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 represented a percentage of the revenues from the lease over its initial term and were paid up front.

Railcar services

Railcar services consists of railcar repair services provided through the Company's various full service facilities or mini shops and mobile units. 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 services.

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, 2018
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing	$	40,766	$	39,783		$	80,549		$	(1,894	)
Railcar leasing (1)	32,427		—			32,427			26,640
Railcar services	26,791		852			27,643			2,731
Corporate	—		—			—			(5,705		)
Eliminations	—		(40,635		)	(40,635		)	122
Total Consolidated	$	99,984	$	—		$	99,984		$	21,894

	Three Months Ended September 30, 2017
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing	$	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

	Nine Months Ended September 30, 2018
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing	$	194,347	$	62,837		$	257,184		$	4,784
Railcar leasing (1)	101,352		—			101,352			58,054
Railcar services	67,051		5,063			72,114			7,412
Corporate	—		—			—			(14,016		)
Eliminations	—		(67,900		)	(67,900		)	4,062
Total Consolidated	$	362,750	$	—		$	362,750		$	60,296

	Nine Months Ended September 30, 2017
	Revenues
	External		Intersegment			Total			Earnings (Loss) from Operations
	(in thousands)
Manufacturing	$	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



(1)—	The earnings from operations for the leasing segment include the impact of a gain recorded for a customer's early lease termination payment. The impact of this gain on the leasing segment operating earnings was $10.1 million for the three and nine months ended September 30, 2018, respectively, and zero for the same periods in 2017. The earnings from operations for the leasing segment also include the impact of an impairment loss recognized on certain railcars within the Company's lease fleet. The impact of the impairment loss was zero and $(3.6) million, net of an intercompany elimination of $8.0 million, for the three and nine months ended September 30, 2018, respectively, and zero for the same periods in 2017.



Total Assets	September 30, 2018			December 31, 2017
	(in thousands)
Manufacturing	$	223,949		$	212,508
Railcar leasing	1,415,264			1,375,315
Railcar services	69,032			59,814
Corporate/Eliminations	(210,409		)	(174,211		)
Total Consolidated	$	1,497,836		$	1,473,426

Sales to Related Parties

As discussed in Note 15, 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,
	2018		2017		2018		2017
Manufacturing	2.6	%	0.2	%	0.7	%	0.1	%
Railcar leasing	0.4	%	0.2	%	0.3	%	0.2	%
Railcar services	—	%	1.0	%	—	%	3.4	%

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 both the three and nine months ended September 30, 2018 and 2017.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Manufacturing revenues from significant customers	—	%	34.7	%	26.9	%	13.9	%