Eliminations	(176,651		)	(112,257		)
Total Consolidated	$	1,467,758		$	1,456,250

Sales to Related Parties

As discussed in Note 14, Related Party Transactions, ARI has numerous arrangements with related parties. Below is a summary of revenue from affiliates for each operating segment reflected as a percentage of total consolidated revenue.

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2017		2016		2017		2016
Manufacturing	0.2	%	—	%	0.1	%	0.2	%
Railcar leasing	0.2	%	—	%	0.2	%	—	%
Railcar services	1.0	%	4.1	%	3.4	%	4.5	%

Sales Concentration

Manufacturing revenues from customers that accounted for more than 10% of total consolidated revenues are outlined in the table below. The railcar leasing and railcar services segments had no customers that accounted for more than 10% of the total consolidated revenues for the three and nine months ended September 30, 2017 and 2016.

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2017		2016		2017		2016
Manufacturing revenues from significant customers	34.7	%	38.9	%	13.9	%	29.7	%